Were the new federal environmental taxes on crude oil, petroleum products, and listed chemicals included in California gross receipts?

Plain-English summary

Public Law 96-510 imposed federal environmental taxes on crude oil received at a United States refinery, petroleum products entering the country, and listed chemicals sold by their manufacturer, producer, or importer.

California treated those charges as manufacturer or importer excise taxes and as expenses included in gross receipts. They were not federal taxes imposed on retail sales, so the retail-tax exclusion did not apply.

The memorandum reached the same inclusion result for California Senate Bill 788 taxes on the same commodities at the same rates.

Common questions

Were the federal environmental taxes excluded from gross receipts?

No.

Why not?

They were manufacturer or importer excise taxes, not taxes imposed on retail sales.

Did the opinion also discuss a California environmental-tax bill?

Yes. It treated the Senate Bill 788 charges as included in the sales-tax measure.

Citations and references

• Public Law 96-510 (Statutes 1980), adding Chapter 38, Environmental Taxes, to Subtitle D of the Internal Revenue Code of 1954
• Historical Internal Revenue Code sections 4611, 4612(b), and 4661
• California Revenue and Taxation Code section 6012(a) and (c)(4)
• California Senate Bill 788
• R. Nunes's April 15, 1981 memorandum concluding that Public Law 96-510 taxes were included in the sales-tax measure — conclusion and confirmation request described; full memorandum not reproduced in the official PDF
• Federal and California crude-oil, petroleum-product, and listed-chemical tax provisions and rates — operative provisions summarized; complete enacted Public Law and Senate Bill texts, rate schedules, legislative materials, and implementation records not reproduced in the official PDF
• Possible later legislation, administrative interpretation, returns, audits, assessments, appeals, or other application after the memorandum — no follow-up or outcome supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/235-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/235-0025.pdf

Original ruling text

State of California

Board of Equalization

235.0025

Memorandum
To:

Mr. R. Nunes

From:

John H. Murray

Subject:

Public Law 96-510

Date:

April 22, 1981

Public Law 96-510 (Statutes 1980) adds “Chapter 38. Environmental Taxes” (commenicng with Section 4611) to Subtitle D of the internal Revneue Code of 1954. These environmental taxes are (1) a tax on crude oil received at a United States refinery and on petroleum products entering into the United States for consumption, use, or warehousing (Section 4611). The tax provides that it shall not be imposed if the person liable for the tax establishes that a prior tax imposed under this act has been imposed with respect to the product (Section 4612(b)); and (2) a tax on some 42 listed chemicals when sold by the manufacturer, producer, or importer thereof (Section 4661). In your memorandum of April 15, 1981, you state that the taxes imposed by Public Law 96-510 are includable in the measure of the sales tax, and you ask that if I agree that I confirm this in writing. I agree with your conclusions. Section 6012(a) includes in “gross receipts” the cost of property sold; the cost of materials used; labor or service cost; interest paid; losses; and any other expense. These taxes are an expense of the taxpayer and are included in his “gross receipts” unless expressly excluded by other provisions of the law. Section 6012(c) excludes from “gross receipts” “the amount of any tax (not including, however, any manufacturers’ or importers’ excise tax) imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.” The taxes in question are manufacturers’ or importers’ excise taxes within the meaning of subparagraph (c)(4) of Section 6012 and, accordingly, are not excluded from the measure of the sales tax. furthermore, it should be noted that these taxes are not taxes “imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.” Senate Bill 788 imposes taxes on the same commodities and at the same rates as does Public Law 96-510. These taxes are imposed upon crude oil received at a refinery in this state and upon petroleum products imported or brought into this state for sale, storage, use, or other consumption in this state and also upon the listed chemicals produced, used, or sold in this state by any person. Again, there is no basis for the exclusion of these items from the measure of sales tax under Section 6012. JHM:at