Are airport fees passed through by an aviation-fuel retailer included in California taxable gross receipts?

Plain-English summary

Airport fees charged to aviation-fuel retailers for the right to do business at an airport were included in taxable gross receipts. They were operating costs, and passing them to airlines as separately stated invoice items did not change their tax treatment.

The letter distinguished two other charges. An into-plane fee could be excluded as transportation if an airport agent delivered the fuel, the retailer did not use its own facilities or sell at a delivered price, the fee was separately stated and passed through actual changes, and it did not exceed the retailer's transportation cost. A federal aviation-fuel tax assumed to arise under Internal Revenue Code section 4091 could also be excluded if the purchaser certified eligibility for a direct refund or income-tax credit.

Citations and references

• California Revenue and Taxation Code sections 6012(a), 6012(c)(4), 6012(c)(7), and 6051 (as cited)
• California Sales and Use Tax Regulations 1617(a), 1617(b), and 1628(a) and (b)(1) — as cited; source says Regulation 1628 was enclosed, but the enclosure is absent from the official PDF
• Internal Revenue Code section 4091 (as cited under an express assumption)
• California Business Taxes Law Guide Annotation 295.1820 dated September 5, 1974 on wharfage charges — as cited; supporting opinion and copy not supplied
• March 20, 1996 letters from an aviation consultant representing several airlines — letters, airline identities, agreements, and attachments not reproduced in the official PDF
• Airline aviation-fuel purchases and sales-tax reimbursement, fuel-retailer invoices separately stating into-plane fees, airport fees and a 4.3-cent federal tax, airport-agent delivery, storage facilities, actual transportation costs and adjustments, airport business-right charges, and purchaser refund-or-credit certifications — fuel contracts, invoices, delivery records, airport agreements, cost records, tax returns, payments, and certifications not reproduced in the official PDF
• July 3, 1996 tax-counsel response based on express transportation, delivered-price, section 4091 and certification assumptions and copied to a redacted district administrator — no consultant or airline reply, verified assumptions, transaction treatment, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1304's airport business-right fee, retailer operating-cost, separately-stated pass-through, taxable-gross-receipts conclusion, and July 3, 1996 date — annotation omits the March 20 letters, airlines, into-plane and federal-tax issues, assumptions, statutory and regulatory authorities, Annotation 295.1820, missing Regulation 1628 enclosure, 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/295-1304.pdf

Original ruling text

295.1304

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 324-2614
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles

July 3, 1996

KATHLEEN CONNELL
Controller, Sacramento
────────
E. L. Sorensen, Jr.
Executive Director

Mr. B--- W. K--B--- A--- Consulting
XXXX --- Drive
--- ---, --- XXXXX
Re: Measure of Tax on the Sale of Aviation Fuel
Dear Mr. K---:
This is in response to your letters dated March 20, 1996, regarding the measure of tax on the sale of aviation fuel to your clients. You state that you represent several airlines which fly in and out of various cities located in California and that these airlines are paying California sales tax reimbursement on their fuel purchases. You ask whether into-plane fees, airport fees and the federal aviation fuel deficit reduction tax of 4.3 cents per gallon, each of which are separately stated on invoices from the fuel retailers, are included in the measure of tax. DISCUSSION Retail sales of tangible personal property in California are subject to sales tax, measured by the gross receipts, unless the sale is specifically exempt from taxation by statute. (Rev. & Tax. Code § 6051.) Revenue and Taxation Code section 6012(a) defines “gross receipts” as the total amount of the sale price of retail sales of retailers, valued in money, whether received in money or otherwise, without any deduction unless specifically provided by statute. Into-Plane Fees Transportation charges which satisfy the requirements of Revenue and Taxation Code section 6012(c)(7), as explained in Sales and Use Tax Regulation 1628 (copy enclosed), are excluded from the measure of tax. Regulation 1628 provides, in part: “(a) ... [T]ax does not apply to ‘separately stated’ charges for transportation of property from the retailer’s place of business or other point from which shipment is made ‘directly to the purchaser,’ provided the transportation is by other than facilities of the retailer, i.e., by United States mail, independent contract or

Mr. B--- W. K---

-2-

July 3, 1996
295.1304

common carrier. The place where the sale occurs ... is immaterial, except when the property is sold for a delivered price or the transportation is by facilities of the retailer, as explained in (b) below. The amount of transportation charges excluded from the measure of tax shall not exceed the cost of the transportation to the retailer. “.... “(b)(1) ... ‘Delivered Price.’ Property is sold for a delivered price when the price agreed upon in the contract for sale includes whatever cost or charge may be made for transportation of the property directly to the purchaser. A sale for a ‘guaranteed price’ including a separately stated amount for transportation is a sale for a ‘delivered price.’ Property is not sold for a delivered price when the price is agreed upon and to this price is added a separately stated amount representing the cost or charge for transportation of the property directly to the purchaser and any increase or decrease in the actual cost of transportation is borne by or credited to the purchaser.” Our understanding is that the separately stated into-plane fees represent a charge to a retailer by an airport agent to deliver or cause fuel to be delivered directly into a purchaser’s aircraft from a storage facility at the airport. Thus, we assume that the transportation of the fuel is not by facilities of the retailer of the fuel. We further assume that the retailer is not selling fuel at a “delivered price,” as defined in Regulation 1628(b)(1). Rather, the price for the fuel is agreed upon and the separately stated amount representing the charge for the transportation of the fuel directly to the purchaser is added to that price, with any increase or decrease in the actual cost of transportation being borne by or credited to the purchaser. Under these facts, if the retailer of the fuel separately states such transportation charges in an amount that does not exceed the amount charged by the airport, the fees are for transportation which is excludable from the retailer’s taxable gross receipts. Airport Fees Our understanding is that airport fees are charged by the airport to aviation fuel retailers for the right to conduct business at the airport. Because airport fees represent another cost of doing business, they are included in the measure of tax. (See BTLG Annot. 295.1820 (9/5/74).) The fact that the retailer may subsequently pass such fees on to the purchasing air carriers and separately state such fees on its invoices has no effect on the application of tax. Federal Deficit Reduction Tax You ask whether the federal aviation fuel deficit reduction tax of 4.3 cents per gallon is included in taxable gross receipts. Revenue and Taxation Code section 6012(c)(4), as explained in Regulation 1617, excludes certain federal taxes from taxable gross receipts. Regulation 1617, provides in relevant part:

Mr. B--- W. K---

-3-

July 3, 1996
295.1304

“(a) RETAILERS’ EXCISE TAXES. Gross receipts subject to sales tax and the sales price subject to use tax do not include the amount of any federal tax imposed upon or with respect to retail sales whether imposed upon the retailer or upon the consumer and regardless of whether the amount of federal tax is stated to the consumer as a separate charge.... “(b) MANUFACTURERS’ OR IMPORTERS’ EXCISE TAXES. (1) Except as stated in (b)(2) below gross receipts subject to sales tax and the sales price subject to use tax include the amount of any manufacturers’ or importers’ excise tax included in the prices of the property sold, even though the manufacturer or importer is also the retailer thereof, and it is immaterial whether or not the amount of such tax is stated as a separate charge. “(2) Gross receipts subject to sales tax and the sales price subject to use tax do not include the amount of manufacturers’ or importers’ excise tax imposed pursuant to Section 4091 of the Internal Revenue Code with respect to diesel fuel and jet fuel for which the purchaser certifies that he or she is entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid
. . . .”
For purposes of this opinion, we assume that the federal aviation fuel deficit reduction tax of 4.3 cents per gallon is the tax imposed on the sale of aviation fuel by the producer or the importer under Internal Revenue Code section 4091. Under these facts, if the purchaser certifies that it is entitled to either a direct refund or credit against its income tax for the federal excise tax paid, such tax is not included in taxable gross receipts. If you have any further questions, please write again. Sincerely,

Sophia H. Chung
Tax Counsel
SHC:rz
Enclosure: Regulation 1628
cc: --- District Administrator (--)