A propane dealer imports propane into New York for sale, and more than half of it is sold for home heating. Does selling propane for residential use qualify the company for the tax law's exclusion for sellers of residential 'fuel oil,' exempting it from the oil company franchise tax?

Plain-English summary

Seimax Gas Corp. sells propane, some of which it imports into New York for sale here, and more than 50% of its sales are of propane for residential (home heating) use. Section 182-a of the Tax Law imposes a franchise tax on "oil companies," a term defined to include corporations engaged in importing petroleum -- expressly including propane -- into New York for sale here. The statute separately excludes from that "oil company" definition any corporation "principally engaged in selling fuel oil (excluding diesel motor fuel) used for residential purposes." Petitioner argued that, since it's principally selling propane for residential use, it should qualify for this exclusion and escape the tax entirely.

The Department rejected the argument on a straightforward textual reading: propane is not "fuel oil" under this statute. The statute itself, in a separate provision, expressly distinguishes "fuel oil" from "liquefied or liquefiable gases" -- a category that by its own terms includes gases like butane, ethylene, and propane. Because the legislature drew this distinction within the same statute, Petitioner cannot use the "fuel oil" exclusion for its propane sales, however residential-focused they are. Petitioner therefore remains an "oil company" subject to section 182-a tax.

That said, Petitioner does get a narrower, separate benefit under a different part of the same statute: its receipts from residential propane sales (except when sold in containers under 100 pounds) are excluded from the "gross receipts from sales of petroleum" figure used to actually COMPUTE the tax -- so while Petitioner can't escape the tax entirely, its residential propane sales don't inflate its tax base. The Department also flagged a related administrative quirk: the official tax return instructions for Form CT-182-a lump propane into a "Residential Fuel Oil" category, but that's just shorthand for purposes of the RECEIPTS exclusion -- it doesn't mean propane counts as "fuel oil" for purposes of the "oil company" DEFINITION itself.

What this means for you

Propane dealers assuming a "residential fuel" exemption applies

Don't assume selling primarily residential propane exempts you from the section 182-a oil company tax the way selling residential fuel oil would -- the statute treats propane as a distinct "liquefied gas" category, not "fuel oil," even though consumers commonly think of them similarly.

Understand the difference between the definitional test and the tax-base exclusion

Even though propane sellers can't use the "fuel oil" DEFINITIONAL exclusion to escape "oil company" status, residential propane receipts still get a separate, narrower exclusion from the actual tax computation -- so it's worth tracking residential propane sales carefully even though you remain a taxable oil company overall.

Don't rely on tax-form terminology to interpret the statute

The Department flagged that Form CT-182-a's instructions group propane under "Residential Fuel Oil" purely as a label for the receipts-exclusion line item -- that administrative shorthand doesn't change the statutory "oil company" definition itself.

Common questions

Q: If I sell mostly residential propane, am I exempt from the oil company franchise tax?
A: No -- propane is legally a "liquefied gas," not "fuel oil," so the residential fuel oil seller exclusion from "oil company" status doesn't apply to propane dealers, regardless of how much of your propane goes to residential customers.

Q: Do I get any benefit at all for selling residential propane?
A: Yes -- your residential propane receipts (except sales in containers under 100 pounds) are excluded from the gross receipts figure used to compute the tax itself, even though you remain a taxable "oil company" overall.

Q: Does the tax return's "Residential Fuel Oil" category mean propane counts as fuel oil?
A: No -- that's just the label used for the residential receipts exclusion line on Form CT-182-a; it doesn't affect the separate statutory definition of "oil company."

Q: Can another propane dealer rely on this specific ruling?
A: No. It binds the Department only as to Seimax's own facts and can't be relied upon by other taxpayers, even other majority-residential propane sellers.

Citations and references

Statutes:

• Tax Law § 182-a.2(a), (b), (e)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a83_6c.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-83(6)C
Corporation Tax
May 9, 1984

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C820721A

On July 21, 1982 a Petition for Advisory Opinion was received from Seimax Gas Corp., P.
O. Box 191, Monticello, New York 12701.
At issue is whether a corporation selling propane, where more than 50% of such propane is
used for residential purposes, is an oil company as defined in Section 182-a of the Tax Law, and
would be subject to the tax imposed by that section.
Section 182-a of the Tax Law imposes a franchise tax on certain oil companies. The term "oil
company" is defined to include corporations engaged in the business of importing petroleum,
including propane, into New York for sale in New York. Tax Law, § 182-a, 2(a) and (e). The statute
provides for an exclusion from the definition of "oil company" with respect to any "corporation
which is principally engaged in selling fuel oil (excluding diesel motor fuel) used for residential
purposes . . . " Tax Law, § 182-a, 2(a).
Petitioner is engaged in the business of selling propane, some of which is imported into New
York for sale in this State. However, more than fifty per cent of its sales are of propane for
residential purposes. Therefore, if propane constitutes "fuel oil," Petitioner would not be an oil
company within the meaning of section 182-a of the Tax Law and thus would not be subject to the
tax imposed thereby. However, the term fuel oil does not include propane. This is made clear by the
statute itself, which in paragraph (b) of section 182-a.2, draws a distinction between "fuel oil" and
"liquefied or liquefiable gases," the latter phrase including such gases as butane, ethylene or propane.
Accordingly, Petitioner is an oil company and is subject to the franchise tax imposed under section
182-a. It should be added that its receipts from the sale of propane, "except when sold in containers
of less than one hundred pounds," for residential purposes should be excluded from the computation
of its "gross receipts from sales of petroleum." Tax Law, § 182-a.2(b). It is to be noted, further, that
the inclusion of the propane within the category of "Residential Fuel Oil" in the instructions for Form
CT-182-a (Additional Franchise Tax Return For Oil Companies Taxable Under Article 9, Section
182-a) is for purposes of such exclusion, and is not applicable to the definition of "oil company."

DATED: February 11, 1983

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

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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