Is Utah's new petroleum environmental surcharge included in the taxable purchase price when calculating Utah sales tax on petroleum products?

Plain-English summary

When Utah enacted a new environmental surcharge of half a cent per gallon on petroleum products sold, used, or received in the state (former Utah Code § 26-14e-401.1, required to be separately stated on the distributor's invoice), a distributor asked the Tax Commission whether that surcharge itself gets added to the taxable "purchase price" for Utah sales tax purposes. The requester's own legal analysis suggested it should — since Utah Code § 59-12-102(6) excludes only federal excise taxes (not state excise taxes) from the definition of purchase price, they reasoned any Utah surcharge on a taxable petroleum sale would logically be part of the taxable amount.

The Commission's Auditing Division reached the opposite conclusion. It reasoned that the environmental surcharge, like the Waste Tire Recycling Fee before it, is "in the nature of an excise tax" rather than part of the sales price of the property itself. The Commission had already ruled that the Waste Tire Recycling Fee — another fee required to be separately stated on invoices and collected from the customer — is not subject to sales tax, and applied that same logic to the new environmental surcharge. So even though the surcharge is a Utah (not federal) excise-type charge, and even though § 59-12-102(6)'s literal exclusion language only names federal excise taxes, the Commission treated separately-stated excise-type fees like this one as falling outside the sales tax base entirely, rather than reading the statute to require their inclusion.

What this means for you

Petroleum distributors and fuel sellers billing environmental or similar surcharges

If a state-imposed surcharge or fee is separately stated on your invoice and functions like an excise tax rather than part of the underlying sale price, the Commission has historically treated it as outside the sales tax base — don't automatically add sales tax on top of such surcharges without checking whether this treatment still applies to your specific fee.

Accountants and tax professionals structuring invoices with pass-through fees or surcharges

The Commission's reasoning here rests on characterizing a fee as excise-like (versus a component of the taxable "purchase price"), and on precedent for a specific fee type (the Waste Tire Recycling Fee) rather than a literal statutory exclusion. When advising on a new or unusual surcharge, look for whether the Commission has treated similar fees as excise taxes before assuming a straightforward exemption.

Anyone researching this topic today

This is a 1991 ruling about a specific historical surcharge (former § 26-14e-401.1) that has since been recodified or replaced. Confirm the current statutory location and status of any environmental surcharge before relying on this reasoning for present-day transactions.

Common questions

Q: Is the petroleum environmental surcharge subject to Utah sales tax?
A: No — the Commission treated it as an excise tax outside the taxable purchase price, not as part of the sales price of the petroleum product.

Q: Why doesn't the literal statutory language (excluding only federal excise taxes) require including this state surcharge in the tax base?
A: The Commission didn't rely on that exclusion language directly. Instead, it characterized the surcharge itself as an excise tax akin to the Waste Tire Recycling Fee, which it had already ruled was outside the sales tax base.

Q: Does this reasoning extend to other separately-stated fees or surcharges?
A: Possibly, if the fee is genuinely excise-like and separately stated, following the same logic — but each fee would need its own analysis.

Q: Can I rely on this ruling for a current-day surcharge question?
A: No — it binds the Commission only for the taxpayer and facts described, and the specific surcharge statute involved is decades old. Confirm current law before relying on it.

Citations and references

Statutes cited:

• Former Utah Code § 26-14e-401.1 (environmental surcharge on petroleum products, since recodified)
• Utah Code Ann. § 59-12-102(6) (definition of "purchase price"; excludes federal excise taxes)
• Utah Code Ann. § 59-12-103(1)(a) (sales tax imposed on retail sales of tangible personal property)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/90-016.pdf

Original ruling text

Response
January 18, 1991

January
18, 1991

XXXXX

Excise
and Wage Taxes

Re: Advisory Opinion - Environmental Surcharge

Dear
XXXXX:

This
letter is in response to your recent request for a Tax Commission ruling on whether
the new environmental surcharge of 1/2 cent per gallon of petroleum products
sold is subject to sales tax. It is
your opinion that it is.

The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your request was referred to the
Tax Commission's Auditing Division for their analysis and recommendation. The Division's recommendation is as follows:

1. The environmental surcharge is in the nature
   of an excise tax, which would not be subject to sales tax.

2. The Tax Commission, by rule, has determined
   that the Waste Tire Recycling Fee, which has to be separately stated on the
   invoices and collected from the customer, is not subject to sales tax. The same logic is applied to the
   environmental surcharge.

For
the Commission,

Joe
B. Pacheco

Commissioner

XXXXX

Utah
State Tax Commission

6th
Floor

160
East 300 South

Salt
Lake City, Utah 84134

OPINION
REQUEST

SALES
TAX ON UST/ENVIRONMENTAL SURCHARGE

We
are requesting a ruling to determine whether the .5 cents/gallon environmental
surcharge on petroleum sold, used or received in Utah is includable as part of
the taxable purchase price for petroleum products for sales tax purposes.

Utah
Code Section 26-14e-401.1 imposes an environmental surcharge of .5 cents/gallon
on petroleum sold, used or received in Utah.
This surcharge is required to be shown as a separate line item on the
distributor's sale invoice.

Utah
Code Section 59-12-103(1)(A) states in part that the Utah sales and use tax is
levied on the purchaser for the amount paid or charged for retail sales of
tangible personal property made within the state.

Utah
Code Section 59-12-102(6) defines "purchase price" to mean the amount
paid or charged for tangible personal property, etc., excluding cash discounts
taken or any excise tax imposed on such purchase price by the federal
government. The term "amount paid" does not appear to be defined in
the law.

Utah
Code Section 59-12-104(1) states that sales of motor fuels and special fuels
subject to a Utah state excise tax under Chapter 13, title 59, are exempt from
the Utah sales tax.

From
the preceding, we have tentatively concluded the following. First, the
"amount paid" for tangible personal property for sales tax purposes
is meant to exclude cash discounts and federal excise taxes. Second, the
exclusion for federal excise taxes is not meant to extend to Utah excise taxes.
Third, to the extent that a sale of petroleum product is not subject to the
motor fuel and special fuel tax, any Utah environmental surcharge imposed upon
such product will be includable in the amount paid or charged which is subject
to the sales tax.

Therefore,
are we correct in concluding that, with respect to petroleum product sales
which are subject to the Utah sales tax, the Utah sales tax will be imposed on
the amount paid for petroleum products, including the amount of the Utah
environmental surcharge imposed thereon?

Very
truly yours,

XXXXX

Excise
and Wage Taxes