Under the historical carrier-fuel rule, did refueler trucks or ordinary hydrant piping turn immediate shipment into storage?

Plain-English summary

Under the historical rule, delivering fuel into a refueler truck did not defeat immediate-shipment treatment when the truck merely moved the fuel directly to aircraft rather than storing it. The described trucks generally emptied their 8,000-to-10,000-gallon loads into one to three aircraft within about four hours.

Fuel passing through a pipeline after title and risk transferred at an isolation valve could also be treated as in a delivery system, not storage. That conclusion assumed a commercially reasonable direct route, a uniform diameter determined by delivery needs, no storage “bulge,” and no intermediate storage before the hydrants.

The source itself warns that the historical air-common-carrier statutory provisions were deleted in 1991 and refers readers to section 6357.5 for later international-flight rules.

Common questions

Did any fuel truck qualify?

No. The conclusion depended on the truck serving as a direct refueling substitute, not a storage tank.

Was fuel sitting in the hydrant pipe considered stored?

Not on the assumed design. The pipe was treated as a delivery system because its size and route were not deliberately expanded to hold extra fuel.

Is the 1989 air-carrier exemption still current?

The official source says the provisions discussed were later deleted and directs attention to newer law.

Citations and references

• California Revenue and Taxation Code section 6385(c) — historical immediate-shipment fuel exemption applied
• California Code of Regulations, title 18, section 1621(b) — historical delivery-versus-storage rule quoted
• California Revenue and Taxation Code section 6357.5 — later air-common-carrier provision identified by the official source note

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/500-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/500-0084.pdf

Original ruling text

500.0084

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-5550

June 6, 1989

Deleted as to
air common
carriers stats
1991, Chap. 85
see now §
6357.5 as to air
common
carriers on
international
flights. SPJ
8/5/02

Re: Section 6385(c) Exemption
This is in response to your letters dated April 29, 1989 to Assistant Chief Counsel Gary Jugum. You ask whether the Section 6385(c) exemption for certain sales of fuel applies to two sets of facts. Refueler Trucks
_ would like to purchase fuel at certain airports as the fuel enters into aircraft refueler trucks owned by __. These trucks will hold between 8,000 and 10,000 gallons of fuels. The trucks will dispense between 4,000 and 10,000 gallons of fuel into each aircraft. Since the trucks will be filled on each visit to the fuel storage tanks, each truck might refuel from one to three aircraft. The trucks generally unload all their fuel within four hours; however, the period may be longer at night when airport operations are curtailed. As you know, a critical requirement to qualify for the exemption is that the fuel is sold for immediate shipment. Fuel sold for storage would not qualify for the exemption. The penultimate paragraph of subdivision (b) of Regulation 1621 states: “A sale of fuel, otherwise qualifying as a sale for immediate shipment under the above rules, will qualify for the exemption even though the fuel is delivered to a fuel truck or barge from which the fuel is delivered directly into the conveyance.” This paragraph was added to the regulation as the Board’s recognition that refueler trucks are utilized at certain airports as substitutes for underground hydrant systems. Thus, the otherwise applicable exemption remains applicable to sales into refueler trucks when those trucks are used merely to transport the fuel and not to store it. Based on the facts set forth above and in your letter, we conclude that the sale of fuel into the refueler trucks is a sale for immediate shipment under Section 6385(c) and subdivision (b) of Regulation 1621. Intermediate Piping

500.0084

_ purchases its fuel supply at the Los Angeles International Airport (LAX) into plane from its fuel subsidiary. The fuel subsidiary owns the day storage facility from which its fuel is delivered into __ aircraft. The storage facility will be removed, and the fuel will then be piped directly from the LAX fuel bulk storage facility to the terminal hydrant systems. The pipe to the terminal hydrant systems will be approximately 12 inches in diameter and 6,000 feet in length. An isolation valve (cutoff valve) will be placed in the pipe approximately half way along its length. The approximately 3,000 feet of pipe between the isolation valve and the hydrant system would continuously have approximately 7,500 gallons of fuel in it. Approximately 300,000 gallons of fuel would move through the pipe daily. The direction of fuel will always be from the isolation valve toward the hydrants, which are the only fueling outlets after the isolation valve. There will be no intermediate storage facilities between the isolation valve and the aircraft. LAX _ will own the pipe and the fuel in the pipe between its storage tanks and the isolation valve. You ask whether the fuel will be considered as fuel purchased for immediate shipment and not for storage if _, rather than its fuel subsidiary, were to own the pipe from the isolation valve to the hydrants and were to accept delivery, title, and risk of loss of the fuel at the isolation valve. That is, you ask whether, assuming all other conditions have been met, sales of fuel under these facts will qualify for the Section 6385(c) exemption. We assume that the pipe between the isolation valve and the hydrant systems will be laid out in the most direct route that is commercially reasonable. That is, we assume that the length of pipe between the isolation valve and the hydrant systems will not be made longer than necessary in order that the pipe may contain more fuel than it otherwise would. Similarly, we assume that the diameter of the pipe has been determined based on the amount and speed at which fuel can be delivered at the hydrant system rather than the amount of fuel that remains in the pipe when the fuel is not flowing. Finally, as we understand your description, the diameter of the pipe will be the same along its entire length. That is, there will be no “bulge” that may be construed as a type of storage. Under the facts and assumptions set forth above, we would regard the pipe between the isolation valve and the hydrant systems as a delivery system for the fuel and not a storage facility. Therefore, we would regard the sale of fuel at the isolation valve as a sale of fuel for immediate shipment and not for storage. Assuming all other conditions have been met, such sales of fuel would qualify for the Section 6385(c) exemption. If you have further questions, feel free to write again.

Sincerely,
David B. Levine
Tax Counsel