A New York corporation makes a Subchapter S election and is therefore exempt from the regular corporate franchise tax. It plans to buy gasoline and diesel fuel out of state, take title there, and ship it into New York for sale to its New York customers. Does its Subchapter S exemption from the regular franchise tax also exempt it from New York's separate oil company tax?

Plain-English summary

Petitioner is a New York corporation that elected Subchapter S treatment and, as a result, is exempt from New York's regular corporate franchise tax under Article 9-A by reason of Tax Law § 209.8. Petitioner planned to regularly purchase gasoline and diesel fuel (for non-residential resale), take title to it out of state, have it shipped by common carrier into New York terminals, and then ship it on to its New York customers. It asked whether its Subchapter S exemption from Article 9-A also shielded it from New York's separate oil company tax.

Tax Law § 182-a imposes its own annual tax -- three-quarters of one percent of gross receipts from petroleum sales -- on every "oil company," defined in § 182-a(2) as a corporation "formed for or engaged in the business of importing... into this state for sale in this state... petroleum." A Department memo, TSB-M-81(5.1)C (Revised), clarifies that a corporation is "importing" petroleum if it owns the fuel outside New York and ships it (or causes it to be shipped) into New York for in-state sale. Petitioner's described operations fit that definition precisely: it takes title out of state and ships the fuel into New York terminals for sale to its own New York customers.

The Department held the Subchapter S exemption simply doesn't apply here -- § 182-a is an entirely separate tax with its own definitions and its own imposition provision, unconnected to Article 9-A taxability. It squarely rejected Petitioner's reliance on a different Department memo, TSB-M-81(5.3)C (Revised), which had stated that corporations "not taxable under Article 9-A" are not taxable under § 182-a; the Department called that prior statement "incorrect." The correct rule, the Department explained, is that a foreign corporation is excluded from § 182-a only if it doesn't do business, employ capital, or own/lease property in New York, and doesn't maintain a New York office -- Article 9-A taxability or exemption has nothing to do with it. Any New York corporation that is an "oil company" under § 182-a's own definition is subject to that tax regardless of its Article 9-A status.

What this means for you

Petroleum importers organized as Subchapter S corporations

Don't assume that an Article 9-A exemption (Subchapter S or otherwise) protects you from New York's oil company tax. Section 182-a is a wholly separate tax that applies based on its own "importing petroleum for New York sale" test, independent of whether you owe (or are exempt from) the regular corporate franchise tax.

Watch for outdated Department guidance

This opinion is a second example (like TSB-A-83(4)C) of the Department using an Advisory Opinion to correct its own prior published guidance -- here, a Technical Services Bureau memo that wrongly suggested Article-9-A-exempt corporations were automatically exempt from the oil company tax too. If a general memo or form seems to conflict with a specific statute, get current professional advice rather than relying on the older guidance.

Note on this opinion's dates

The petition was received October 13, 1982 and the Department's internal draft is dated December 1, 1982, but the opinion carries a "TSB-A-82(17)C" header showing a May 9, 1984 date -- the same release date appearing on TSB-A-83(7)C. This appears to reflect a later official publication/release of an opinion drafted well earlier, keeping the original petition-year numbering; it does not affect the substance of the answer.

Common questions

Q: If my corporation is exempt from the regular Article 9-A franchise tax, am I automatically exempt from New York's oil company tax too?
A: No. Section 182-a is a separate tax with its own "importing petroleum for New York sale" definition; Article 9-A taxability or exemption (including a Subchapter S exemption) doesn't affect it.

Q: What makes a corporation an "oil company" subject to section 182-a?
A: Owning petroleum outside New York and shipping it (or causing it to be shipped) into New York for sale here, per TSB-M-81(5.1)C (Revised) -- combined with exercising your corporate franchise as a New York corporation, or, for a foreign corporation, doing business, employing capital, owning/leasing property, or maintaining an office in New York.

Q: Can another Subchapter S petroleum importer rely on this Opinion?
A: No. It binds the Department only as to this Petitioner's own facts and can't be relied upon by other taxpayers, even those with similar import-and-resell operations.

Citations and references

Statutes and guidance:

• Tax Law § 182-a(1), (2) (oil company tax; definition of "oil company")
• Tax Law § 209.8 (Subchapter S exemption from Article 9-A)
• TSB-M-81(5.1)C (Revised) (definition of "importing" petroleum)
• TSB-M-81(5.3)C (Revised) (cited by Petitioner; the Department held its statement on Article-9-A-exempt corporations incorrect)

Related ruling:

• TSB-A-83(7)C -- shares the same May 9, 1984 header release date, suggesting a batch of older opinions was officially published together that day

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a82_17c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(17)C
Corporation Tax
May 9, 1984

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C821013A

On October 13, 1982 a Petition for Advisory Opinion was received from Conrad P. Homier,
C.P.A., 60 Cutter Mill Road, Great Neck, New York 11021.
At issue is whether a New York corporation which expects to purchase and import gasoline
and diesel fuel into New York State on a regular basis would be subject to tax as an oil company
under Section 182-a of the Tax Law. Such corporation has made an election under Subchapter S of
the Internal Revenue Code and is exempt from the tax imposed under Article 9-A of the Tax Law
by reason of section 209.8 thereof.
The corporation will take title to the gasoline and diesel fuel (to be sold other than for
residential purposes) in the state where it is purchased. The fuel will be shipped into New York State
by common carriers. The petroleum products will then be unloaded into terminals within New York
State, and subsequently shipped to the corporation's customers within New York.
Section 182-a(1) of the Tax Law, in pertinent part, imposes an annual tax upon every oil
company for, among other things, exercising its corporate franchise (viz., existing as a New York
corporation), equal to three quarters of one percent of gross receipts from sales of petroleum.
Section 182-a(2) of the Tax Law, in pertinent part, defines the term "oil company" to mean
"every corporation, formed for or engaged in the business of importing . . . into this state for sale in
this state . . . petroleum."
The meaning of the term "importing" has been clarified in a Technical Services Bureau
memorandum, TSB-M-81(5.1)C(Revised), as follows:
"For the purposes of this section, a corporation is engaged in
the business of importing petroleum into New York State if it owns
petroleum outside New York State and ships or causes it to be
shipped to a point within New York State for sale in New York
State."
The corporation in question will be (1) exercising its corporate franchise, and (2) engaging
in the business of importing petroleum into New York for sale in New York. Accordingly, such
corporation will be subject to the tax imposed under section 182-a of the Tax Law. The fact that the
corporation is entitled to "Subchapter S treatment" for New York purposes, and is thus exempt from
the franchise tax imposed under Article 9-A of the Tax Law, has no bearing on the matter
whatsoever. The statement in Technical Services Bureau Memorandum TSB-M-81(5.3)C(Revised),

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-82(17)C
Corporation Tax
May 9, 1984

referred to by Petitioner, to the effect that "the following sellers of petroleum are not taxable under
this section [viz., section 182-a]: . . . a corporation not taxable under Article 9-A," is incorrect. A
correct construction of the statute would exclude any foreign corporation which does not do
business, employ capital, own or lease property in New York in a corporate or organized capacity
or maintain an office in New York, for all or any part of its taxable year. A foreign corporation which
does satisfy one or more of these jurisdictional criteria, and any New York corporation, which is an
"oil company," would be subject to tax under section 182-a irrespective of its subjection to Article
9-A or its exemption therefrom by reason of section 209.8 of the Tax Law.

DATED: December 1, 1982

s/FRANK J. PUCCIA
Director
Technical Services Bureau