How to Start a Fuel Distribution Business: Licenses, Supply, Trucks and Cash

A new jobber pays for fuel within days of lifting it at the rack and gets paid by commercial customers, often 30 days or more after delivering it. The business carries the fuel money in between, and at 250,000 gallons a month that runs past $1 million.

The cash tied up in unpaid bills

Take a jobber selling 250,000 gallons of on-road diesel a month to about 30 trucking companies and fleet yards. A transport truck hauls roughly 7,500 of them per trip, so that is 33 loads, one and a half each working day. Say the diesel costs $4.80 a gallon at the rack with federal and state taxes in the price, and it sells at 15 cents over cost.

In a 30-day month that fuel costs $1.2 million, or $40,000 a day. With the supplier drafting your account 10 days after each lift, you owe about 10 days of fuel at any moment: $400,000. Customers on 30-day terms who pay in 35 days on average owe you 35 days of sales at $41,250 a day, or $1,443,750. The gap, $1,043,750, is money the business has paid out for fuel and is still waiting to collect. A year's gross margin at 15 cents a gallon comes to $450,000, so the cash tied up is more than twice the year's gross margin, before trucks, payroll and insurance come out of it.

U.S. retail diesel averaged $6.13 a gallon the week of November 9, 2026, $2.29 more than a year earlier, and the fourth row takes that rise back out. Each day customers stretch past terms adds $41,250 to the cash the business needs, so credit checks and collections belong in the start-up plan. Owners carry the gap with their own money, a bank line of credit, longer supplier terms or a mix.

Licenses and tax registration

Federal excise tax is charged when fuel leaves the terminal rack: 18.4 cents a gallon on gasoline and 24.4 cents on diesel. The position holder, the company that owns the fuel inside the terminal, owes it, so a jobber buying at the rack pays the tax inside the price. IRS Form 637 registration is required of refiners, terminal operators, position holders and blenders, among others; reselling tax-paid fuel falls outside that list. If you blend biodiesel or ethanol into fuel yourself outside a terminal, the IRS counts you as a blender who has to register. A jobber may also register as an ultimate vendor, which lets it claim the tax back on sales to state and local governments and nonprofit schools.

The state license and its bond, in four states:

FastDragon's article on motor fuel tax bonds covers what a surety charges to write one.

Trucks, drivers and insurance

Hauling your own fuel makes you a hazardous materials carrier. The tank truck runs under placards. Its driver holds a commercial driver's license with the X endorsement, which combines the tank and hazmat endorsements. The company registers with PHMSA, the federal hazmat safety agency, before the first load. A driver adding hazmat clears a TSA security check first, and TSA asks applicants to enroll at least 60 days ahead.

A jobber can also hire a licensed fuel carrier for transport loads and own no trucks at the start. The carrier holds its own registration and insurance.

Supply, branded or unbranded

Unbranded fuel is bought at the rack without a refiner's brand, from any supplier that opens an account for you. Branded supply is a contract to sell a refiner's brand, with standards for the stations that carry it; Valero, for one, requires branded sites to meet minimum requirements and economic criteria. Fleets buy diesel for their own trucks, so a brand counts for less with them than at a station.

The supplier account sets the draft days in the cash example, and the $400,000 owed at any moment is the credit line that example needs.

Questions for a supplier

1. How many days after a lift do you draft my account?
   Get the answer per product and in writing. Ten days against three is worth $280,000 in the example above.
2. How large a credit line will you open, and what do you need for it?
   Ask whether the supplier wants financial statements, a personal guarantee, a letter of credit or a deposit, and how big a line each one supports.
3. Which terminals can I lift from?
   A second terminal keeps trucks loading when one rack runs short or a loading lane is down.
4. How is my share set when supply gets tight?
   In a shortage, suppliers cap what each account can lift, called allocation. Ask how a new account's cap is figured before the first shortage.
5. Is there a minimum volume?
   Ask for any monthly or yearly minimum in gallons, and what the contract lets the supplier do if you fall short of it.
6. Do you collect the state tax on each lift, or do I remit it?
   The answer sets your bond and your filing dates. In Texas the bond is figured on the tax that could build up on fuel bought tax-free in one reporting period.

A bulk plant, or straight from the rack

A jobber can start with no storage: the truck loads at the rack and drops into customers' tanks. A bulk plant, a yard of aboveground tanks, lets you hold several days of fuel and refill tank wagons, the smaller delivery trucks (also called bobtails) that serve farm and fleet tanks, without a trip to the terminal. It also brings EPA's spill prevention rule. A facility that could spill into a waterway and holds more than 1,320 gallons in aboveground containers of 55 gallons or more needs a written SPCC plan before it starts operating. Up to 10,000 gallons above ground with a clean spill history, the owner can certify the plan; a plant with one 12,000-gallon tank is already past that line, and a licensed professional engineer certifies its plan.

Dates to watch: Georgia's suspension of its motor fuel excise tax runs through November 30, 2026 unless extended, and PHMSA registration for each July-to-June year is due by June 30.

Buying an existing jobber

Buying a jobber brings its customers and supply contracts along. FastDragon's article on buying or selling a jobber goes through valuation and supplier consent.

The back office, from the first invoice

Each delivery produces a bill of lading from the terminal, an invoice taxed for the customer's state and use, an inventory movement and a receivable to collect. FastDragon, ours, reads the supplier's invoice file, matches each load to the customer who bought it and posts to its own general ledger. Our review of petroleum wholesale software compares the systems built for that chain, and the petroleum accounting guide works through a month-end close. A jobber that later supplies stations run by commissioned agents, where the jobber owns the fuel and the agent runs the store, or adds stores of its own, has a guide to software for jobbers with stores, and the PDI competitors guide sets PDI's products against the other vendors.