If a retailer restructures its fuel supply chain through a related importing corporation, which company owes Article 13-A gross receipts tax, and on what price level?

Plain-English summary

Uni-Marts, Inc. imported petroleum into New York and sold it at retail through its own convenience stores. Because Article 13-A's gross receipts tax is based on the seller's actual selling price, and Uni-Marts sold at retail (unlike competitors who bought from a wholesale importer and thus were taxed only on the lower wholesale price), Uni-Marts felt it was at a competitive disadvantage -- it had to either charge more or accept a smaller margin than competitors whose supplier absorbed the tax at the wholesale level. Uni-Marts asked the Department to evaluate two possible restructurings using a wholly-owned subsidiary.

In the first scenario, the subsidiary would import the fuel and sell it to Uni-Marts at wholesale, with Uni-Marts then reselling at retail. The Department agreed that in this structure, the subsidiary -- as the actual importer -- is the one subject to Article 13-A tax, computed on the wholesale price it charges Uni-Marts. Uni-Marts itself isn't importing anything, so it isn't taxed under Article 13-A at all on its retail sales. But there's a catch: normally, a sale "for resale to a purchaser that is a petroleum business subject to Article 13-A" is excluded from the SELLER's taxable gross receipts. That exclusion does NOT apply here, because Uni-Marts (the buyer) isn't itself an Article 13-A taxpayer -- so the subsidiary must include its full wholesale receipts from selling to Uni-Marts in its own taxable gross receipts, with no resale exclusion.

In the second scenario, Uni-Marts itself would import the fuel, sell it to its subsidiary at wholesale, and the subsidiary would sell it back to Uni-Marts (plus additional costs) for final retail distribution. Here, Uni-Marts is the importer and thus the Article 13-A taxpayer -- but because its own subsidiary (the buyer in the first leg) isn't itself an Article 13-A taxpayer, the same resale exclusion again doesn't apply. Uni-Marts must include in its taxable gross receipts BOTH its sales to the subsidiary AND its own separate retail sales at the convenience stores -- essentially taxing both legs of the transaction chain, which does nothing to reduce Uni-Marts' overall tax base compared to not restructuring at all.

What this means for you

Petroleum retailers considering related-party restructuring to manage Article 13-A tax

Routing fuel through a related importing subsidiary CAN shift the tax burden to the subsidiary and off the retail parent -- but only if the subsidiary is a genuine Article 13-A taxpayer and the retail parent is the SOLE downstream buyer with no further intercompany resale loop. Compare the two scenarios in this ruling: the first (subsidiary imports, sells once to the retailer) achieves the intended result; the second (parent imports, routes through the subsidiary, then buys back) does not save any tax, because the resale exclusion never applies when the immediate buyer isn't itself an Article 13-A taxpayer.

Anyone relying on the "sale for resale" exclusion under section 303(b)

This exclusion is narrower than it might seem -- it only shields a seller's receipts from being taxed twice on the SAME petroleum when selling to another Article 13-A taxpayer who will pay tax on the next sale. If the buyer in the chain isn't itself subject to Article 13-A, the exclusion simply doesn't apply, and the seller's full receipts remain taxable.

Related-company restructuring generally

See also TSB-A-87(30)C (Reid Petroleum Corp.), a companion ruling from the same year, where a similar related-importer restructuring successfully removed the retail parent from Article 13-A entirely -- the key distinguishing fact there and in Uni-Marts' first scenario is a clean one-way sale from the taxable importer to the non-importing retailer, with no round-trip through a second related entity.

Common questions

Q: Does forming an importing subsidiary always reduce a retailer's overall New York petroleum tax exposure?
A: Not automatically -- it depends on whether the structure creates a clean one-way sale (Scenario 1, which works) or a round-trip through multiple related entities (Scenario 2, which doesn't help, since the resale exclusion never applies to a non-Article-13-A-taxpayer buyer at any step).

Q: Why doesn't the sale-for-resale exclusion in section 303(b) apply to sales between these related companies?
A: Because that exclusion requires the BUYER to be an Article 13-A taxpayer who will pay tax on the resale. In both scenarios described, at least one link in the chain involves selling to a company that isn't itself an Article 13-A taxpayer, so the exclusion doesn't apply to that sale.

Q: Can another retailer rely on this specific ruling to justify its own restructuring?
A: No. It binds the Department only for this petitioner's specific facts and can't be relied upon by other taxpayers, even similarly structured retailers.

Citations and references

Statutes and regulations:

• Tax Law § 301 (Article 13-A imposition); § 300(c) (definition of "petroleum business")
• Tax Law § 303 (computation of gross receipts; exclusions under § 303(b), including sale-for-resale-to-an-Article-13-A-taxpayer)
• TSB-M-83(22)C (20,000-gallon import threshold guidance)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a87_22c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87 (22) C
Corporation Tax
August 25, 1987

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. M870413A

On April 13, 1987, a Petition for Advisory Opinion was received from Uni-Marts, Inc., 477
East Beaver Avenue, State College, Pennsylvania 16801-5690.
The issue raised is the application of the tax on petroleum businesses imposed by Article 13A of the Tax Law in the following situations: (1) where petroleum is imported into New York State
by Petitioner's wholly owned subsidiary and subsequently sold to Petitioner, and (2) where petroleum
is imported into New York State by Petitioner, sold to Petitioner's wholly owned subsidiary and
subsequently resold to Petitioner.
Section 301 of Article 13-A of the Tax Law imposes "...upon every petroleum business, for
the privilege of engaging in business, doing business, employing capital, owning or leasing property,
or maintaining an office in this state, for all or any part of each of its taxable years, an annual tax
equal to two and three-quarters per centum of (i) its gross receipts from sales of petroleum where
shipments are made to points within the state .... "
The term "petroleum business" is defined in section 300(c) of the Tax Law as "every
corporation and unincorporated business formed for, engaged in or conducting the business, trade
or occupation of importing or causing to be imported (by a person other than one which is subject
to tax under this article) into this state for sale in this state, extracting, producing, refining,
manufacturing, or compounding petroleum .... "
Technical Services Bureau Memorandum TSB-M-83(22)C provides that a petroleum
business is importing petroleum into New York State if it takes title to petroleum outside New York
State and ships or causes to be shipped into New York State 20,000 gallons or more of such
petroleum during its taxable year. Also, a petroleum business is deemed to be causing petroleum to
be imported into New York State if it purchases 20,000 gallons or more of petroleum located outside
New York State for delivery into New York State from a seller not subject to tax under Article 13-A
of the Tax Law.
Petitioner contends that most of their competitors do not import petroleum, but acquire
petroleum from a wholesale distributor who is the importer of the petroleum and the entity subject
to Article 13-A. Under Article 13-A, a taxpayer's tax liability is based on gross receipts from sales
of petroleum. Therefore, the tax liability of an Article 13-A taxpayer who sells at the wholesale level
is based on the wholesale price.
However, in Petitioner's case, Petitioner, itself, imports petroleum into New York State and
sells such petroleum at the retail level at several convenience store locations. Since Petitioner is
importing petroleum and selling such petroleum at the retail level, Petitioner's Article 13-A tax
liability is based on the gross receipts from the sales of petroleum at the retail price level rather than

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

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TSB-A-87 (22) C
Corporation Tax
August 25, 1987

the wholesale price level. Accordingly, Petitioner feels it is at a competitive disadvantage because
it must either charge more for its petroleum than its competitors to get the same gross margin, or
accept a smaller gross margin. Therefore, Petitioner is contemplating changing its business
operations to one of the following situations.
Situation 1
Petitioner's wholly owned subsidiary corporation would acquire petroleum from a refiner,
import such petroleum into New York State and subsequently sell the petroleum to Petitioner at the
current wholesale price level. Petitioner, in turn, would sell the petroleum at its convenience store
locations.
Petitioner contends that since the subsidiary is importing petroleum into New York State, the
subsidiary is the entity subject to the tax imposed by Article 13-A and that the tax would be assessed
on the then current wholesale price.
In this situation, it is agreed that Petitioner's wholly owned subsidiary corporation is
importing petroleum into New York State. As such, the subsidiary is engaged in a petroleum
business and is subject to the tax imposed by Article 13-A of the Tax Law.
Petitioner, is purchasing petroleum that is located in New York State from a seller that is an
Article 13-A taxpayer. Subsequently, Petitioner sells such petroleum at its convenience store
locations. Petitioner, itself, is not importing petroleum or causing petroleum to be imported into New
York State. Accordingly, Petitioner is not engaged in a petroleum business subject to Article 13-A
of the Tax Law.
An Article 13-A taxpayer computes its gross receipts from sales of petroleum pursuant to
section 303 of the Tax Law, which provides that such gross receipts means all receipts from sales
of petroleum where shipments are made to points within New York State, whether in cash, credits
or property of any kind or nature, without deduction for the cost of the property sold, the cost of
materials used, labor, services or other costs, interest or discount paid or any other expense. Gross
receipts does not include taxes on the sales of petroleum that are imposed directly on the purchaser.
Therefore, the New York State and local sales taxes, New York State tax on motor fuel, New York
State tax on diesel fuel, federal tax on diesel fuel, and New York City leaded motor fuel tax are
excluded from gross receipts. The exclusions from gross receipts provided in section 303(b) of the
Tax Law are:
(1)
(2)
(3)

receipt from any sale of fuel oil (excluding diesel motor fuel) or liquified or
liquifiable gases used for residential purposes,
receipt from any sale for resale to a purchaser that is a petroleum business subject to
Article 13-A,
receipt from any exchange sale of petroleum between petroleum businesses subject
to tax under Article 13-A,

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TSB-A-87 (22) C
Corporation Tax
August 25, 1987

(4)
(5)

receipt from any sale of petroleum if such petroleum is sold for immediate
exportation from New York State,
receipt from any sale to a purchaser for consumption by it when the purchaser
furnishes a consumption certificate.

Even though in this situation the subsidiary's sale of petroleum to Petitioner is a sale for
resale, the receipts from such sales are not excluded from the subsidiary's gross receipts because
Petitioner is not an Article 13-A taxpayer. Therefore, when Petitioner's subsidiary computes its gross
receipts from sales of petroleum, it must include the gross receipts it receives from sales of
petroleum to Petitioner where such petroleum is shipped to points in New York State.
Situation 2
Petroleum would be imported into New York State by Petitioner, sold to its wholly owned
subsidiary in New York State at the current wholesale price. The subsidiary, in turn, would sell the
petroleum back to Petitioner, at the wholesale price plus any additional costs incurred, to be
distributed to Petitioner's convenience store locations in New York State for sale to consumers.
Petitioner contends that it would be the entity importing petroleum into New York State and
thus would be subject to the tax imposed by Article 13-A and that the tax would be assessed on the
wholesale price.
In this situation, it is agreed that Petitioner is importing petroleum into New York State.
Accordingly, Petitioner is engaged in the petroleum business and is subject to the tax imposed by
Article 13-A of the Tax Law.
Petitioner's subsidiary is purchasing petroleum that is located in New York State from
Petitioner, an Article 13-A taxpayer. Petitioner's subsidiary subsequently sells such petroleum back
to Petitioner for sale at Petitioner's convenience store locations. Petitioner's subsidiary is not
importing petroleum or causing petroleum to be imported into New York State. Accordingly,
Petittoner's subsidiary is not subject to the tax imposed by Article 13-A of the Tax Law.
When Petitioner computes its gross receipts from sales of petroleum, it must include all gross
receipts from sales of petroleum. Since Petitioner's subsidiary is not an Article 13-A taxpayer, the
exclusion from gross receipts of a receipt from a sale for resale is not applicable.
Therefore, Petitioner must include in its gross receipts from sales of petroleum, the gross
receipts from petroleum sales to its subsidiary where shipments of such petroleum are made to points
in New York State. Petitioner must also include in gross receipts, the gross receipts from sales of
petroleum at its convenience store locations within New York State. These sales made at

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Corporation Tax
August 25, 1987

convenience store locations are separate from the sales made to the subsidiary, and, as such, the gross
receipts from both types of sales must be included in the computation of Petitioner's gross receipts.

DATED: August 25, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.