Can a petroleum wholesaler form a separate corporation (NEWCO) to handle fuel imports, so that the wholesaler itself avoids Article 13-A importer status and its associated Article 9-A tax add-back, and under what specific delivery/title arrangements does a purchase count as 'importing'?

Plain-English summary

Petroleum Sales and Service, Inc., a vertically integrated Buffalo-based wholesale motor-fuel distributor and retail gas station operator/lessor, has been subject to Article 13-A's petroleum business tax since 1985. Because Article 9-A requires Article 13-A taxpayers to add back their Article 13-A tax liability (section 208.9(b)(4)), Petitioner -- having recently done very little actual fuel importing -- considered revoking its Article 13-A registration and instead routing any future imports through a newly formed corporation, "NEWCO," which would separately register as an Article 13-A importer. The core question: would a separate corporate structure actually be respected by the Department for Article 13-A/9-A purposes, and under exactly what delivery arrangements does a fuel purchase count as "importing" in the first place?

Corporate separation is respected, with one key condition. Whether NEWCO is structured as Petitioner's subsidiary or as a brother/sister affiliate under common ownership, the Department confirmed both will be recognized as separate and distinct operations for Article 13-A and Article 9-A purposes as long as NEWCO maintains separate books and records -- this held true even where NEWCO has no employees or titled property of its own and Petitioner's personnel handle NEWCO's purchasing, invoicing, and record-keeping as a paid administrative service; even where NEWCO sells to Petitioner at cost; and even where trucks transferred to NEWCO remain registered in Petitioner's name or bear Petitioner's logo (as long as NEWCO's own books reflect true ownership and depreciation of those trucks). The Department flagged one caveat throughout: combined reporting may still be required under section 211.4 for Article 9-A purposes even with valid corporate separation.

"Importing" turns entirely on where legal title passes, not who physically moves the fuel. The ruling worked through a dense set of delivery scenarios (Petitioner's own trucks, common carriers, F.O.B. destination terms) and consistently found that a purchase is not "importing" by Petitioner as long as title and risk of loss remain with the seller (whether NEWCO or an unrelated out-of-state Article 13-A supplier) until the fuel is actually pumped into Petitioner's domestic tanks or delivered to its New York customers -- documented by a written agreement. The one wrinkle: if Petitioner uses its own truck to pick up product before title passes, Petitioner itself becomes a "common carrier" for that leg of the trip and must bill the seller a standard freight charge accordingly. Separately, the Department confirmed Article 13-A offers no exemption or refund mechanism for sales to residential customers (though a residential-use certificate can be furnished to upstream Article 13-A suppliers) or to exempt government agencies, but a non-13-A reseller like Petitioner CAN pass along the embedded Article 13-A cost to its own customers as a separately stated "Cost of Gross Receipts Tax" line item.

What this means for you

Petroleum wholesalers and distributors structuring import operations through affiliates

A genuinely separate corporate structure -- subsidiary or brother/sister -- can isolate Article 13-A importer status and its Article 9-A add-back consequences in one entity, but only with real bookkeeping separation. Shared personnel, at-cost intercompany pricing, and even shared truck branding are all tolerated as long as the affiliate's own books independently reflect its transactions, assets, and depreciation.

Businesses trying to avoid "importing" status through careful delivery terms

The controlling fact is legal title and risk-of-loss passage, documented in writing -- not which company's truck physically crosses the state line. Using your own vehicle to pick up product before title transfers converts you into a "common carrier" for that transaction, with its own freight-billing obligations, even if you never become the "importer."

Accountants and tax attorneys advising on Article 13-A structuring

Watch the combined-reporting caveat closely -- corporate separation for import-status purposes doesn't automatically mean the entities file completely independent Article 9-A returns; section 211.4 combined reporting can still apply on top of the separate Article 13-A treatment.

Common questions

Q: Can forming a separate corporation to handle fuel imports shield the parent/affiliate from Article 13-A importer status?
A: Yes, if the new corporation maintains genuinely separate books and records -- shared personnel, at-cost pricing, and shared truck branding don't defeat the separation as long as the books are independent.

Q: Does using your own truck to pick up product from an out-of-state seller make you the "importer"?
A: Only if title and risk of loss pass to you before or during that pickup. If a written agreement keeps title with the seller until the fuel is pumped into your domestic tanks, you're not the importer -- but you do become a "common carrier" for that leg and must bill the seller freight accordingly.

Q: Can a non-13-A reseller recover the embedded Article 13-A tax cost from its own customers?
A: Yes, by separately stating it on the customer invoice as a "Cost of Gross Receipts Tax" line item -- but there's no refund or exemption mechanism for sales to residential or governmental customers under Article 13-A itself.

Citations and references

Statutes:

• Tax Law section 208.9(b)(4) (Article 9-A add-back of Article 13-A tax)
• Tax Law section 211.4 (Article 9-A combined reporting)
• Article 13-A of the Tax Law generally (petroleum business tax and importer registration)

Prior guidance cited:

• TSB-M-83(22)C (no governmental-sale exemption under Article 13-A)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a90_12c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90(12)C
Corporation Tax
May 16, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. Z891204C

On December 4, 1989, a Petition for Advisory Opinion was received from Petroleum Sales
and Service, Inc., 300 Ohio Street, Buffalo, New York 14204.
The issue raised by Petitioner, Petroleum Sales and Service, Inc., is whether a subsidiary
corporate structure, or a corporation related by common stockholder ownership, will enable the
separate companies to be treated separately in respect to imposition of Article 13-A and Article 9-A
of the Tax Law.
Petitioner was organized in New York State in 1930 and has operated exclusively within
New York State from its inception. Petitioner is presently subject to Article 13-A. Petitioner has
received a Certificate of Taxability under Article 13-A effective March 1, 1985. For New York State
franchise tax purposes pursuant to section 208.9(b)(4) of Article g-A, Petitioner is required to add
back the Article 13-A tax to which it is subject.
Petitioner's operations are vertically integrated. Outside of its trucks and retail tanks,
Petitioner has no storage capacity. Petitioner's operations consist of wholesale distribution of motor
vehicle fuels generally utilizing its own trucks; ownership and operation of retail gasoline service
stations; and rental of retail stations to independent operators. As such, it is subject to the Article
13-A tax based upon sales to 1) independent retail service stations, 2) nonindependently operated
service stations and 3) other independent wholesalers.
Because of competitive economies, purchasing may be made, in any given period, exclusively
within New York State or from other Article 13-A importers; exclusively from outside New York
State or from non-13-A entities; or some combination of the above. Pricing modulation has to be
employed to weigh the relative price advantage of either domestic or nondomestic sources. This is
due to the fact that the industry practice is to quote a unit price per gallon exclusive of any Article
13-A tax which is separately invoiced by Article 13-A import suppliers.
During 1989, Petitioner found that based upon its purchasing practices it had been almost
exclusively purchasing from domestic suppliers and had done very little importation. Given this
environment it was determined that it might be advisable to revoke its Article 13-A status and cease
any importation and thereby eliminate the additional franchise tax imposed via addition of tax
liability incurred as an Article 13-A corporation. Though currently Petitioner is importing very little,
Petitioner anticipates that future economics may dictate resumption of import purchasing. Petitioner
proposes to form a new corporation,
TP-9 (9/88)

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NEWCO, which would be established concurrently with Petitioner's revocation of its Article 13-A
status. NEWCO itself would duly register and qualify as an Article 13-A corporation. NEWCO's
primary purpose would be to handle any future importation as may be required.
Fundamentally, this ruling request is made in order to establish definitely whether a
subsidiary corporate structure, or a corporation related by common stockholder ownership, will
enable the separate companies (Petitioner and NEWCO) to be treated separately in respect to
imposition of the Article 13-A tax and the Article 9-A franchise tax. There is contemplated various
operational integration and/or segregation which may be employed. Set forth therein are
assumptions regarding future operations (Item I and Item II) which demand inquiry in order to
answer the basic question set forth and to establish practices which may or may not be employed in
order to preserve the intended benefit from an alternative corporate structure. Finally, Item III sets
forth questions regarding the general application of Article 13-A.
Item I . The following factual scenario is presented. NEWCO would be established as a separate
legal entity, and duly registered as an Article 13-A importer. However, NEWCO would employ no
personnel, nor have any property titled in its name. Separate cash accounts, sales invoicing, purchase
invoicing, record keeping, etc. would be performed by Petitioner's personnel for NEWCO's
operations. NEWCO's sole function would be to execute purchases of imported gasoline which
would be sold predominately to Petitioner (as a non-13-A corporation) for resale and to nonrelated
Article 13-A wholesalers. Petitioner will charge NEWCO for management and administrative
services. These services will include fuel purchase ordering and invoicing, customer sales invoicing,
vendor payments, tax reporting and record keeping functions performed by Petitioner's personnel.
Under these circumstances, the following questions are directed for separate answers.
a)

Whether a parent/subsidiary corporate structure (with Petitioner as parent and
NEWCO as subsidiary) will be recognized as separate and distinct operations for
Article 13-A and Article 9-A tax purposes.
For purposes of both Article 13-A and Article 9-A, Petitioner and Newco will be
recognized as separate and distinct operations as long as Newco maintains separate
books and records. However, for purposes of Article 9-A, combined reporting may
be required pursuant to section 211.4 of Article 9-A.

b)

Whether a brother/sister corporate structure will be recognized as separate and
distinct operations for Article 13-A and Article 9-A, tax purposes.
Same answer as I a) above.

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c)

If NEWCO made sales to Petitioner at a price equivalent to its cost, would the
answers to I a) and I b) above be the same?
Yes.

d)

If the purchaser wasNEWCO and delivery was made to Petitioner's facilities or to
Petitioner's customer F.O.B. destination by a common carrier whose freight bill is
paid by the seller - would this be considered importing by Petitioner?
No.

e)

What if Petitioner picked up NEWCO's purchase of product from an independent
out-of-state supplier (non-13-A corporation) with its own truck and Petitioner and
NEWCO had a written agreement that risk of loss and title did not pass to Petitioner
until the product was pumped into Petitioner's domestic tanks or delivered to New
York situs customers of Petitioner - would this be considered importing by
Petitioner?
No. Title did not pass until product was sitused in New York. However, Newco
would have to prove that it retained title until the product was delivered to the New
York site. In this situation, Petitioner is considered a common carrier. Therefore,
Petitioner should prepare a standard freight bill and charge Newco accordingly.

Item II. The following factual scenario is presented in the alternative. NEWCO would receive the
trucking operations of Petitioner in a tax-free reorganization. Drivers and dispatching personnel
would be employed by NEWCO. Any purchasing by either company would be picked up by
NEWCO's trucks and all deliveries would be handled by NEWCO's trucks. Sales of NEWCO's
imported gasoline to Petitioner's retail operations would be invoiced to Petitioner at prevailing retail
pricing plus a delivery charge as would be the case in retail sales to any independent retail service
station. Where Petitioner utilizes NEWCO's trucks for any purpose (purchasing or retail sales
delivery), a standard freight bill will be prepared and charged to Petitioner. Petitioner will charge
NEWCO for management and administrative services.
These services will include fuel purchase ordering and invoicing, customer sales invoicing,
vendor payments, tax reporting and other administrative and record keeping functions to be
performed by Petitioner's personnel. Separate cash accounts, accounting records and purchase and
sales records will be maintained for NEWCO's operations.
Under these circumstances, the following questions are directed for separate answers.
a)

Whether a parent/subsidiary corporate structure (with Petitioner as parent and
NEWCO as subsidiary) will be recognized as separate and distinct operations for
Article 13-A and Article 9-A tax purposes.

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Same answer as I a) above.
b)

Whether a brother/sister corporate structure will be recognized as separate and
distinct operations for Article 13-A and Article 9-A tax purposes.

Same answer as I a) above.
c)

If NEWCO made sales toPetitioner at a price equivalent to its cost, would answers
to II a) and II b) remain the same?

Yes.
d)

Whereas legal, operational and record keeping functions are segregated, if the trucks
transferred to NEWCO remained registered to Petitioner and/or bore the logo of
Petitioner would answers to II a) and II b) remain the same?

Yes, if the trucks are owned by Newco and Newco's books and records reflect such
ownership and depreciation. It is irrelevant whose logo is on the trucks. If the trucks are
carried on the books and records of Petitioner, Petitioner would become a common carrier
when it transports the product owned by Newco. In such situation Petitioner should prepare
a standard freight bill and charge Newco accordingly.
Item III . The following general questions regarding application of Article 13-A are directed for
separate answers.
a)

Could Petitioner as a non-13-A corporation sell to exempt residential customers and
apply for a refund of the Article 13-A tax charged to Petitioner by Article 13-A
suppliers in respect to such residential sales.
No. However, Petitioner may furnish Article 13-A suppliers with a residential use
certificate with respect to residential sales.

b)

Could Petitioner as a non-13-A corporation sell to exempt New York State
governmental organizations and apply for a refund of the Article 13-A tax charged
to Petitioner by Article 13-A suppliers in respect to such exempt sales.
No. Under Article 13-A, there is no exemption on sales made to governmental
agencies. (See TSB-M-83(22)C).

c)

If Petitioner as a non-13-A corporation purchases product from-a nonrelated
registered Article 13-A corporation from an out-of-state source and that product is
delivered to Petitioner F.O.B. destination by the seller directly so that title does not
pass to Petitioner until the fuel is pumped into Petitioner's tanks or Petitioner's
customers' tanks, would this be considered importing by Petitioner?

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No.
d)

Assuming that the seller in III c) was the related new Article 13-A corporation (NEWCO),
would this be considered importing by Petitioner?
No.

e)

If delivery were to Petitioner or to its customer F.O.B. destination by a common carrier
whose freight bill is paid by the seller (who is a registered Article 13-A corporation) - would
this be considered importing by Petitioner?
No.

f)

Assuming that the seller in III e) was the related new Article 13-A corporation (NEWCO),
would this be considered importing by Petitioner?
No.

g)

In III e), if the seller charges Petitioner freight as a separately stated invoice item, would the
answer be the same?
Yes.

h)

In III e), if the common carrier's freight bill was invoiced to and paid by Petitioner but risk
of loss and title was still F.O.B. destination, would the answer be the same?
Yes.

i)

What if Petitioner picked up the product out-of-state with its own truck and the seller (who
is a registered Article 13-A corporation) and Petitioner had a written agreement that risk of
loss and title did not pass to Petitioner until Petitioner pumped the product into its domestic
tanks or delivered it to its New York situs customer - would this be considered importing by
Petitioner?
No. However, since this is an unusual situation, the seller would have to prove that it
retained legal title until the product was pumped into Petitioner's domestic tanks or delivered
to the New York site of Petitioner's customers. In this situation, Petitioner is considered a
common carrier when it picks up the seller's product outside New York and delivers it into
New York. Petitioner should prepare a standard freight bill and charge the seller
accordingly.

j)

Assuming that the seller in III i) was the related new Article 13-A corporation (NEWCO),
would this be considered importing by Petitioner?
Same answer III i) above.

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k)

If Petitioner was a non-13-A corporation, would they be allowed to charge the Article
13-A tax as a separately stated item on their invoice to customers, as follows "Cost
of Gross Receipts Tax"?
Yes.

DATED: May 16, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.