Natural Gas and Hydrogen

This page gives information regarding taxes imposed on compressed natural gas (CNG), liquified natural gas (LNG), and hydrogen. For more information regarding these tax types, see Pub 66, Fuel Tax General Information.

Fuel Taxes on Natural Gas and Hydrogen

The fuel tax on these fuel types is collected by the owner or lessor of the fuel compressor or dispensing equipment.

Sales Taxes on Natural Gas and Hydrogen

Fuel subject to special fuel tax because it is used to operate a motor vehicle on public roads is exempt from sales tax. Fuel suppliers who purchase hydrogen and natural gas intended to operate a vehicle can give form TC-721F, Exemption Certificate for Special Fuels, to the fuel supplier. This certificate exempts all hydrogen and natural gas purchases from sales and municipal energy tax at the time of purchase.

Note: Buyers must have a fuel tax account, sales and use tax account, and a municipal energy sales and use tax account to report:

  • Special fuel taxes for hydrogen and natural gas used as a fuel on road
  • Sales and use tax for residential and commercial uses of hydrogen and natural gas
  • Municipal energy sales and use tax for natural gas not used as a fuel on road