REQUEST LETTER

02-015

NAME

COMPANY

ADDRESS

We hereby request that the Utah State Tax Commission issue a Letter Ruling on the Utah motor fuels tax-exempt status of fuel imported into the State of Utah in the tanks of motor vehicles transported by common carrier and/or rail from other states, regardless of whether similar taxes were paid to other states.

The following discussion explains the facts and our conclusion that Utah's motor fuels tax should not be imposed on fuel in the tanks of motor vehicles transported into Utah by common carrier and/or rail from other states, regardless of whether similar taxes were paid to other states.

Subject

The application of Utah's motor fuels tax on fuel imported into the State of Utah in the tanks of motor vehicles transported by common carrier and/or rail.

Facts

The taxpayer is a motor vehicle manufacturer headquartered in STATE. Motor vehicles produced in the taxpayer's manufacturing facilities are exported to independently owned dealers throughout the United States, and outside of the United States, via common carrier and/or rail. A specific amount of fuel is placed into the tanks of all motor vehicles at the taxpayer's manufacturing facilities to accommodate the loading and unloading of the motor vehicles in transit. In some cases, motor fuel tax is paid to the state in which the manufacturing facilities are located. In other cases, motor fuel tax is not paid to the state in which the manufacturing facility is located because the fuel is subsequently exported from the state or because the state does not impose tax on such fuel.

Our Conclusion

We believe that Utah's motor fuels tax should not be imported into the State of Utah in the tanks of motor vehicles transported by common carrier and/or rail from other states, regardless of whether similar taxes were paid to other states.

Basis for Our Conclusion

The Utah motor fuel tax code defines "Persons and Motor Fuels Subject to Tax" as:

"Distributors must pay a tax on all motor fuels sold, used or in Utah and manufactured from Utah coals, oil shale, etc., fuels in interstate commerce, sales to the United States or to Utah and its political subdivisions of 750 gallons or more per sale, or fuels actually exported (Sec. 13, 201). Aviation fuel is taxable (Sec. 59-13-401)." (Emphasis added)

It is unclear, based upon the guidelines established by Utah statutes, whether fuel imported into the State of Utah I n the tanks of motor vehicles transported by common carrier and/or rail is taxable for Utah's motor fuels tax purposes.

Motor fuels tax laws and regulations promulgated by numerous states specifically exempt fuel that is delivered into a state in the tank of a motor vehicle that is directly connected to the engine of that motor vehicle for purposes of providing fuel to the engine to which the tank is connected.

For example, STATE regulations state that:

"Every distributor, refiner, manufacturer, producer, compounder and importer must pay a motor fuels tax on the distribution of all motor vehicle fuel (Rev. & Tax. Code, Sec. 7306; rev. & Tax. Code, Sec. 7351). . . . . Fuel brought into the state in an ordinary vehicle fuel tank is exempt." (Rev. & Tax. Code, Sec. 7305). (Excerpted, emphasis added).

Similarly, STATE excludes such fuel by defining "Importer" as follows:

"Importer shall mean any person who owns motor vehicle fuel at the time such fuel enters the State of STATE by any means other than barge, barge line, or pipeline. Importer shall not include a person who imports motor vehicle fuel in a tank directly connected to the engine of a motor vehicle, train, watercraft, or airplane for purposes of providing fuel to the engine to which the tank is connected" (Tax. Code Sec. 66-482(9)).

(Emphasis added)

We believe that, while Utah's laws and regulations do not explicitly define this exemption, the exemption is implied in the laws and regulations promulgated by the State of Utah.

The taxpayer imports fuel in motor vehicle fuel tanks that are being transported across state borders and are therefore in interstate commerce, exempt as defined by
Sec. 59-13-201. Thus, we believe that the taxpayer is not a distributor for Utah's motor fuels tax purposes and, therefore, such taxes should not be imposed on the fuel imported by the taxpayer into the State of Utah in the tanks of motor vehicles transported by common carrier and/or rail from other states, regardless of whether similar taxes were paid to other states.

Based upon the discussion above, we respectfully request the Commission to issue a Letter Ruling stating that Utah's motor fuels tax should not be imposed on fuel imported into the State of Utah in the tanks of motor vehicles transported by common carrier and/or rail from other states, regardless of whether similar taxes were paid to other states.

If you have any questions with respect to this matter, please call me at PHONE.

Copy to NAME – COMPANY

RESPONSE LETTER

NAME

COMPANY

ADDRESS

Re: Application of Utah’s motor fuel tax

Dear NAME,

You have requested information regarding the taxability of motor fuel that is placed in vehicles at the manufacturing plant. The vehicles are then transported either via common carrier and/or rail into Utah. You feel that the fuel, whether purchased exempt in other states or not, is involved in interstate commerce and the $0.245 per gallon Utah motor fuel tax should not be imposed.

While Utah statutes regarding the imposition of the motor fuel tax do not specifically impose or exclude motor fuel tax on gasoline in the situation you describe, we read the pertinent statute to exclude Utah taxation on the fuel in this fact scenario. In Utah Code Ann. §59-13-102 (5), the statute sets forth that “ ‘Distributor’ means any person in this state who: (a) imports or causes to be imported motor fuel for use, distribution, or sale, whether at retail or wholesale”. Your client imports vehicles into the state to be sold. A motor vehicle manufacturer is not a motor fuel distributor solely because of its import of vehicles into the state. Fuel is merely placed in the tanks of the vehicles to facilitate shipment of the vehicles and is incidental to the importation into Utah. Under these circumstances, we do not deem a car manufacturer to be a “distributor” of motor fuel as contemplated by Utah law. Accordingly, a motor vehicle distributor is not required to report and pay Utah’s motor fuel tax on such gasoline.

Should you have further questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/PL

02-015