Were separately stated fees for loading aviation fuel into an aircraft subject to Illinois Retailers' Occupation Tax?

Plain-English summary

An aviation-fuel seller passed airport operators' into-plane loading fees to customers at cost and separately stated them on its invoices.

IDOR applied the inseparable-link test from Kean v. Wal-Mart. Separate statement was not enough by itself. If the aircraft owner contracted with the seller to buy and load fuel and the seller selected the loader, fuel delivery was inseparable from the sale and the into-plane fee was subject to Retailers' Occupation Tax.

If the aircraft owner bought fuel but instructed the seller to use a specific ground-based operator with which the owner had contracted, there was no inseparable link. The into-plane fee was not taxable even when the fuel seller facilitated billing by separately stating the delivery charge.

Because the submitted facts did not establish the exact contractual relationships, IDOR did not give a definitive answer for the seller's actual transactions.

What this means for you

Aviation-fuel sellers should retain contracts and other documentation showing who selected and contracted with the loading provider. Passing the fee through at cost and separately stating it does not make it nontaxable when the fuel seller controls delivery.

Common questions

Did separate statement make the fee exempt? No.

When did IDOR say the fee was not taxable? When the customer had separately contracted with and specified the ground operator that loaded the fuel.

Did the letter decide the company's own transactions? No; the contractual relationships were unclear.

Citations and references

• 86 Ill. Adm. Code 130.415.
• Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 919 N.E.2d 926 (2009).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2016.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2016/st-16-0047-gil.pdf

Original ruling text

ST 16-0047-GIL 09/21/2016

DELIVERY CHARGES

This letter discusses into plane fees in light of the decision in Kean v. Wal-Mart Stores, Inc.,
235 Ill. 2d 351, 919 N.E.2d 926 (2009). See 86 Ill. Adm. Code 130.415. (This is a GIL)

September 21, 2016

Dear Xxxxx:
This letter is in response to your letter dated June 29, 2016, in which you requested
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
Our Company, COMPANY 1 and its subsidiary, COMPANY 2 (together ABC) is in the
business of selling aviation fuel nationwide and internationally to both commercial
aircraft, fractional aircraft operators and to private aircraft owners. The majority of the
fuel we purchase is from major oil companies as well as from local fixed based
operators (“FBO’s”).
We generate our revenue by adding a margin to the fuel price received from the
supplier. All other charges, including all taxes and costs of delivery of the fuel into the
aircraft (“into plane fees”) are passed directly onto the customer at cost and shown
separately on invoices as the cost of delivery of the fuel, other charges and taxes.
We currently add tax to the “into plane fee” when charging our customers. We are now
requesting your consideration as to whether this is in fact the correct treatment or
whether the “into plane fees” should be exempt from tax on the basis that a separable
link exists between the purchase price of the fuel and the delivery of the fuel into the
aircraft, as described in Part 130 Section 415.
We are requesting the Illinois Department of Revenue to consider the “into plane fees”
as being exempt from Retailers’ Occupation Tax on the basis that:

1. The “into-plane fees” represent a charge to the company of aviation fuel by an
airport agent to deliver or cause fuel to be delivered directly into a purchaser’s
aircraft from a storage facility at the airport.

2. The company is not selling the fuel at a “delivered price”, rather, the price for the fuel
   is agreed upon per transaction and the separately stated amount representing the
   charge for the transportation of the fuel directly to the customer is added to that
   price.
3. The company separately states such transportation charges in an amount that does
   not exceed the amount charged by the airport agent.
4. The “into plane fee” is generally negotiated between the end customer and the
   company delivering the fuel into the aircraft. ABC provides the service of collating all
   charges related to the fueling of the aircraft to simplify the billing process for both the
   supplier and end customer and these charges are “passed on” to the customer at
   the same rate charged by the airport agent, with no mark up.
   We attach an example of both the invoice from the airport agent and our invoice to our
   customer as an example, as well as other invoices for a different customers at the same
   location to show the different “into plane fee” negotiated by the customer directly with
   the airport agent. We also attach examples of email correspondence advising ABC of
   the “into plane fee” to charge different customers at various locations.
   ABC’s customer has the option to choose another delivery process or provider to deliver
   the fuel into the aircraft. ABC, as a convenience to both the airport agent and the
   customer, allows a single invoice to be raised by the airport agent and the end customer
   receives a single invoice for the fueling of their aircraft.
   We can provide any further information or documentation the Department may require
   to make their determination.
   DEPARTMENT’S RESPONSE:
   The Department’s regulation regarding transportation and delivery charges, 86 Ill. Adm. Code
   130.415, was recently amended in light of the decision in Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d
   351, 919 N.E.2d 926 (2009). At issue in Kean was whether shipping charges for certain Internet
   purchases of tangible personal property were subject to Illinois sales tax. The court found that an
   “inseparable link” existed between the sale and delivery of the merchandise plaintiffs purchased from
   Wal-Mart’s Internet store. Thus, the court in Kean concluded that the outgoing transportation and
   delivery charges were part of the gross receipts subject to the Retailers’ Occupation Tax.
   An inseparable link exists when (a) the transportation and delivery charges are not separately
   identified to the purchaser on the contract or invoice or (b) the transportation and delivery charges are
   separately identified to the purchaser on the contract or invoice, but the seller does not offer the
   purchaser the option to receive the property in any manner except by delivery from the seller (i.e., no
   pick-up option). In contrast, if the tangible personal property that the customer agreed to buy can be
   sold to the customer without the retailer rendering the delivery service, then an inseparable link does
   not exist and the delivery charges should not be included in the selling price of the sale of tangible
   personal property. Kean, 235 Ill. 2d at 375.

Thus, when charges for outgoing transportation and delivery are separately identified and the
purchaser has the option to pick up the tangible personal property, outgoing transportation and
delivery is considered a service separate and distinct from the sale of tangible personal property that
is being transported or delivered and charges for such services should be excluded from the gross
receipts subject to the Retailers’ Occupation Tax (or Use Tax in the case of out-of-state retailers who
sell directly to Illinois residents). When a seller offers the purchaser the option to pick up the property
at the seller’s location, the seller must maintain documentation which demonstrates that the
purchaser had that option.
We are unable to determine the exact contractual relationship between your company, the
aircraft owner or operator and the company delivering, or loading, the fuel and so cannot provide you
with a definitive answer regarding the arrangement you describe in your letter. However, if an aircraft
owner or operator contracts with you to buy and load fuel on an aircraft and you select the person to
load the fuel, there is an inseparable link between the purchase of the fuel and the delivery of the fuel,
and the “into plane fee” is subject to Retailers’ Occupation Tax, regardless of whether you separately
state the “into plane fee” on the invoice. 86 Ill. Adm. Code 130.415(b)(1)(B). If an aircraft owner or
operator contracts with you to buy fuel and instructs you to use a specific ground-based operator that
he has contracted with to load fuel, there is no inseparable link between the purchase of the fuel and
the delivery of the fuel, and the “into plane fee” would not subject to Retailers’ Occupation Tax. This
is the case even if the company selling the fuel facilitates the transaction between the customer
buying the fuel and the company loading the fuel by separately stating the delivery charges on its
invoice.
I hope this information is helpful. If you require additional information, please visit our website at
www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:bkl