Is number 2 heating oil used only for heating a taxable 'petroleum product' under Connecticut's petroleum products gross earnings tax?

Note: DRS later clarified this Ruling (Announcement 92(6)) and amplified and clarified it in Ruling 99-2. It remains grounded historical guidance, but confirm the current treatment of number 2 heating oil under the petroleum products gross earnings tax before relying on it.

Plain-English summary

Connecticut's Petroleum Products Gross Earnings Tax taxes companies on their gross earnings from selling "petroleum products" in the state. But the statutory definition of "petroleum products" (Conn. Gen. Stat. § 12-587(a)(4)) carves out one thing: number 2 heating oil (the grade the American Society for Testing and Materials designates as "Specification for Heating Oil D396-69") "to be used exclusively for heating purposes."

A refiner/distributor sold number 2 heating oil to a customer that used it in three ways, all involving heat:

• Heating the interior space of its commercial and manufacturing buildings;
• Heating manufacturing materials to remove moisture from them; and
• Heating a storage container to keep the finished product at a temperature that prevents spoilage.

DRS ruled the oil is not a "petroleum product." The statute's words are plain: number 2 heating oil "to be used exclusively for heating purposes" is excluded. Under the commonly approved usage of the language (Conn. Gen. Stat. § 1-1(a)), to "heat" means to make warm or hot / raise the temperature — and every use here (warming space, warming materials to dry them, warming a container to protect product) is heating. So the sales of this oil are outside the gross earnings tax.

A construction thumb-on-the-scale for the taxpayer. DRS added that because § 12-587(a)(4) is definitional — it determines whether a product is taxable in the first place, rather than granting an exemption from a tax that otherwise applies — any doubt is resolved by strictly construing the statute against the taxing authority and in favor of the taxpayer (following Plasticrete Block & Supply Corp. v. Commissioner). That's the opposite of the strict-against-the-taxpayer rule that governs true exemptions.

What this means for you

"Heating purposes" is read broadly — heating space or things counts

The exclusion isn't limited to space heating. Using number 2 heating oil to warm tangible personal property — drying manufacturing materials, keeping stored product from spoiling — is still "heating." If the oil is used exclusively for heating in any of these senses, its sale is outside the petroleum products gross earnings tax.

Definition vs. exemption changes who wins a tie

Whether a provision defines what is taxed or exempts something otherwise taxable flips the interpretive tie-breaker. A definitional limit (like this one) is construed against the tax; a true exemption is construed against the taxpayer. Knowing which you're arguing about can decide a close case.

It's about the product's use, not a blanket product exemption

The carve-out hinges on the oil being "used exclusively for heating purposes." Number 2 heating oil put to a non-heating use (historically, for example, as diesel motor-vehicle fuel) is treated differently, so the intended use of the fuel is what controls.

Common questions

Q: Is number 2 heating oil subject to the petroleum products gross earnings tax?
A: Not when it is to be used exclusively for heating purposes — the statute's definition of "petroleum products" excludes it, so its sale is outside the tax.

Q: Does heating manufacturing materials or a storage container count as "heating purposes"?
A: Yes. DRS read "heating" by its common meaning — raising the temperature — which covers warming building space, warming materials to remove moisture, and warming a container to keep product usable.

Q: Why does DRS construe the statute in the taxpayer's favor here?
A: Because § 12-587(a)(4) is definitional (it decides whether the product is taxable at all), not an exemption, so under Plasticrete any ambiguity is resolved against the taxing authority.

Q: Is this ruling still current?
A: It was later clarified by Announcement 92(6) and amplified and clarified by Ruling 99-2, so treat it as historical guidance and confirm the current rules.

Citations and references

Statutes and public acts:

• Conn. Gen. Stat. § 12-587(a)(4) (definition of "petroleum products"; number 2 heating oil for heating excluded)
• Conn. Gen. Stat. § 1-1(a) (commonly approved usage of language)
• 1985 Conn. Pub. Acts 381 (added subsection (a) to § 12-587)

Case law (as cited by the ruling):

• Plasticrete Block & Supply Corporation v. Commissioner, 216 Conn. 17, 579 A.2d 20 (1990); Robinson v. Unemployment Security Board of Review, 181 Conn. 1, 434 A.2d 293 (1980)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 92-6

Original ruling text

Ruling 92-6, Petroleum Products Gross Earnings Tax

Ruling 92-6

Petroleum Products Gross Earnings Tax

This Ruling has been clarified by   AN 92(6) ; amplified and clarified by   Ruling 99-2

FACTS:

A company which is engaged in the refining or distribution of petroleum products distributes a product commonly known as number 2 heating oil [hereinafter, "the heating oil"] to a customer.

The heating oil meets the specification for Heating Oil D396-69 that have been established by the American Society for Testing and Materials.

The customer uses the heating oil in its heating system to heat the interior space of its buildings. Those buildings are used for commercial and manufacturing purposes.

The customer also uses the heating oil to generate heat that is used in its manufacturing process. The process requires that the manufacturing materials be heated in order to remove moisture therefrom.

The customer also uses the heating oil to heat the interior space of a container in which the manufactured product is stored prior to its sale. If the manufactured product is not kept at a certain temperature, it becomes unusable and cannot be resold.

ISSUE:

Whether number 2 heating oil is a "petroleum product", as defined in Conn. Gen. Stat. §12-587(a)(4), if it is to be used exclusively for heating interior space or for heating tangible personal property.

DISCUSSION:

Conn. Gen. Stat. §12-587(a)(4) provides in pertinent part:

"petroleum products" means those products which contain or are made from petroleum or a petroleum derivative, but shall not mean (A) the product designated by the American Society for Testing and Materials as "Specification for Heating Oil D396-69," commonly known as number 2 heating oil, to be used exclusively for heating purposes . ... [Emphasis furnished]

This excerpted language was added as part of a new subsection (a) to Conn. Gen. Stat. §12-587 by 1985 Conn. Pub. Acts 381. Prior to the passage of 1985 Conn. Pub. Acts 381, Conn. Gen. Stat. §12-587 provided in pertinent part:

"petroleum products" includes any product which contains or is made from petroleum or a petroleum derivative, but shall not include the product designated by the American Society for Testing and Materials as "Specification for Heating Oil D396-69," commonly known as number 2 heating oil except when said product is sold for use as fuel for diesel engine motor vehicles ....

The Connecticut Supreme Court has noted that:

[A] cardinal rule of statutory construction is that statutes are to be construed to give effect to the apparent intention of the lawmaking body. Farms Country Club, Inc. v. Carini, 172 Conn. 439, 444, 374 A.2d 1094; Jarvis Acres, Inc. v. Zoning Commission, 163 Conn. 41, 46, 301 A.2d 244; McAdams v. Barbieri , 143 Conn. 405, 416, 123 A.2d 182; 2A Sutherland, Statutory Construction (4th Ed.) §45.05. If the language of the statute is clear, it is assumed that the intention is expressed by the words themselves and therefore there is no need to construe the statute; Anderson v. Ludgin , 175 Conn. 545, 552, 400 A.2d 712; for where the wording is plain, courts will not speculate as to any supposed intention because the question before a court then is not what the legislature actually intended but what intention it expressed by the words that it used. Doe v. Institute of Living, Inc., 175 Conn. 49, 68, 392 A.2d 491; Lee v. Lee , 145 Conn. 355, 358, 143 A.2d 154.

Robinson v. Unemployment Security Board of Review , 181 Conn. 1, 6, 434 A.2d 293 (1980).

In the instant matter, the wording of Conn. Gen. Stat. §12-587(a)(4) is plain: number 2 heating oil "to be used exclusively for heating purposes" is not a petroleum product. Even if, arguendo, the statements made in the course of debate on the floor of the House and the Senate concerning Substitute House Bill No. 7759 (which became 1985 Conn. Pub. Acts 381) were clearly indicative of legislative intent, there is no justification here for taking notice thereof.

If the phrase "to be used exclusively for heating purposes" is construed according to the commonly approved usage of the language; Conn. Gen. Stat. §1-1(a); the verb "heat" means "to make warm or hot: raise the temperature of [heat the oven to 350 degrees] [water heated by the sun] ...." Webster, Third New International Dictionary . The uses that the customer makes of the heating oil all involve the raising of the temperature, and the making warm or hot, of space or tangible personal property: heating interior building space, heating manufacturing materials to remove moisture, and heating the interior of a container in which the manufactured product is stored.

Furthermore, "when a taxpayer's claim 'concerns the imposition of a tax rather than a claimed right to an exemption or a deduction, the issue must be resolved by strictly construing the statute against the taxing authority and in favor of the taxpayer.' [Citations omitted.]" Plasticrete Block & Supply Corporation v. Commissioner , 216 Conn. 17, 25, 579 A.2d 20 (1990). Like the definition of "gross receipts"; Conn. Gen. Stat. §12-407(9); involved in Plasticrete, supra, the language pertaining to "petroleum products"; Conn. Gen. Stat. §12-587(a)(4); "is definitional in nature, and serves to determine whether certain [products] are taxable, not whether certain [products] that are ordinarily taxable should be exempt from taxation as a matter of legislative grace." Id., at 26.

RULING:

Number 2 heating oil to be used exclusively for heating interior space or for heating tangible personal property is not a "petroleum product", as defined in Conn. Gen. Stat. §12-587(a)(4).

LEGAL DIVISION

April 16, 1992