I believe that different states have different legislation concerning taxes on biofuel. For example, any person using, producing, storing, or selling biofuel in the state of Mississippi must abide by the provisions of the Mississippi Fuel Tax law and must also obtain a Special Fuel Distributor Permit. They must also pay any applicable taxes.
Not if you get it for free like my uncle does! Whenever lives in Placerville, CA and has converted a diesel Mercedes to run on vegetable oil. Whenever he eats lunch at a restaurant he frequents, the owners give him their used vegetable oil to run his car. He then takes it home and filters it before putting it in his car.
However, if biofuels (or any alternative fuel for that matter) replace gasoline as the primary fuel, they will inevitably be taxed because gasoline taxes are used to maintain our roads. Without tax money to support public roads, every single road would be a private toll road.
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