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Title 26 — Internal Revenue CodeRelease 119-73

§4105 Two-party Exchanges

Title 26 › Subtitle Subtitle D— Miscellaneous Excise Taxes › Chapter 32— MANUFACTURERS EXCISE TAXES › Subchapter A— Automotive and Related Items › Part III— PETROLEUM PRODUCTS › Subpart B— Special Provisions Applicable to Fuels Tax › § 4105

Last updated Apr 6, 2026|Official source

Summary

In a two-party exchange of taxable fuel, the person delivering the fuel is not liable for the fuel tax under section 4081(a)(1)(A)(ii). A two-party exchange is a transfer, not a sale, between two registered taxable fuel registrants. It must meet four tests: the delivering person holds the fuel's inventory position at the terminal, the exchange happens before or at the same time the fuel is removed across the rack, the terminal operator's records treat the receiving person as the one removing the fuel, and there is a written contract.

Full Legal Text

Title 26, §4105

Internal Revenue Code — Source: USLM XML via OLRC

(a)In a two-party exchange, the delivering person shall not be liable for the tax imposed under section 4081(a)(1)(A)(ii).
(b)The term “two-party exchange” means a transaction, other than a sale, in which taxable fuel is transferred from a delivering person registered under section 4101 as a taxable fuel registrant to a receiving person who is so registered where all of the following occur:
(1)The transaction includes a transfer from the delivering person, who holds the inventory position for taxable fuel in the terminal as reflected in the records of the terminal operator.
(2)The exchange transaction occurs before or contemporaneous with completion of removal across the rack from the terminal by the receiving person.
(3)The terminal operator in its books and records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction to the Secretary.
(4)The transaction is the subject of a written contract.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Prior sections 4111 to 4113, 4121, and 4131 of this title constituted a former subchapter B of this chapter, see

Prior Provisions

note set out preceding section 4121 of this title.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 108–357, title VIII, § 866(c), Oct. 22, 2004, 118 Stat. 1622, provided that: “The amendment made by this section [enacting this section] shall take effect on the date of the enactment of this Act [Oct. 22, 2004].”

Reference

Citations & Metadata

Citation

26 U.S.C. § 4105

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73