SERVICE OUTLINES GASOLINE TAX REFUND AND CREDIT PROCEDURES FOR WHOLESALE DISTRIBUTORS.

Notice 89-29

This Notice informs taxpayers of an amendment made by section 6102 of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. 100-647) ("1988 Act") to the gasoline excise tax credit and refund provision under section 6416 of the Internal Revenue Code, and sets forth the procedures the Internal Revenue Service will adopt in regulations implementing this section of the 1988 Act. These procedures will be effective as of October 1, 1988. Section 6102 of the 1988 Act provides that, if certain conditions are met, a gasoline wholesale distributor will be treated as the person who paid the gasoline excise tax for purposes of claiming a credit or refund under section 6416 of the Code.

Section 6416(b)(2) of the Code provides that the person that paid gasoline excise tax to the government under section 4081 may receive a credit or refund of the amount of such tax if the gasoline is, by any person, exported, used or sold for use as supplies for vessels or aircraft, sold to a state or local government for its exclusive use, sold to a nonprofit educational organization for its exclusive use, or used or sold for use in the production of special fuels, ("exempt purposes").

Section 48.6416(a)-3(b) of the Manufacturers and Retailers Excise Tax Regulations conditions this credit or refund upon a showing that the person that paid the tax (1) has not included the tax in the price of the gasoline with respect to which it was imposed and has not collected the amount of the tax from a person that purchased such gasoline; or (2) has repaid or agreed to repay the amount of the tax to the ultimate vendor of the gasoline; or (3) has obtained the written consent of such ultimate vendor to the allowance of the credit or refund. Section 48.6416(b)(2)-3 sets forth the supporting evidence required for obtaining such credit or refund.

Effective for sales of gasoline on or after October 1, 1988, section 6102 of the 1988 Act added section 6416(a)(4) to the Code. Section 6416(a)(4) provides that a wholesale distributor who purchases gasoline tax paid and sells the gasoline directly to its ultimate purchaser is treated as the person (and the only person) who paid the gasoline tax to the government.

Under section 6416(a)(4)(B) of the Code, the term "wholesale distributor" includes any person who sells gasoline to producers, retailers, or to users who purchase in bulk quantities and deliver into bulk storage tanks. For this purpose, the term "producer" includes a refiner, compounder, blender, or wholesale distributor of gasoline, or a dealer selling gasoline exclusively to producers of gasoline. The term "wholesale distributor" does not include any person that is an importer, refiner, compounder, or blender of gasoline, or is a dealer selling gasoline exclusively to producers.

Therefore, if a wholesale distributor (1) purchases gasoline at a price that includes the tax, (2) sells such gasoline after September 30, 1988, directly to the ultimate purchaser for an exempt purpose (with an exporter treated as the ultimate purchaser in the case of exported gasoline), and (3) meets the other requirements of section 6416 of the Code and this Notice, then the wholesale distributor is treated as the person who paid the tax to the government and is the only person eligible to claim a credit or refund under section 6416. In such a case the person that actually paid the tax on the gasoline is not eligible to claim the credit or refund. However, if the tax is not included in the price of the gasoline purchased by the wholesale distributor, or the gasoline is not sold directly to the ultimate purchaser by the wholesale distributor, then only the person who actually paid the tax to the government may file a claim under section 6416.

Regulations will provide that, for purposes of section 6416(a)(4) of the Code, a sale charged on an oil company credit card issued to an exempt person is not considered a direct sale by the wholesale distributor to the ultimate purchaser (assuming that the wholesale distributor receives a reimbursement from the oil company with respect to such sale that is based on a price that includes the tax). Thus, the person who actually paid the tax is treated as the taxpayer eligible to claim a credit or refund for such sale.

Regulations will provide that, in order to qualify as a wholesale distributor for purposes of eligibility to claim a credit or refund under section 6416 of the Code, a person must (1) hold itself out to the public as being engaged in the trade or business of selling gasoline to producers of gasoline (including wholesale distributors), to retailers, or to users of gasoline who purchase in bulk quantities and accept deliver into bulk storage tanks; and (2) actually make more than casual sales of gasoline to the producers, retailers, or users described in (1). For purposes of determining whether a person meets this definition of wholesale distributor, a bulk storage tank is any tank that is not the fuel supply tank of an aircraft, train, vehicle, or vessel. Delivery into a bulk storage tank may be made by means of a "cardlock system" at an unattended location.

In order for the wholesale distributor to obtain a credit or refund under section 6416 of the Code for gasoline sold to an ultimate purchaser after September 30, 1988, the wholesale distributor must (1) submit a statement that it sold the gasoline at a price that did not include the tax, and did not otherwise collect the amount of the tax from a purchaser, and (2) obtain a certificate of ultimate purchaser as described in section 48.6416(b)(2)-3(b) of the Regulations. However, any wholesale distributor that provides a Statement of Ultimate Vendor, or transmits a certificate of ultimate purchaser, as described in section 48.6416(b)(2)-3(b), to its vendor, if such Statement or certificate is executed on or before March 31, 1989, for any sale of gasoline to which this amendment applies, is not treated as the taxpayer for such sale. If the wholesale distributor provides a Statement of Ultimate Vendor, or transmits a certificate of ultimate purchaser, to its vendor, then the person that actually paid the tax on gasoline for sales covered by such Statement or certificate is the person eligible to claim the credit or refund of such tax. Any wholesale distributor that is eligible to claim a credit or refund under section 6416 of the Code may not provide a Statement of Ultimate Vendor, or transmit a certificate of ultimate purchaser, to its vendor if such Statement or certificate is executed on or after April 1, 1989.

A claim for credit, up to the amount of the wholesale distributor's excise tax liability for the quarter (including, for example, liability for tax on sales of diesel fuel), is made on Form 720 ("Quarterly Federal Excise Tax Return"), Line 2. A claim for refund is made on Form 843 ("Claim"). Each claim for refund of gasoline excise tax imposed on any gasoline sold for an exempt purpose generally must be filed within three years of the date the excise tax return was filed by the person that actually paid the tax. A claim for credit or refund must be accompanied by the required supporting documents described in section 48.6416(b)(2)-3(a) of the Regulations and must include a statement that sets forth the basis for the claimant's eligibility to claim a credit or refund under section 6416 of the Code as a gasoline wholesale distributor.

A claim for credit or refund under section 6416 of the Code by the person that paid (or that is treated under this Notice as having paid) the tax to the government is an alternative to a claim for credit or refund under section 6421 by the ultimate purchaser. For any particular transaction, a claim may be filed under only one of these two sections. As provided in Notice 88-13, 1988-6 I.R.B. 13, the regulations under section 6416 as they relate to the gasoline excise tax will be amended to provide that the person that paid (or that is treated under this Notice as having paid) the tax to the government may not claim a credit or refund unless it has received from the ultimate purchaser a certification that the ultimate purchaser has not and will not claim a credit or refund under section 6421.

This document serves as an "administrative pronouncement" as that term is described in section 1.6661-3(b)(2) of the Income Tax Regulations and may be relied upon to the same extent as a revenue ruling or revenue procedure.

The principal author of this Notice is Ruth Hoffman, Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this Notice, contact Ruth Hoffman on (202) 566-4077 (not a toll-free call).