Over $1 billion in federal fuel tax refunds goes unclaimed each year by small businesses that use fuel in off-road equipment, according to FuelCred. A fuel tax credit is a federal subsidy that allows businesses to reduce taxable income on specific types of fuel purchases, including everything from the fuel that fishermen use to run boats to fuel used in warehouse forklifts.
The startup claims to provide the world’s first and only fuel tax refund app for small farmers and landscapers. It automates the process of claiming the refund to help farmers get their fuel tax back into their pockets.
“What we’ve found is that many small businesses are unaware these credits even exist. What’s most surprising is that many of the CPAs and tax preparers who serve these businesses are also unaware, let alone TurboTax or any of the common DIY tax packages,” company head of technology Joe Chan told AFN. “Currently, the average FuelCred subscriber is owed about $600 in fuel tax refunds on top of whatever else they may be expecting in terms of their regular income tax refund.”
The company’s iOS app allows users to connect their credit card to the app so that it can automatically categorize and import any past and future fuel purchases. The company uses the data along with weekly regional fuel prices to make a fuel tax refund calculation as well as completing the appropriate IRS paperwork. The service is free to use and only requires a fee if a user wants to generate an IRS form and claim the refund.
The federal tax credit for diesel fuel is $0.243 per gallon while the federal tax credit for gasoline is $0.183 per gallon. Some states also have fuel taxes with a similar refund option, which FuelCred hopes to add to the platform down the road.
“At the end of the year, this form can be provided to your CPA or tax preparer to be filed with your regular income taxes. And then you receive a check for the refund.”
FuelCred is new to the startup scene having launched this past September at the GIE+ EXPO. The company hasn’t taken on any venture capital investment yet, but may eventually consider adding outside investment from investors who offer a true partnership.
Here’s the rundown on FuelCred’s startup journey and its new app.
What is your technology and what is it trying to solve?
FuelCred is a new iOS mobile app that helps small businesses apply for federal tax credits for gasoline or diesel fuel used in off-road equipment. FuelCred automates tracking of off-road fuel use, applies the correct tax treatment using IRS rules, and generates Form 4136, which is the form the IRS requires to apply for fuel tax credits. Farmers, landscapers, and other small businesses can now save about $0.20/gallon on fuel used in mowers, tractors, generators and other equipment regardless of whether they owe any other tax to the federal government.
Who is your target customer?
Our target customers are small businesses that use non-dyed fuel for off-road, business purchases, such as small farmers, landscapers, construction companies, etc.
What are some of the challenges that you’ve faced and how did you overcome them?
We’ve faced the typical start-up challenges- namely scarcity of funds and a lack of a reputation with our target customers. Additionally, this specific tax credit, while well known by larger companies (and in fact, we know about it because we all come from large accounting companies), is not well known at all by most small businesses. So we face the additional challenge of educating our potential customers about the pot of free money that they’re missing out on.
What’s been the most surprising aspect of your startup journey so far?
I think the biggest surprise to us is how difficult it is to break through all the noise that our customers are bombarded with on a daily basis regarding new products and new services. In theory, our service should be a “no-brainer” since it ultimately pays the user back in real cash way more than they pay to receive the benefit. But so far it’s been a real struggle.
Do you have any mentors that have assisted you along the way?
Way too many to name and we’d certainly risk upsetting the folks who we left off that list. But mostly we’d like to give a shout out to our parents. Actually, all of the founders of FuelCred come from farming families. Our parents’ perspectives, motivating advice, and daily examples of the true grit that’s necessary to make a small business work have in most ways made our business possible and got us to where we are today.
Do you have any competitors? Is anyone else trying to address this issue?
Our only competitors are the large tax firms who prepare these calculations for their clients using an army of accountants. For small and medium businesses our competitors are mostly the CPAs who happen to understand how these tax credits work. That said, FuelCred is a tool that could also help CPAs and tax preparers complete these tax forms on behalf of their clients. So we’re really not competing at all.
Any advice for other startups out there?
I’d say, “Keep at it and never give up!” Rome certainly wasn’t built in a day and it’s highly unlikely that your successful start-up will be built in a day either.