NY TSB-A-11(1)M, (8)S Motor Fuel Tax; Petroleum Business Tax; Sales Tax 2011-03-22

Is RBOB (reformulated gasoline blendstock for oxygenate blending) a 'motor fuel' subject to NY's excise, petroleum business, and prepaid sales taxes?

Short answer: Yes. RBOB -- reformulated gasoline blendstock for oxygenate blending -- is a 'motor fuel' for purposes of the Article 12-A excise tax (and petroleum testing fee), the Article 13-A petroleum business tax, and the Article 28/29 sales taxes that must be prepaid under section 1102. Even though RBOB has to be splashed with ethanol before it can power a vehicle, the motor-fuel definition reaches a product that is 'destined for use' in a motor-vehicle engine, and RBOB's only purpose is to be blended into motor fuel, so it's clearly destined for the automotive market. The taxable incidence for the Article 12-A and 13-A taxes occurs when RBOB is imported into New York; if the company is the importer, those taxes are due from it (if it buys RBOB in-state, the importer's tax is passed through to it). The prepaid sales tax is due when a distributor imports RBOB (or causes it to be imported) or sells it if not previously imposed.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

This is a combined (multitax) Advisory Opinion addressing Motor Fuel Tax (Article 12-A), Petroleum Business Tax (Article 13-A), and Sales Tax (Articles 28/29). The petitioner buys RBOB -- Reformulated Gasoline Blendstock for Oxygenate Blending -- in bulk within New York and will also import it. RBOB must be blended with another product (ethanol) before it can be sold or used in a vehicle, and the petitioner argued it isn't taxable until it has been "splashed" with ethanol. The question: is RBOB a "motor fuel" subject to these taxes?

The Office of Counsel concluded RBOB is a motor fuel:

One shared definition. "Motor fuel" is defined in Tax Law 282.2 (gasoline or other product suitable for use in a motor-vehicle engine; a mixture suitable for such use is motor fuel "in its entirety"). The petroleum business tax (300(d)) and the sales tax (1101(b)(4)(ii)(C)) both incorporate that definition.
"Destined for use" is enough. Under the motor-fuel regulations, a product not commonly known/sold as gasoline becomes "suitable for use" when, among other triggers, it is "destined for use" in a motor-vehicle engine as reasonably concluded from the facts (20 NYCRR 410.2(a)(ii)(b)). Because RBOB's only purpose is to be blended into motor fuel for the automotive market, it is destined for use in a motor vehicle -- so it's a motor fuel, even before the ethanol splash.
When and from whom the tax is due. For the Article 12-A and 13-A taxes, the taxable incidence occurs when RBOB is imported into New York: if the petitioner is the importer, those taxes are due from it; if it buys RBOB in-state, the importer's tax is passed through on its purchase. For the prepaid sales tax under section 1102, if the petitioner is a distributor, the tax is prepaid when it imports RBOB (or causes its import) or when it sells RBOB if the tax wasn't previously imposed.

(The opinion notes proposed budget legislation would explicitly enumerate RBOB as a "motor fuel.")

What this means for you

Fuel blenders, distributors, and importers

Gasoline blendstocks like RBOB are taxed as motor fuel in New York -- you cannot defer the motor-fuel excise, petroleum business tax, or prepaid sales tax until after you splash in ethanol. A product whose only use is to be blended into motor fuel is "destined for use" in a motor vehicle and is motor fuel "in its entirety." Plan for the tax at import (the taxable incidence for the Article 12-A/13-A taxes), and for prepaid sales tax at the distributor's import or sale. If you buy blendstock in-state, expect the importer's tax to be passed through to you.

Why it matters

The "it isn't fuel until it's blended" argument doesn't work for a blendstock that has no other destination -- it's taxed as motor fuel from import.

Common questions

Q: Is RBOB taxable before it's blended with ethanol?
A: Yes. Because its only purpose is to be blended into motor fuel, it's "destined for use" in a vehicle and is a motor fuel from import.

Q: Which taxes apply?
A: The Article 12-A motor-fuel excise (plus petroleum testing fee), the Article 13-A petroleum business tax, and the Article 28/29 sales tax, which must be prepaid under section 1102.

Q: When is the tax due, and from whom?
A: On import into New York -- from the importer for the Article 12-A/13-A taxes (passed through if you buy in-state); a distributor prepays the sales tax on import or sale.

Citations and references

Tax Law section 282.2 (definition of motor fuel)
Tax Law section 300(d) (petroleum business tax; motor fuel definition)
Tax Law section 1101(b)(4)(ii)(C) (sales tax; motor fuel definition)
Tax Law section 1102 (prepayment of sales tax on motor fuel)
20 NYCRR section 410.2 (suitability for use in a motor vehicle)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a11_1m_8s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-11(1)M
Motor Fuel Tax
Petroleum BusinessTax
TSB-A-11(8)S
Sales Tax
March 22, 2011

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S110112A

Petitioner, name redacted asks whether the petroleum product “Reformulated Gasoline
Blendstock for Oxygenate Blending” (RBOB) is considered a motor fuel subject to the Article 12-A
excise tax (including the petroleum testing fee), Article 13-A petroleum business tax, and the State and
local sales taxes imposed by Article 28 and pursuant to the authority of Article 29 and required to be
prepaid by section 1102 of the Tax Law. We conclude that RBOB is considered a motor fuel for purposes
of these taxes.
Facts
Petitioner buys RBOB in bulk within the State. Petitioner also will be involved in the importation
of RBOB into this State. Petitioner asserts that RBOB must be blended with another petroleum product
before it could be sold or used with any intent of use in a motor vehicle. Petitioner further asserts that
RBOB is not taxable until it has been splashed with ethanol.
Analysis
Section 282.2 of Article 12-A of the Tax Law defines motor fuel as gasoline, benzol or other
product, except kerosene and crude oil, which is suitable for use in operation of a motor vehicle engine,
but if kerosene or crude oil is compounded or mixed with any other product or products, and the resulting
compound or mixture is suitable for use in the operation of any such motor vehicle engine, such resulting
compound or mixture in its entirety shall be a "motor fuel.” The Article 13-A petroleum business tax
refers to Section 282.2 for the definition of motor fuel (see section 300(d)). The State and local sales
taxes imposed by Article 28 and pursuant to the authority of Article 29 of the Tax Law also incorporate
the definition of motor fuel in Section 282.2 (see section 1101(b)(4)(ii)(C)).
Section 410.2(a)(ii) of the motor fuel tax regulations specifically provides that:
[A]ny product that is not commonly or commercially known or sold as gasoline or a blend thereof, will
not generally be considered to be suitable for use in the operation of a motor vehicle engine until one of
the following, whichever is the earliest, takes place.
Subparagraph (b) of this regulation provides that one of the four events that would cause a
product to be considered to be suitable for use in the operation of a motor vehicle engine is when the
“product is destined for use in the operation of a motor vehicle engine as is reasonably concluded from
facts and circumstances concerning such product.”

-2-

TSB-A-11(1)M
Motor Fuel Tax
Petroleum BusinessTax
TSB-A-11(8)S
Sales Tax
March 22, 2011

Because RBOB’s only purpose is to be blended with motor fuel, it clearly is intended for the
automotive market as motor fuel. Thus, it is considered a product destined for use in the operation of a
motor vehicle and accordingly would be considered a motor fuel under 20 NYCRR § 410.2(a)(ii)(b).1 As
a motor fuel, the taxable incidence for purposes of the taxes imposed by Articles 12-A and 13-A of the
Tax Law occurs when RBOB is imported into this State. If Petitioner is the importer of the RBOB, the
applicable taxes are due from petitioner. For purposes of the sales tax required to be prepaid under
section 1102 of the Tax Law, if Petitioner is a distributor of motor fuel, the tax is required to be prepaid
when Petitioner imports RBOB or causes it to be imported into the state, or when it sells the RBOB if the
tax has not previously been imposed. If Petitioner buys the RBOB within the State, the applicable taxes
are due from the importer and must be passed through to the petitioner upon its purchase of the RBOB.

DATED: March 22, 2011

NOTE:

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set
forth therein and is binding on the Department only with respect to the person or entity to
whom it is issued and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect
as of the date the Opinion is issued or for the specific time period at issue in the Opinion.

1
It should be noted that the Governor’s proposed budget legislation makes clarifications to the definitions of “motor fuel” and
“diesel motor fuel.” As part of the clarification, RBOB would be explicitly enumerated as a “motor fuel” for purposes of
taxation under the three Tax Law articles in question. (See New York State Bill – S.2811-A/A.4011-A.)