Did separately stated reimbursements for Port of Long Beach wharfage fees remain in a fuel seller's California taxable gross receipts?

Plain-English summary

The Board's Out-of-State auditing office asked whether a redacted taxpayer's separately stated wharfage reimbursements entered the tax measure. The Port of Long Beach collected fees for the privilege of passing merchandise through its wharf facilities and measured petroleum charges by the delivered volume. The taxpayer sold fuel oil to steamship companies through the port and separately recovered the port's charge from customers.

Headquarters legal counsel concluded that the reimbursements remained in taxable gross receipts. The wharfage fee was a labor or service cost and seller expense forming part of the fuel sale, similar to taxable “into plane fees” on aircraft fuel; no source for that prior treatment is reproduced.

It did not qualify for the exclusion covering separately stated transportation from the retailer's shipping point directly to the purchaser. The movement occurred entirely within the port premises, so the memorandum compared the service to a gas station pumping fuel into a vehicle rather than to shipment from one point to another.

The PDF supplies no port tariff, fee invoice, fuel contract, title or delivery term, audit determination, appeal, or later outcome.

Citations and references

• California Revenue and Taxation Code section 6012(a)(2) and (3), (b)(1) and (2), and (c)(7) — quoted in part for gross receipts without deductions for materials, labor or service cost, other expense, or transportation, including part-of-sale services and all forms of receipts, while excluding certain separately stated transportation from the retailer's shipping point directly to the purchaser; complete text, version, other conditions, and later history not supplied
• Board treatment of “into plane fees” on aircraft fuel — identified as analogous and taxable gross receipts; no annotation, ruling, opinion, facts, date, complete analysis, or later history identified or reproduced in the official PDF
• August 8, 1974 memorandum from Out-of-State Auditing asking whether a redacted taxpayer's separately stated wharfage charges entered the tax measure — request, audit report and workpapers, taxpayer records, fee schedules, port tariffs, fuel-sale contracts and invoices, title and delivery terms, and tax records not reproduced in the official PDF
• Port of Long Beach fees described as charging for the privilege of moving merchandise through port wharf facilities and, for petroleum, measuring the charge by delivered volume; the taxpayer sold fuel oil to steamship companies through the port and sought reimbursement from customers — port tariff, invoices, receipts, measurement records, legal-incidence material, contracts, and transaction records not reproduced
• September 5, 1974 Headquarters Legal Counsel memorandum treating wharfage as seller expense and part-of-sale service rather than shipment, because movement remained within the same port premises, and analogizing it to pumping gasoline into an automobile — no implementation, return adjustment, audit determination, assessment, refund claim, appeal, or later outcome supplied
• Official Annotation 295.1820's port privilege, wharf facility, labor-or-service cost, expense, customer pass-through, gasoline-pumping analogy, and September 5, 1974 rules — annotation omits the internal-request and audit provenance, Port of Long Beach, petroleum volume basis, fuel-oil and steamship facts, into-plane-fee analogy, section 6012 quotation and transportation analysis, absent 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/295-1820.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State (DMA) – Auditing

From:

Legal Counsel (HLC) - Headquarters

295.1820

Date:

September 5, 1974

Subject:

This is in response to your memorandum of August 8, 1974, in which you inquire as to whether “wharfage charges” separately stated by subject taxpayer should be included within the measure of tax. It is our opinion that these charges are similar to “into plane fees” charged on fuel sold to owners of airplanes and which are considered to be part of the gross receipts subject to tax. We understand that “wharfage” charges” are fees collected by the Port of Long Beach for the privilege of passing merchandise through the wharf facilities operated by the Port, and that in the case of petroleum and petroleum products the charge is measured by the volume of merchandise delivered. Taxpayer makes sales of fuel oil to steamship companies through the Port of Long Beach and makes a separate charge to its customers for reimbursement of the “wharfage charges” which the Port charges taxpayer. The basis upon which the charges made by taxpayer to its customers for reimbursement of the charges made by taxpayer to its customers for reimbursement of the “wharfage charges” are considered includable in the measure of sales tax on the sale of the fuel is described in the following paragraphs. Section 6012 of the Revenue and Taxation Code defines “gross receipts”, which constitute the measure of sales tax. The portions of the section that bear on the question presented are as follows: (a)“Gross receipts” mean the total amount of the sale… price… without any deduction on account of any of the following:

(2) The cost of the materials used, labor or service cost, interest paid, losses, or any other expense.

(3) The cost of transportation of the property, except as excluded by other provisions of this section.

(b) The total amount of the sale… price includes all of the following: (1) Any services that are a part of the sale. (2) All receipts, cash, credits and property of any kind. (c) “Gross receipts” do not include any of the following:… (7) Separately stated charges for transportation from the retailer’s place of business or other point from which shipment is made directly to the purchaser… The “wharfage charge” constitutes a labor or service cost and an expense, and is made for a service that is part of the sale. The expense is incurred by taxpayer, and is passes on to its customer as a part of the “sale price” and “gross receipts” from the sale of the fuel. The fee is not excludable from the measure of tax as a charge for “transportation from the retailer’s place of business or other point from which shipment is made directly to the purchaser”. The movement of the fuel is entirely within the same place of business or premises, i.e., the port. The movement does not constitute a shipment within the meaning of Section 6012. The service provided is essentially the same as that provided by the operator of a service station in pumping gasoline into an automobile. The “wharfage charge” is therefore includable in the measure of tax.

HLC:rl