A gasoline distributor buys nearly all its gasoline from a New Jersey-based supplier that already pays New York's oil company tax. The distributor takes title to the gasoline in New Jersey and ships it into New York for sale at its own affiliated stations. Does buying from an already-taxed supplier exempt the distributor from also owing the oil company tax itself?

Plain-English summary

Merit Oil Corporation is a gasoline distributor and management company that buys nearly all of its gasoline from a single supplier -- one that is itself already subject to New York's oil company tax under Tax Law § 182-a. Under Petitioner's contract with that supplier, delivery happens F.O.B. at loading points in New Jersey: title to the gasoline, and all risk of loss or damage, passes to Petitioner in New Jersey, either when the gasoline crosses the flange into a barge or when it flows from the seller's truck loading pipe into a transport truck Petitioner arranged. From there, the gasoline is shipped to terminals in New York and distributed to gasoline stations affiliated with Petitioner for retail sale.

Section 182-a defines an "oil company" as a corporation "formed for or engaged in the business of importing... into this state for sale in this state... petroleum" (with an exception, not relevant here, for importing done BY a corporation already subject to tax under the same section). A Department memo, TSB-M-81(5.1)C (Revised), clarifies that a corporation is "importing" petroleum if it owns the fuel outside New York and ships it (or causes it to be shipped) into New York for sale here. Merit Oil's facts fit precisely: it owns the gasoline once title passes in New Jersey, and it causes that gasoline to be shipped into New York for sale at its own affiliated stations. Because it's also plainly doing business in New York (selling gasoline at its own stations), the jurisdictional requirement in § 182-a.1 is satisfied too.

The key point: the fact that Petitioner's OWN SUPPLIER already pays the oil company tax on this same fuel doesn't exempt Petitioner. Each corporation in the supply chain that independently meets the "importing for New York sale" definition can be separately liable -- the statute's narrow exception is for importing done BY an already-taxed corporation (i.e., you don't get taxed twice on the SAME import transaction performed by the same corporation that's already covered), not a blanket exemption for anyone who merely buys from a taxed seller further up the chain.

What this means for you

Distributors buying from an already-taxed supplier

Don't assume that because your gasoline supplier already pays New York's oil company tax, you're automatically exempt from it too. If you independently take title to petroleum outside New York and cause it to be shipped into New York for your own resale, you can be a separately taxable "oil company" regardless of your supplier's own tax status.

Where title passes matters more than who else in the chain is taxed

The critical fact here was where and when title transferred (New Jersey, under an F.O.B. contract) combined with Petitioner's own act of causing the fuel to be shipped into New York for sale -- not any comparison to the supplier's tax treatment. Track your own title-transfer point carefully when assessing oil company tax exposure.

Common questions

Q: If my fuel supplier already pays New York's oil company tax, am I exempt from it as a downstream distributor?
A: Not automatically -- if you independently take title to the fuel outside New York and cause it to be shipped into New York for your own resale, you can be separately liable as an "oil company" under section 182-a's own definition.

Q: What activity actually triggers the tax?
A: Owning petroleum outside New York and shipping it (or causing it to be shipped) into New York for sale here, combined with doing business in New York (such as selling the fuel at your own stations).

Q: Can another distributor with a similar F.O.B.-New-Jersey supply arrangement rely on this Opinion?
A: No. It binds the Department only as to Merit Oil's own facts and can't be relied upon by other taxpayers, even those with an apparently identical title-transfer and distribution structure.

Citations and references

Statutes and guidance:

• Tax Law § 182-a.1, § 182-a.2(a) (oil company tax; "oil company" definition)
• TSB-M-81(5.1)C (Revised) (definition of "importing")

Related ruling:

• TSB-A-82(6)C (Bitterman's Automotive) -- a contrasting case finding a retailer of lubricating oils and grease was NOT a taxable "oil company," because it only sold already-imported product rather than importing petroleum itself

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a82_11c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(11)C
Corporation Tax
July 29, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C820330B

On March 30, 1982 a Petition for Advisory Opinion was received from Merit Oil
Corporation, 44 West Lancaster Avenue, Ardmore, Pennsylvania 19003.
The issue raised herein is whether Petitioner is an oil company subject to the franchise tax
on certain oil companies imposed under section 182-a of the Tax Law.
Petitioner is a gasoline distributor, as well as a management company. Petitioner states that
it purchases substantially all of its gasoline from a supplier (hereinafter "Seller") which itself is
subject to tax under section 182-a of the Tax Law. The contract between Petitioner and Seller
provides for delivery F.O.B. at designated loading points in New Jersey for shipment into New York.
Petitioner has contracted with barging companies and trucking companies to receive the gasoline in
New Jersey for shipment into New York. The applicable contract provides that title to the gasoline
delivered and all responsibility for any loss and/or damage passes from Seller to Petitioner when
such gasoline passes the flange between Seller's delivery line and the vessel's permanent hose con­
nections with respect to delivery into barges, and when such gasoline passes from Seller's truck
loading fill pipe into the tank transport trucks with respect to deliveries into trucks. The gasoline is
transported to terminals within New York and then distributed to gasoline stations affiliated with
Petitioner, in New York, for retail sale at these locations.
Section 182-a of the Tax Law imposes a franchise tax on every oil company "for the privilege
of exercising its corporate franchise, or of doing business, or of employing capital, or of owning or
leasing property in . . . [New York] in a corporate or organized capacity, or of maintaining an office"
in New York. Tax Law, §182-a.1. The term "oil company" is defined, in relevant part, as "every
corporation formed for or engaged in the business of importing or causing to be imported (by a
person other than a corporation subject to tax under this section) into this state for sale in this state
. . . petroleum." Tax Law, §182-a.2(a).The meaning of the term "importing" has been clarified in
a Technical Services Bureau memorandum, TSB-M-81(5.1)C(Revised), as follows:
"For the purposes of this section, a corporation is engaged in
the business of importing petroleum into New York State if it owns
petroleum outside New York State and ships or causes it to be
shipped to a point within New York State for sale in New York
State."

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-82(11)C
Corporation Tax
July 29, 1982

Since Petitioner takes title to the gasoline in question in New Jersey and thereupon has it
shipped to New York for sale in New York, Petitioner is engaged in importing petroleum into New
York for sale therein, within the meaning of section 182-a of the Tax Law. Since Petitioner is
engaged in the business of selling gasoline in New York it is "doing business" in New York, thus
satisfying the jurisdictional criteria set forth in section 182-a.1 of the Tax Law. Accordingly,
Petitioner is an "oil company" subject to tax under section 182-a of the Tax Law.

DATED: July 29, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau