PS 94(4.1)

Exemptions For Petroleum Products Gross Earnings Tax Purposes

This publication has been superseded by PS 2001(10)

PURPOSE: This Policy Statement reflects the legislative changes made during the 1995 and 1996 sessions of the Connecticut General Assembly that affect what, for purposes of the petroleum products gross earnings tax, are exempt petroleum products; describes the new policy on circumstances in which CERT-116, Exempt Petroleum Products Certificate, is required to be issued; and describes the new policy on eligibility to file claims for refund.

BACKGROUND: In general, the petroleum products gross earnings tax is imposed on the gross earnings derived from the first sale in Connecticut of petroleum products. Conn. Gen. Stat. §12-587(a)(4) defines petroleum products as "those products which contain or are made from petroleum or a petroleum derivative" but Conn. Gen. Stat. §12-587(a)(3) and (4) exclude the gross receipts derived from the first sale in Connecticut of certain products described therein from the petroleum products gross earnings tax. These products, the gross receipts from the first sale in Connecticut of which are excluded from tax, are referred to in PS 94(4), Petroleum Products Gross Earnings Tax Exemptions, as exempt petroleum products. Whether or not a product is an exempt petroleum product depends on the use to which it will ultimately be put. Frequently, a petroleum product that might ultimately be put to an exempt use is, after its first sale in Connecticut, sold multiple times before being purchased by its ultimate user. This created a dilemma for the person making the first sale of petroleum products that were to be resold. Before the issuance of PS 94(4), the Department dealt with this dilemma by requiring those persons making the first sale in Connecticut of exempt petroleum products to pay the tax on the gross earnings derived there from, if the sale was made to a person who would be reselling the product; and, upon the filing of a Form AU-740, Application for Refund/Petroleum Products Gross Earnings Tax (Kerosene), Form AU-742, Application for Refund/Petroleum Products Gross Earnings Tax (Propane), or Form AU-743, Application for Refund/Petroleum Products Gross Earnings Tax (#2 Fuel Oil), the Department would refund the tax if it was established that the product was ultimately put to an exempt use by an end user. In PS 94(4), the Department announced a new policy that requires any person who purchases, for resale to others, exempt petroleum products from the person making their first sale in Connecticut to issue to the seller CERT-116 in order to establish that charges for such products are not subject to the petroleum products gross earnings tax. If a properly completed CERT-116 is taken from the purchaser, and the seller has no knowledge of facts that give rise to a reasonable inference that the product is not an exempt petroleum product, the gross earnings from that first sale are not subject to petroleum products gross earnings tax.

STATUTORY AUTHORITY: Conn. Gen. Stat. §12-587(a)(3) and (4), as amended by 1995 Conn. Pub. Acts 172, §3 and 1996 Conn. Pub. Acts 183, §3.

EFFECTIVE DATE: Effective upon issuance.

EXEMPT PETROLEUM PRODUCTS: In light of the changes made to Conn. Gen. Stat. §12-587(a)(3) and (4) by 1995 Conn. Pub. Acts 172, §3 and 1996 Conn. Pub. Acts 183, §3, the following petroleum products are exempt petroleum products for petroleum products gross earnings tax purposes:

• number 2 heating oil to be used exclusively for heating purposes;
• kerosene (commonly known as number 1 oil) to be used exclusively for heating purposes, provided delivery is by a supplier of both number 1 oil and number 2 oil, and delivery is made by means of a truck with a metered delivery ticket to a residential dwelling or a centrally-metered system serving a group of residential dwellings;
• propane gas to be used exclusively for heating purposes;
• bunker fuel oil, intermediate fuel, marine diesel oil and marine gas oil to be used in any vessel having a displacement exceeding 4,000 deadweight tons;
• propane gas to be used exclusively as fuel for a motor vehicle; and
• number 2 heating oil to be used in a commercial fishing vessel by a person who has been issued a Form OR-256, Commercial Fisherman Permit, by the Department of Revenue Services, and who is purchasing such fuel on or after the date of issuance of the permit but on or before the date of expiration of such permit.

NEW POLICY ON CIRCUMSTANCES IN WHICH CERT-116 IS REQUIRED TO BE ISSUED: Effective on or after the date of issuance of this Policy Statement, CERT-116 must be issued to every person selling exempt petroleum products (including the person making the first sale in Connecticut of those products) by:

• any person who is purchasing for resale to others those exempt petroleum products; or
• any person who is purchasing (but not for resale) bunker fuel oil, intermediate fuel, marine diesel oil and marine gas oil to be used in any vessel having a displacement exceeding 4,000 deadweight tons; propane gas to be used exclusively as fuel for a motor vehicle; or
• any person who is purchasing (but not for resale) number 2 heating oil to be used in a commercial fishing vessel by a person who has been issued a Form OR-256 by the Department of Revenue Services and who is purchasing such fuel on or after the date of issuance of the permit but on or before the date of expiration of such permit.

Acceptance by the seller of a CERT-116, when properly completed by the purchaser, shall relieve the seller from the burden of proving that the seller's gross earnings from the sale of an exempt petroleum product were not subject to the petroleum products gross earnings tax. A CERT-116 is valid only if taken in good faith by the seller. The good faith of the seller will be questioned if the seller has knowledge of facts that give rise to a reasonable inference that the product sold is not an exempt petroleum product (because, for example, the seller has knowledge of facts that number 2 heating oil that the seller has sold to the purchaser is likely to be used as fuel for a motor vehicle).

The seller must maintain a copy of CERT-116 and bills or invoices to the purchaser for a period of at least three years from the date of purchase (or, if the certificate is used for a continuing line of exempt purchases, three years from the date of the last purchase). The seller shall mark the bills, invoices or records covering all purchases made under the certificate with the words Exempt Petroleum Products Certificate or Exempt under CERT-116 to indicate that an exempt purchase has occurred.

A purchaser who is required to issue a CERT-116 must retain a copy of the certificate and records that substantiate the information entered on the certificate for a period of at least three years from the date of its issuance.

Any person who purchases for resale to others petroleum products and who issues a CERT-116 at the time of purchasing such products and who then resells those products in Connecticut must pay the petroleum products gross earnings tax on the gross earnings from such sale, unless issued a CERT-116 by the person to whom those products are resold. The tax is due with Form OP-161, Petroleum Products Gross Earnings Tax Return, on or before the last day of the month next succeeding the quarterly period in which such products are resold.

Any person who purchases (but not for resale to others) petroleum products and who is required by this Policy Statement to issue (and does issue) a CERT-116 at the time of purchasing such products and who then puts those products to a non-exempt use must pay the petroleum products gross earnings tax on the consideration paid (or contracted to be paid) for those products by the purchaser. The tax is due with Form OP-161 on or before the last day of the month next succeeding the quarterly period in which such products are purchased.

NOTE: Any person who is purchasing (but not for resale) any product that is an exempt petroleum product (other than bunker fuel oil, intermediate fuel, marine diesel oil and marine diesel gas oil) to be used exclusively for heating purposes is not required to issue a CERT-116 to the person from whom such product was purchased.

NEW POLICY ON REFUND CLAIMS: When a person who is subject to the petroleum products gross earnings tax pays the tax on gross earnings that are not subject to tax, the person may claim a refund by filing an amended Form OP-161 "within three years from the due date for which such overpayment [of tax] was made, stating the specific grounds upon which the claim is founded." Conn. Gen. Stat. §12-589(a).

A person is subject to the tax if the person is engaged in the refining or distribution, or both of petroleum products and makes the first sale in Connecticut of such products; Conn. Gen. Stat. §12-587(b); or if the person is importing or causing to be imported into Connecticut, in a calendar quarter, petroleum products for which more than $100,000 is paid (or contracted to be paid); Conn. Gen. Stat. §12-587(c).

A person who is not subject to the tax may not claim a refund even though the person may bear the economic burden of the tax. van Eck v. Gavin, No. 552501 (Conn. Superior Court. (Tax Sess.) Feb. 1, 1996). Thus, a person not subject to the tax purchasing exempt petroleum products from a seller who is subject to the tax and who passes on the economic burden of the tax to the purchaser (even though tax does not apply to the seller's gross earnings from the sale of such products) may not claim a refund. (If the seller paid the petroleum products gross earnings tax on those gross earnings, the seller could claim a refund, as discussed above.) Therefore, Form AU-740, Application for Refund/Petroleum Products Gross Earnings Tax (Kerosene), Form AU-742, Application for Refund/Petroleum Products Gross Earnings Tax (Propane), and Form AU-743, Application for Refund/Petroleum Products Gross Earnings Tax (#2 Fuel Oil) will no longer be accepted by the Department.

EFFECT ON OTHER DOCUMENTS: PS 94(4) is modified and superseded and may not be relied upon on or after the date of issuance of this Policy Statement.

EFFECT OF THIS DOCUMENT: A Policy Statement is a document that explains in depth a current Department policy or practice affecting the liability of taxpayers. Unlike a Ruling, a Policy Statement does not apply a policy or practice to a specific set of facts but it may be referred to for general guidance by taxpayers. Unlike a Special Notice, it does not announce a new policy or practice in response to changes in state or federal laws or regulations or to judicial decisions. 

PS 94(4.1)
Petroleum tax
Issued: 10/3/96