Rev. Rul. 57-250

Advice has been requested whether, for purposes of purchasing gasoline tax-free, a parent corporation is a producer of gasoline by reason of refining operations performed by its wholly-owned subsidiary.

A corporation buys and sells, but does not refine, compound, blend, or produce, gasoline. It purchases the gasoline tax paid and does not sell exclusively to producers of gasoline. However, its wholly-owned subsidiary which purchases and refines crude oil into gasoline is registered and bonded as a producer.

Section 4081 of the Internal Revenue Code of 1954 imposes a tax on gasoline sold by the producer or importer thereof, or by any producer of gasoline. Section 4082 of the Code states that the term `producer' includes a refiner, compounder or blender, and a dealer selling gasoline exclusively to producers of gasoline, as well as a producer. Any person to whom gasoline is sold tax-free under this subpart shall be considered the producer of such gasoline. Section 4083 of the Code provides that the tax imposed by section 4081 of the Code shall not apply in the case of sales of gasoline to a producer of gasoline.

Section 314.30(a) of Regulations 44, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that a `producer' includes a refiner, compounder, or blender, and a dealer selling gasoline exclusively to producers of gasoline, as well as an actual producer. The term `producer' also includes any person (not included in the preceding sentence) to whom gasoline is sold tax free for any purpose but such person is considered a `producer' only with respect to gasoline purchased tax free. The mere blending or mixing by any person of gasoline to adapt it for seasonal use or to meet the requirements of particular vendees, or blending which is not a substantial part of the blender's regular year-round business, does not constitute him a producer.

The fact that the subsidiary in the instant case, which is wholly-owned and controlled by the parent, is a registered and bonded producer does not make the parent a producer in its own right. Accordingly, it is held that, since the parent corporation does not actually produce gasoline or lubricating oil or sell gasoline exclusively to producers of gasoline, it is not a producer of gasoline within the meaning of section 4082 of the Code. Therefore, the exemption in the case of sales to a producer provided by section 4083 of the Code does not apply to gasoline sold to the parent corporation by any producer or importer. Furthermore, the tax on gasoline imposed by section 4081 of the Code does not apply when it is resold by the parent corporation.