SERVICE ANNOUNCES FIVE-MONTH EXTENSION OF CERTIFICATION PROCEDURES FOR TAX-FREE AND TAX-REDUCED SALES OF DIESEL AND AVIATION FUEL.

Notice 88-112

The purpose of this notice is to extend until February 1, 1989, the date by which heating oil retailers and others must be registered with the Internal Revenue Service in order to buy diesel and aviation fuel tax free or at a tax-reduced rate under the provisions of section 4093 of the Internal Revenue Code.

Section 10502 of the Revenue Act of 1987 (P.L. 100-203, 101 Stat. 1330) ("1987 Act") added section 4091 to the Code, which, beginning on April 1, 1988, moved the point of imposition of the tax on diesel and aviation fuel to the sale by the producer from the sale by the retailer. The 1987 Act also added section 4092 which defines the terms "diesel fuel", "aviation fuel" and "producer" and section 4093 which provides rules concerning exemptions from the tax. Notice 88-30, 1988-13 I.R.B. 7, as corrected by Announcement 88-64, 1988-16 I.R.B. 35, and modified by Notice 88-55, 1988-19 I.R.B. 25, provides interim rules for the administration of the diesel and aviation fuel taxes.

Section III(B)(2) of Notice 88-30 provides the procedures that must be followed to effectuate (1) tax-free sales of diesel and aviation fuel destined for use as heating oil to a heating oil retailer, (2) tax-reduced sales of diesel fuel to be used by the purchaser as a fuel in a diesel-powered train, (3) tax-reduced sales of aviation fuel to be used by the purchaser in an aircraft not in noncommercial aviation, and (4) tax-free sales of diesel and aviation fuel to be used by the purchaser other than as a motor fuel.

Section III(B)(2)(a) of Notice 88-30 provides that the tax-free or tax-reduced sales listed in the preceding paragraph can be made between April 1, 1988, and October 1, 1988, through the use of a prescribed certification procedure. On and after October 1, 1988, however, section III(B)(2)(b) provides that these tax-free or tax- reduced sales will not be allowed unless (among other requirements) both the seller and the buyer are registered with the Service in accordance with the provisions of section 4101. These registrations are accomplished through the use of Form 637, Registration for Tax- Free Transactions Under Chapters 31, 32 and 38 of the Internal Revenue Code, for heating oil retailers, railroads and users of fuel other than as a motor fuel and Form 637A, Registration for Tax-Free Sales and Purchases of Fuel Used in Aircraft Under Chapter 31 of the Internal Revenue Code, for commercial airlines.

The Internal Revenue Service is concerned that it may not be feasible for district directors to implement, and for taxpayers to comply with, these registration requirements by October 1, 1988. Accordingly, Notice 88-30 is modified to provide that these buyers who would otherwise would be required to be registered by October 1 will not be required to be registered until February 1, 1989, in order to make the tax-free or tax-reduced purchases described in Notice 88-30. Rather, the certification procedures described in section III(B)(2)(a) will remain in effect until that date.

The Service requests that producers, including wholesale distributors, remind their customers who buy diesel and aviation fuel tax-free or at a tax-reduced rate under the certification procedures of section III(B)(2)(a) of the registration requirements that are effective February 1.

This notice does not change any of the substantive rules of Notice 88-30. Thus, it does not modify any of the terms defined by Notice 88-30 and it does not require registration by state and local governments or by a person buying diesel and aviation fuel for such person's own use as heating oil. Also, it does not affect the present registration requirement for producers, including wholesale distributors.

The Service also reminds taxpayers of the rules concerning the validity of conditional registration certificates issued to producers under section III(B)(1)(d) of Notice 88-30. That section states that such certificates are "valid until the effective date of any final decision made by the District Director with respect to the application" made for a Certificate of Registry. "When a final decision is made, a notice will be sent by the District Director to the applicant stating that (i) the application for registry has received final approval, (ii) the conditional Certificate will expire at a date not less than 60 days after the date of such notice unless a bond is given, or (iii) the Certificate is revoked." Although the Service may announce the revocation of all conditional certificates in the future, no such blanket announcement will be made before a final decision has been made by the District Director on each conditional certificate issued under section III(B)(1)(d) of Notice 88-30.

EFFECT ON OTHER DOCUMENTS.

Notice 88-30 is modified.

ADMINISTRATIVE PRONOUNCEMENT.

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.

DRAFTING INFORMATION.

The principal author of this notice is Frank Boland of the Individual Tax Division of Chief Counsel. For further information, contact Mr. Boland on (202) 566-4077 (not a toll-free call).