How should a propane (LPG) distributor report purchases and sales—gross gallons or net gallons—when suppliers don't give it the data to compute gross gallons?

Plain-English summary

A company that buys and sells propane (LPG) in Colorado got caught in a reporting-method transition. Colorado's LPG excise tax is imposed per gross gallon (§ 39-27-105(1)), but the company had switched to reporting in net gallons in January 2014 (the industry-standard method). The Department then told it to restate its distributor returns in gross gallons — but one of its largest suppliers doesn't provide the data (temperature and specific gravity) needed to convert to gross gallons, so the company couldn't accurately do so. It asked how to proceed.

The Department's practical answer leaned on a 2015 law change:

• The tax is on gross gallons — "gross gallons" means 231-cubic-inch units measured at storage or metered temperature (§ 8-20-201(3)); "net gallons" are the same units measured at standard temperature (§ 8-20-201(5)).
• House Bill 15-1228 (2015) flips reporting to net gallons, effective January 1, 2016. Even before that date, the General Assembly signaled it wants the industry to report on a net-gallon basis.
• So the Department will likely accept the net-gallon returns as filed for January 1, 2014 to present and not require restatement in gross gallons.
• But until January 1, 2016, any gallons the company can report in gross gallons should be reported that way.

In short: the looming statutory switch to net-gallon reporting let the Department take a lenient, pragmatic view of the company's interim net-gallon filings — while still asking for gross-gallon reporting where feasible until the new law took effect. As a GIL, this is general guidance only, not binding.

What this means for you

Propane and LPG distributors

The tax base is gross gallons, but reporting moved to net gallons from January 1, 2016 under HB 15-1228. If you straddled that transition, the Department's stance here suggests it would accept good-faith net-gallon filings for 2014–2015 rather than force a costly restatement — especially where suppliers can't give you the temperature/specific-gravity data needed to convert. Report in gross gallons where you can; document where you can't.

Fuel-tax compliance generally

Know the difference: gross gallons = measured at actual storage/metered temperature; net gallons = temperature-corrected to standard. A statutory change in the measurement basis can change what your returns should show — track the effective date.

Accountants and tax professionals

This is a transition-relief GIL, not a permanent rule. The durable law is § 39-27-105(1) (gross-gallon tax) and the § 8-20-201 definitions, as amended by HB 15-1228 (net-gallon reporting from 1/1/2016). The relief was tied to the legislature's signaled preference; confirm current reporting requirements for any period you're working.

Common questions

Q: Is Colorado's propane (LPG) excise tax measured in gross or net gallons?
A: The tax is imposed per gross gallon under § 39-27-105(1). Reporting, however, moved to a net-gallon basis effective January 1, 2016 under House Bill 15-1228.

Q: I reported in net gallons for 2014–2015. Do I have to restate in gross gallons?
A: The Department indicated it would likely accept those net-gallon returns as filed and not require restatement, given the legislature's move to net-gallon reporting — but until January 1, 2016, gallons you can report in gross gallons should be.

Q: What if my supplier won't give me the data to compute gross gallons?
A: That practical difficulty was central here; the Department's lenient stance reflected it. You can only report gross gallons where you have the necessary information.

Q: What's the difference between gross and net gallons?
A: Gross gallons are measured at storage/metered temperature; net gallons are the same volume corrected to standard temperature.

Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance only, not binding on the Department. A binding answer requires a private letter ruling.

Citations and references

Statutes and legislation:
- § 39-27-105(1), C.R.S. (LPG excise tax per gross gallon)
- § 8-20-201(3), C.R.S. (definition of "gross gallons")
- § 8-20-201(5), C.R.S. (definition of "net gallons")
- House Bill 15-1228 (2015) (net-gallon reporting, effective January 1, 2016)
- 1 CCR 201-1, Rule 24-35-103.5 (GIL/PLR procedure)

Source

• Landing page: https://tax.colorado.gov/all-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-15-020.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-15-020
July 20, 2015
XXXXXXXXXXXXXXX
Attn: XXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
Re: Propane Reporting
Dear XXXXXXXXXX,
You submitted on behalf of XXXXXXXXXXXXXXX (“Company”) a request for guidance to
determine how Company should report its purchases and sales of liquefied petroleum gas
(“LPG”) on gross gallons when its suppliers do not provide it with the information needed to
calculate such amount.
The Colorado Department of Revenue (“Department”) issues general information letters and
private letter rulings. A general information letter provides a general overview of the relevant
tax issues but is not binding on the Department. A private letter ruling provides a specific
determination for a specific set of facts, is binding on the Department but not on the taxpayer,
and requires payment of a fee. For more information about general information letters and
private letter rulings, please see Department Regulation 24-35-103.5 at
www.colorado.gov/revenue/tax > Tax Library > Rulings.
The Department treats this request as one for a general information letter. It is important to
remember that general information letters, such as this one, are general discussions of tax law
and are not binding on the department. If a taxpayer would like the Department to issue a
private letter ruling on the issue raised here, the retailer can resubmit a request and fee in
compliance with Department Regulation 24-35-103.5.
Issue
How should Company report its purchases and sales of LPGs on gross gallons when its
suppliers do not provide Company with the information needed to calculate such amount?
Background
Company buys and sells LPG in Colorado. From 2001-December 2013, Company was
reporting LPG purchases and sales on a truckload basis and remitting $10.00 per truckload.
Beginning in January 2014, Company began reporting its purchases and sales to the State of
Colorado in net gallons. Company believes it was compliant with section 39-27-105(1), C.R.S.
Net gallon reporting is the industry standard reporting method for LPG businesses.

Company was contacted by the Department in December 2014 about discrepancies on two
specific invoices for the period of January 31, 2014. Pursuant to the December 2014 letter,
Company was advised that it should have been reporting in gross gallons rather than net
gallons. The Department requested that we restate our Colorado Distributor Return in gross
gallons. Company states that for the period in question (December 2014 to January 2015), the
net gallons reported on Company's Colorado Distributor Returns were greater than the actual
gross gallons. Thus, for the period in review, Company paid Colorado more money than would
be required had Company reported in gross gallons.
Restating and amending the Colorado Distributors Returns will have an enormous burden on
our resources. The biggest challenge Company faces is that one of Company’s largest
suppliers does not provide information on their Bill of Ladings that would allow Company to
calculate the gross gallons. Thus, Company is unable to calculate the volume acquired by this
supplier in gross gallons. Additionally, other suppliers provide temperature but not specific
gravity. The lack of this information prevents Company from having the ability to accurately
calculate the amounts in gross gallons. In order to report these volumes in gross gallons,
Company will have to estimate the specific gravity, which will not result in accurate reporting.
Therefore, Company would like guidance on how to proceed regarding retroactive gross gallon
reporting. Company can only report gross gallons for purchases made from supplies who
supply company with the information to calculate the gross gallons, but are unsure what to do
with respect to the volumes we acquire from supplies that do not provide the information that
will allow Company to calculate gross gallons. As a consequence, Company is in a position that
will allow it to comply with the statute only with regard to some of its purchases. Company has
contacted the suppliers in question and they have stated that they are unable to provide the
information needed on their Bill of Lading.
Discussion
Colorado imposes an excise tax on LPG that is taxed at a rate per gross gallon1 that will change
annually from January 1, 2014 through 2019. However, the Colorado General Assembly
enacted in the 2015 session House Bill 15-1228 that, among other things, changes the
reporting requirements of LPG to a net gallon2 basis. Although House Bill 15-1228 will not
become effective until January 1, 2016, the General Assembly has signaled that it wishes
industry to report gallons on a net gallon basis rather than a gross gallon basis. As such, the
Department will likely accept Company’s Colorado Distributor Returns for January 1, 2014 to
present as originally filed on a net gallons basis and will likely not ask that Company resubmit
their returns in gross gallons. However, until January 1, 2016, those gallons that are able to be
reported on a gross gallon basis, should be reported as such rather than a net gallon basis.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable
on state taxes issues. However, the Department does not make a specific determination here
on any of the issues raised and the Department is not bound by this general information letter.
The Department administers state and state-administered local sales and use taxes. This letter
does not address sales and use taxes administered by home-rule cities and home-rule counties.
You may wish to consult with local governments, which administer their own sales or use taxes
1
2

2

"Gross gallons" as applied to fuel and petroleum products means units of two hundred thirty-one cubic
inches measured at storage or metered temperature. § 8-20-201(3), C.R.S.
"Net gallons" as applied to fuel and petroleum products means units of two hundred thirty-one cubic
inches measured at standard temperature. § 8-20-201(5), C.R.S.
DR 4010A (06/11/14)

about the applicability of those taxes. Visit our web site at www.colorado.gov/revenue/tax for
more information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted
letter will be made public within 60 days of the date of this letter. Please let me know in writing
within that 60-day period whether you have any suggestions or concerns about this redacted
letter.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue

3

DR 4010A (06/11/14)