Were new federal environmental taxes on crude oil, imported 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 U.S. refineries, petroleum products entering the country, and listed chemicals sold by manufacturers, producers, or importers.

The Board concluded that these amounts remained in California taxable gross receipts. They were manufacturer or importer excise taxes and expenses of the taxpayer, not federal taxes imposed on retail sales that qualified for the statutory exclusion.

The memorandum reached the same no-exclusion conclusion for parallel California taxes imposed by Senate Bill 788 on crude oil, petroleum products, and listed chemicals.

Citations and references

• California Revenue and Taxation Code sections 6012(a), 6012(c), and 6012(c)(4) (as cited)
• Internal Revenue Code of 1954, Subtitle D, Chapter 38, sections 4611, 4612(b), and 4661 (as cited)
• Public Law 96-510 (Statutes 1980) (as cited)
• California Senate Bill 788 imposing taxes on the same commodities and at the same rates as Public Law 96-510 (as cited) — bill version, chapter, enactment status, text, analyses, and effective date not supplied
• April 15, 1981 Nunes memorandum stating that the Public Law 96-510 taxes were includable in the sales-tax measure and requesting written confirmation — memorandum and attachments, if any, not reproduced in the official PDF
• Crude oil received at refineries, petroleum products entering the United States or California, listed chemicals, prior-tax proof under section 4612(b), and federal and California environmental-tax amounts — returns, invoices, import records, tax calculations, proof, and payment records not reproduced in the official PDF
• April 22, 1981 internal Board confirmation copied to Ronald L. Dick — no recipient response, return treatment, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1200's sections 4611 and 4661, crude-oil, imported-petroleum, listed-chemical, inclusion conclusions, and April 22, 1981 date — annotation omits Public Law 96-510, section 4612(b), Senate Bill 788, the April 15 memorandum, manufacturer-or-importer and non-retail-tax reasoning, underlying records, later outcome, and reliance status and supplies no additional proceeding record

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-1200.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. R. Nunes

From:

John H. Murray

Subject:

Public Law 96-510

295.1200

Date:

April 22, 1981

Public Law 96-510 (Statutes 1980) adds "Chapter 38. Environmental Taxes" (commencing with Section 4611) to Subtitle D of the Internal Revenue 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 the sales tax under Section 6012. JHM:at cc: Mr. Ronald L. Dick