SB771

Regular Session

Relating to a credit or refund for diesel fuel taxes paid on diesel fuel used in this state by auxiliary power units or power take-off equipment.

ModeratePlan for compliance

Low Cost

Effective:2025-09-01

Enforcing Agencies

Comptroller of Public Accounts

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025
Compliance Deadline: September 1, 2025. To claim refunds for the first eligible period, data tracking systems (metering or logging) must be operational on this date. There is no retroactive "look-back" period.
Agency Rulemaking: The Comptroller of Public Accounts must publish rules prior to September 1, 2025. This rulemaking will define the specific "fixed percentage" allowed for claims without meters and establish the approval process for metering devices.

Immediate Action Plan

Audit Fleet Assets: Immediately identify and list all vehicles with PTO or APU units (excluding sleeper cab APUs).
Verify Telematics Capabilities: Contact your telematics vendor to confirm they can generate a report separating "PTO-On Fuel Burn" from general idling by Q2 2025.
Calculate ROI: Compare estimated tax recovery against the cost of metering upgrades. If the recovery is low, plan to use the state's default "Percentage Method" to minimize administrative burden.
Monitor Rulemaking: Assign a compliance officer to track the Comptroller’s proposed rules in Summer 2025 regarding approved devices and percentage rates.

Operational Changes Required

Contracts

Full-Service Leases: Review agreements immediately. If the lessor pays for fuel/tax, the lessor owns the credit. You must renegotiate to pass this tax benefit through to your organization.
Telematics/Vendor Agreements: Update service level agreements (SLAs) with telematics providers (e.g., Geotab, Samsara). You require a guarantee that their reporting tools can isolate "PTO Active" fuel burn from general "Idling." Standard idling reports are insufficient for tax substantiation.

Hiring/Training

Fleet Management Training: Fleet managers must be trained to distinguish between *taxable idling* (driver comfort/HVAC) and *non-taxable PTO usage* (active pumping, mixing, lifting).
Driver Protocols: Drivers of vehicles using manual PTO engagement must be trained to engage the PTO system strictly during work operations to ensure ECU data logs are accurate.

Reporting & Record-Keeping

Refund Claim Workflow (Non-License Holders): Most businesses must implement a new workflow to aggregate fuel invoices and PTO data logs to file periodic refund claims (likely Form 06-106).
Tax Return Modification (License Holders): Licensed suppliers/distributors must update tax software to utilize the specific line item for Section 162.227(d-1) credits.
Audit Defense: You must retain digital data logs and calibration records for metering devices for four years. Data must explicitly separate propulsion fuel from auxiliary fuel.

Fees & Costs

Hardware/Software Upgrades: While there are no new state fees, businesses opting for the "Metered Method" (to maximize refunds) may incur capital costs to retrofit vehicles with physical flow meters or upgrade telematics subscriptions to access ECU fuel data.

Strategic Ambiguities & Considerations

The "Percentage" Determination: The statute grants the Comptroller authority to determine a fixed percentage of fuel eligible for refund if a meter is not used. It is currently unclear if this will be a blanket flat rate (e.g., 5% for all trucks) or asset-specific (e.g., 30% for cement mixers vs. 5% for bucket trucks). A low blanket rate would disadvantage heavy-use industries.
Definition of "Approved Device": The law requires the use of a "metering or measuring device." The Comptroller has not yet confirmed if standard OEM Engine Control Unit (ECU) data satisfies this requirement or if external, physical flow meters will be mandated.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsTaxation Taxation--motor Fuels Comptroller of Public Accounts

Official Analysis

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BILL ANALYSIS

Senate Research Center	S.B. 771
89R4129 SRA-F	By: Hinojosa, Juan "Chuy"
	Finance
	3/7/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Prior to 2003, Texas provided the same credit/refund for motor fuels tax paid on either gasoline or diesel used to operate auxiliary power units (APUs) and power take-off (PTO) equipment. Because the fuel used to power APUs and PTO equipment is not used to propel a vehicle on the highway, Texas historically provided a credit or rebate for the motor fuel tax paid on either the gasoline or diesel used to power such equipment.

In 2003, when the motor fuels tax was rewritten to change the point of taxation, the credit and refund provisions applicable to tax paid on diesel fuel were eliminated, while the same provisions for tax paid on gasoline were retained. This bill will create a more equitable tax situation by reinstating the credit/refund previously granted to diesel fuel users.

As proposed, S.B. 771 amends current law relating to a credit or refund for diesel fuel taxes paid on diesel fuel used in this state by auxiliary power units or power take-off equipment.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 162.227, Tax Code, by adding Subsection (d-1), as follows:

(d-1) Authorizes a license holder to take a credit on a return for the period in which the purchase occurred, and authorizes a person who does not hold a license to file a refund claim with the Comptroller of Public Accounts of the State of Texas (comptroller), if the license holder or person paid tax on diesel fuel and the diesel fuel is used in this state by auxiliary power units or power take-off equipment on any motor vehicle. Authorizes the comptroller, if the quantity of that diesel fuel can be accurately measured while the motor vehicle is stationary by any metering or other measuring device or method designed to measure fuel separately from fuel used to propel the motor vehicle, to approve and adopt the use of the device as a basis for determining the quantity of diesel fuel consumed in those operations for a tax credit or refund. Authorizes the license holder, if there is no separate metering device or other approved measuring method, to take the credit and authorizes the person who does not hold a license to claim the refund on a percentage of the diesel fuel consumed by each motor vehicle equipped with an auxiliary power unit or power take-off equipment. Requires the comptroller to determine the percentage of diesel fuel for which the credit or refund is authorized to be claimed. Provides that the climate-control air conditioning or heating system of a motor vehicle that has a primary purpose of providing for the convenience or comfort of the operator or passengers is not a power take-off system, and a credit or refund is prohibited from being allowed for the tax paid on any portion of the diesel fuel that is used for that purpose. Prohibits a credit or refund from being allowed for the diesel fuel tax paid on that portion of the diesel fuel that is used for idling.

SECTION 2. Effective date: September 1, 2025.

Senate Authors

Sen. Juan HinojosaDemocrat · Primary Author

House Sponsor

Rep. Trent AshbyRepublican · Primary Sponsor

Bill Text(with markup)

S.B. No. 771

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to a credit or refund for diesel fuel taxes paid on diesel
	fuel used in this state by auxiliary power units or power take-off
	equipment.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 162.227, Tax Code, is amended by adding
	Subsection (d-1) to read as follows:
	(d-1) A license holder may take a credit on a return for the
	period in which the purchase occurred, and a person who does not
	hold a license may file a refund claim with the comptroller, if the
	license holder or person paid tax on diesel fuel and the diesel fuel
	is used in this state by auxiliary power units or power take-off
	equipment on any motor vehicle. If the quantity of that diesel fuel
	can be accurately measured while the motor vehicle is stationary by
	any metering or other measuring device or method designed to
	measure the fuel separately from fuel used to propel the motor
	vehicle, the comptroller may approve and adopt the use of the device
	as a basis for determining the quantity of diesel fuel consumed in
	those operations for a tax credit or tax refund. If there is no
	separate metering device or other approved measuring method, the
	license holder may take the credit and the person who does not hold
	a license may claim the refund on a percentage of the diesel fuel
	consumed by each motor vehicle equipped with an auxiliary power
	unit or power take-off equipment. The comptroller shall determine
	the percentage of diesel fuel for which the credit or refund may be
	claimed. The climate-control air conditioning or heating system of
	a motor vehicle that has a primary purpose of providing for the
	convenience or comfort of the operator or passengers is not a power
	take-off system, and a credit or refund may not be allowed for the
	tax paid on any portion of the diesel fuel that is used for that
	purpose. A credit or refund may not be allowed for the diesel fuel
	tax paid on that portion of the diesel fuel that is used for idling.
	SECTION 2. This Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 21, 2025

TO:	Honorable Joan Huffman, Chair, Senate Committee on Finance

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB771 by Hinojosa, Juan "Chuy" (Relating to a credit or refund for diesel fuel taxes paid on diesel fuel used in this state by auxiliary power units or power take-off equipment.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for SB771, As Introduced: a negative impact of ($5,230,000) through the biennium ending August 31, 2027.

General Revenue-Related Funds, Five- Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026	($2,473,000)
2027	($2,757,000)
2028	($2,817,000)
2029	($2,876,000)
2030	($2,933,000)

All Funds, Five-Year Impact:

Fiscal Year	Probable Revenue (Loss) from General Revenue Fund 1	Probable Revenue (Loss) from Available School Fund 2	Probable Revenue (Loss) from State Highway Fund 6
2026	($207,000)	($2,266,000)	($6,798,000)
2027	($231,000)	($2,526,000)	($7,579,000)
2028	($236,000)	($2,581,000)	($7,744,000)
2029	($241,000)	($2,635,000)	($7,905,000)
2030	($245,000)	($2,688,000)	($8,063,000)

Fiscal Analysis

The bill would allow a credit or refund of diesel fuel tax paid on diesel fuel used for auxiliary power units or power take-off equipment on any motor vehicle.

The bill would take effect September 1, 2025.

Methodology

The bill would reinstate the auxiliary power unit and power take-off deduction, previously allowed under former Chapter 153, Texas Tax Code. The bill would allow a diesel fuel tax license holder to take a credit and permit a person who does not hold a diesel fuel tax license to file a refund claim, for the amount of diesel fuel tax paid on diesel fuel used by an auxiliary power unit or power take-off equipment on any motor vehicle.

According to the Comptroller, the estimates were distributed by fund in accordance with the statutory allocation of diesel tax revenue. The estimate for fiscal 2026 was adjusted for the statutory lag in motor fuel tax remittances.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

JMc, KK, SD

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Frequently Asked Questions

Common questions about SB771

What does Texas SB771 do?

SB771 reinstates the statutory mechanism allowing businesses to claim tax credits or refunds for diesel fuel used in Auxiliary Power Units (APUs) and Power Take-Off (PTO) equipment, effective September 1, 2025. This legislation creates a revenue recovery opportunity for construction, waste management, and energy sectors, provided they can substantiate non-propulsion fuel usage through strict data logging. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: September 1, 2025.

Who authored SB771?

SB771 was authored by Texas Senator Juan Hinojosa during the Regular Session.

When was SB771 signed into law?

SB771 was signed into law by Governor Greg Abbott on May 24, 2025.

Which agencies enforce SB771?

SB771 is enforced by Comptroller of Public Accounts.

How urgent is compliance with SB771?

The compliance urgency for SB771 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB771?

The cost impact of SB771 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB771 address?

SB771 addresses topics including taxation, taxation--motor fuels and comptroller of public accounts.

Legislative data provided by LegiScanLast updated: November 25, 2025

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