Is the 'into-plane fee' for transporting aviation fuel from the airport fuel farm to a customer's aircraft subject to Colorado sales tax when the customer buys the fuel from one company but contracts separately with a different fixed-base operator for the fueling service?

Plain-English summary

A company sells aviation fuel at Colorado airports but employs no one there to actually fuel the planes. To get fuel into their aircraft, customers must separately hire a fixed-base operator (FBO) to haul the fuel from the airport's fuel farm to the plane. The FBO charges an "into-plane fee" for that service. The fuel company and the FBO coordinate, and for some FBOs the fuel company collects the into-plane fee on the FBO's behalf — with no markup, shown separately on the same invoice it sends for the fuel. Is that into-plane fee taxable?

Colorado taxes sales of tangible personal property (aviation jet fuel is taxable), but generally not services — and transporting/dispensing fuel isn't one of the few taxed services. The wrinkle is that an otherwise-nontaxable service can become taxable when it is inseparably bundled into the purchase of taxable property in a single transaction. So everything turns on separability.

The Department concluded the into-plane fee here is separable and therefore not taxable. The reason: the customer has to enter two separate transactions, under two separate contracts, with two separate entities — buying fuel from the company and buying the fueling service from the FBO. That structural separation is what keeps the service nontaxable. The fact that the fuel company collects both charges and puts them on a single invoice doesn't fuse them into one taxable sale.

The Department drew a sharp contrast: if the customer had to engage only the one company for both the fuel and the into-plane service, the whole price would be taxable — because then the service would be inseparable from the fuel sale, "although the into-plane charge is separately stated." Separately stating a charge isn't enough; what matters is whether the buyer could get the goods without buying the service from the same seller.

What this means for you

Aviation fuel vendors and FBOs

The structure of the deal controls the tax, not the invoice layout. If the fueling service is provided by a genuinely separate entity under a separate contract the customer signs, the into-plane fee can be a nontaxable service even when you collect it on one invoice. But if you sell both the fuel and the fueling as a single package from one vendor, expect the into-plane charge to be taxable as part of the fuel sale — separately stating it won't save it.

Accountants and tax advisers

This is a clean application of Colorado's inseparability doctrine (A.D. Store, Leanin' Tree, Noble Energy; SR-18). Two tests recur: (1) Can the customer buy the taxable goods without also buying the service from the same vendor? (2) Are there genuinely separate vendors/contracts? A single invoice and a separately stated line item are not dispositive. Aviation jet fuel itself is taxable under Rule 39-26-715.1(a).

Common questions

Q: Is an aircraft into-plane fee taxable in Colorado?
A: It depends on the structure. Where the customer buys fuel from one company and the into-plane fueling service from a separate FBO under a separate contract, the fee is a nontaxable, separable service — even if both charges appear on one invoice.

Q: What if I sell both the fuel and the fueling service?
A: Then the into-plane fee is likely taxable. The Department said that if the customer had to engage only one vendor for both, the total price is taxable because the service is inseparable from the fuel sale — even though the into-plane charge is separately stated.

Q: Doesn't separately stating the fee make it nontaxable? A: No. The Department was explicit that a separately stated charge can still be taxable if it's inseparable from the goods sale. Separability — not separate statement — is the test.

Q: Is aviation jet fuel itself taxable?
A: Yes. Under Rule 39-26-715.1(a), aviation jet fuel sales are subject to Colorado sales tax. This letter is only about the separate into-plane fueling fee.

Q: Can I rely on this letter?
A: Only as general guidance. A General Information Letter is not binding on the Department and makes no specific determination. For a binding answer on your facts, request a private letter ruling.

Citations and references

Statutes and rules:

• § 39-26-104(1)(a), C.R.S. (tax on tangible personal property, not services)
• 1 CCR 201-5, SR-18 (transportation/delivery charges)
• 1 CCR 201-4, Rule 39-26-715.1(a) (aviation jet fuel sales are taxable)

Case law (cited by the Department):

• A.D. Store Co. v. Executive Dir. of Dept. of Rev., 19 P.3d 680 (Colo. 2001)
• City of Boulder v. Leanin' Tree, Inc., 72 P.3d 361 (Colo. 2003)
• Noble Energy v. Colo. Dept. of Rev., 232 P.3d 293 (Colo. App. 2010)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: GIL-16-008.pdf

Original ruling text

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

GIL-16-008
June 23, 2016
XXXXXXXXXXXXXXX
Attn: XXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
Re: Into-Plane Fee
Dear XXXXXXXXXXX,
You submitted on behalf of XXXXXXXXXXXXXXXXX (“Company”) a request for guidance regarding the taxability of the into-plane fee charged in association with aircraft refueling. 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 Rule 1 CCR 201-1, 24-35-103.5 at www.colorado.gov/pacific/tax/letter-rulings The Department treats this request as 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 Company would like the Department to issue a private letter ruling on the issue raised here, Company can submit a request and pay the fee in compliance with Department Rule 1 CCR 201-1, 24-35-103.5. Issue Is the into-plane fee that Company collects subject to sales tax? Background Company sells fuel for aircraft at airports in Colorado. However, Company employs no personnel at these airports to perform refueling services. Instead, Company’s customers must contract separately with a fixed-based operator (“FBO”) to transport the fuel from the fuel farm where fuel is stored at the airport to the customer’s aircraft. The FBOs charge customers an into-plane fee for providing this service. The FBOs also contract with Company to coordinate the provisioning of fuel for their mutual customers. Company collects the into-plane fees on behalf of some, but not all, of the FBOs it contracts with. Other FBOs Company contracts with collect the fees directly from their customers. When Company collects fees on an FBO’s behalf, the fee includes no markup and appears separately on the invoice Company issues its customers for fuel.

Structure of Analysis
To determine whether the fee is subject to tax, the Department will examine the following questions:

1. Is the fee a taxable service under § 39-26-104, C.R.S.?
   a. Is the fee taxable as a service inseparable from the sale of tangible personal property taxable under § 39-26-104(1)(a), C.R.S.? Discussion In general, Colorado imposes tax on the sale of tangible personal property, but not on the sale of services.1 Only a few services are explicitly taxed under Colorado law, and the transportation and dispensation of aviation fuel are not among them. However, fees for services otherwise exempt from taxation may be taxable to the extent that they are inseparably included in the purchase price paid for tangible personal property.2 For example, delivery fees a vendor charges may be taxable if the retailer does not separate the charge for the delivery from the price for the taxable goods or if the customer cannot purchase the taxable goods without also purchasing transportation services from the same vendor.3 The taxability of services inseparably included in the sale of tangible personal property results from the inclusion of the service and the property in a single transaction between buyer and seller.4 It is only by virtue of this transactional unity that the otherwise nontaxable service becomes taxable. The into-plane fee may then only become taxable if it is not separable from the taxable sale of aviation fuel. Even though the into-plane fee is charged and collected by Company pursuant to the agreement with the FOB, the fee appears to be a separate transaction from the purchase of the fuel. Because the customer must engage in two separate transactions (purchasing fuel and purchasing the service to have the fuel inserted into the plane), covered by two separate contracts, with two separate entities (Company and the FBO), the transactions are separable. If the customer had to only engage Company to purchase the fuel and purchase the service to have the fuel inserted into the plane, the total price charged by Company would be subject to tax because, although the intoplane charge is separately stated, it would not be separable from the sale of the fuel. Because the customer must contract separately with two entities, these transactions are separable. The collection of payment for the charges associated with the into-plane fee and the fuel through a single invoice appears insufficient to unify these transactions into one. Rather, the two charges represent two separate sales - a taxable sale of fuel5 and a nontaxable sale of services - their common appearance on a single invoice notwithstanding. As a result, the intoplane fee in this case appears not to be subject to Colorado sales tax. Miscellaneous

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§ 39-26-104(1)(a), C.R.S.; A.D. Store Co., Inc. v. Executive Dir. of Dept. of Rev., 19 P.3d 680 (Colo. 2001). A.D. Store Co., Inc. v. Executive Dir. of Dept. of Rev., 19 P.3d 680 (Colo. 2001), City of Boulder v. Leanin' Tree, Inc., 72 P.3d 361 (Colo. 2003), Noble Energy v. Colo. Dept. of Rev., 232 P.3d 293 (Colo. App. 2010). Department Rule 1 CCR 201-5, SR-18 See A.D. Store Co., Inc. v. Executive Dir. of Dept. of Rev., 19 P.3d 680 (Colo. 2001). The Department conceded that otherwise nontaxable alteration services would only be taxable if they were contracted for at the time of the initial purchase. Department Rule 1 CCR 201-4, 39-26-715.1(a). Aviation jet fuel sales are subject to sales tax. DR 4010A (06/11/14)

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 about the applicability of those taxes. Visit our web site at www.colorado.gov/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

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DR 4010A (06/11/14)