Of the federal excise tax, state fuel taxes, and the state environmental assurance fee that appear on a petroleum invoice, which ones count toward the Utah sales and use tax base?

Plain-English summary

A petroleum products seller asked the Commission which of five different taxes and fees appearing on its invoices should be included when calculating the Utah sales and use tax base. The Commission went through each one:

1. Federal excise tax on gasoline, jet fuel, and diesel fuel -- not included in the taxable base. Utah Code Ann. § 59-12-102(17) excludes from "purchase price" any excise tax the federal government imposes, as long as it's separately stated on the invoice/sales ticket and actually collected from the purchaser.
2. Utah State Motor Gasoline Tax, 3. Utah State Aviation Fuel Tax, and 4. Utah State Special Fuel Tax -- there's no taxable-base question at all here, because Utah Code Ann. § 59-12-104(1) exempts the entire sale of aviation, motor, and special fuel from sales and use tax whenever it's already subject to Utah's own fuel excise tax under Title 59, Chapter 13. Since there's no sales/use tax on these fuel sales in the first place, there's nothing to calculate a base for.
3. Utah Environmental Assurance Fee -- included in the taxable base. Utah Code Ann. § 19-6-410.5(4) imposes this fee (¼ cent per gallon) on the first sale or use of petroleum products in Utah, generally occurring at the refinery level or on import into the state. The Commission held the fee should be included in the sales/use tax base on that first sale and on all subsequent sales.

A notable feature of the published record: attached after the formal ruling is a set of internal Commission staff notes discussing an inconsistency with a 1990 advisory opinion on the old (pre-1998) version of the environmental assurance fee, which had advised not including that fee in the tax base -- reasoning that (1) as an excise tax it wasn't subject to sales tax, and (2) it was analogous to the waste tire recycling fee, which Rule 865-19S-93 says to exclude. The staff notes push back on that older reasoning: § 59-12-102(17)'s definition of "purchase price" excludes only two things -- cash discounts and a separately-stated federal excise tax -- so being "an excise tax" alone doesn't create an exclusion for a state fee. The notes also flag that Utah's sales tax is a tax on the transaction, not on the property itself, so anything paid as part of the price is includable unless one of those two specific exceptions applies. The notes further point out an unresolved inconsistency in how the state's separate oil recycling fee is treated (excluded on the first sale but included on subsequent sales, a distinction staff couldn't find a principled basis for) and recommend the Commission eventually handle all these excise-like fees consistently. These notes reflect internal Commission deliberation, not part of the formal advisory opinion's holding -- they're included here because they were part of the published record, but the binding conclusion is the numbered analysis above.

What this means for you

Petroleum and fuel sellers

Only the environmental assurance fee needs to be built into your Utah sales/use tax calculation among these five common invoice line items. Federal excise tax stays out (if separately stated), and state fuel excise taxes create no sales tax base issue because the fuel sale itself is exempt.

Businesses layering multiple taxes/fees onto an invoice

This ruling is a good illustration of how narrowly Utah's "purchase price" exclusions are drawn: only a separately-stated federal excise tax and cash discounts are excluded by statute. A state-level fee doesn't automatically get the same treatment just because it's also structured as an excise-style charge.

Accountants and tax professionals

The attached internal notes are a rare, candid look at the Commission's own reasoning process and an acknowledged inconsistency in how it has historically treated similar excise-style fees (waste tire recycling fee, old environmental assurance fee, oil recycling fee). Useful context if you encounter a similar Utah fee-inclusion question and want to understand the analytical framework, but treat the formal five-item analysis above as the actual holding.

Common questions

Q: Is federal excise tax on fuel included in the Utah sales tax base?
A: No, as long as it's separately stated on the invoice and actually collected from the purchaser.

Q: Do I need to calculate sales tax on Utah's own motor fuel, aviation fuel, or special fuel taxes?
A: No -- those fuel sales are exempt from Utah sales and use tax entirely, so there's no base calculation needed for them.

Q: Is the Utah Environmental Assurance Fee included in the sales tax base?
A: Yes, on the first sale (generally at the refinery or on import) and on all subsequent sales.

Q: Does this ruling apply to my business?
A: No. It binds the Commission only for the requesting company and the facts described. Another taxpayer can't rely on it as binding, though it may carry some persuasive weight in a dispute with closely similar facts.

Citations and references

Statutes and rules:

• § 59-12-102(17) (federal excise tax excluded from "purchase price")
• § 59-12-104(1) (exemption for fuel already subject to Utah's fuel excise tax)
• § 19-6-410.5(4) (environmental assurance fee)
• Utah Admin. Code R865-19S-93 (waste tire recycling fee exclusion, referenced in internal notes)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/98-053.htm

Original ruling text

98-053

Response
August 11, 1998

Request
Letter

Mr.
Chapman,

I
want to request an advisory opinion on a Sales and Use Tax matter. In regards to COMPANY s sales of
petroleum products, if any of the following taxes and fees are charged on its
invoice, should those taxes and fees be included in the taxable base for Sales
and Use Tax calculation?

Federal Excise Tax on Gasoline, Jet Fuel, Diesel Fuel

Utah State Motor Gasoline Tax

Utah State Aviation Fuel Tax

Utah State Special Fuel Tax

Utah Environmental Assurance Fee

You
may fax reply to#####, or mail your reply to:

COMPANY

Please
contact me at ##### if you need additional information. Thank you.

Sincerely,

NAME

September
29, 1998

NAME

COMPANY

RE: Taxable base on petroleum products for purposes
of the Utah sales and use tax

Dear
NAME,

We have received your request for an
advisory opinion concerning which taxes and fees on petroleum products should
be included in the taxable base when calculating the Utah sales and use
tax. You have specifically asked about
five separate taxes and fees, which we will address individually below.

1. Federal Excise Tax on Petroleum Products. This tax is not included in the taxable
base when calculating the Utah sales and use tax. For purposes of the sales and use tax, Utah Code Ann.
�59-12-102(17) excludes from the definition of �purchase price� any excise tax
imposed on the purchase price by the federal government. To be excluded from the purchase price, the
federal tax must be separately stated on the invoice or sales ticket and
collected from the purchaser.

2., 3., and 4. Utah State Motor Gasoline, Aviation Fuel,
and Special Fuel Taxes. Utah Code
Ann. �59-12-104(1) exempts from the sales and use tax all sales of aviation
fuel, motor fuel, and special fuel subject to a Utah state excise tax under
Title 59, Chapter 13, Motor and Special Fuel Tax Act. As there is no sales or use tax on these products, there is no
need to establish a taxable base on these products for sales and use tax purposes.

5. Utah Environmental Assurance Fee. Utah Code Ann. �19-6-410.5(4) imposes an environmental assurance
fee of � cent per gallon on the first sale or use of petroleum products in
Utah. The Tax Commission has issued a
tax bulletin identifying the first sale as the one generally occurring at the
refinery level or upon import into the state.
Upon these and subsequent sales, the environmental assurance fee should
be included as part of the taxable base when calculating the Utah sales and use
tax.

In conclusion, of the taxes and fee
you ask about, only the environmental assurance fee should be included as part
of the taxable base when calculating the Utah sales and use tax. Please contact us if you have any other
questions.

For
the Commission,

Joe
B. Pacheco, CPA

Commissioner

Notes
to Consider:

There
is a 1990 advisory opinion issued on the �old� environmental assurance fee (the
new law was passed in 1998). This
advisory said not to include the fee in the tax base because (1) as an excise
tax, the fee was not subject to sales tax; and (2) Rule 865-19S-93 states that
the waste tire recycling fee, another excise tax, should not be included in the
tax base.

First
issue: The definition of purchase price for purposes of the sales tax is the
amount paid or charged for the personal property, �excluding only cash
discounts taken or any excise tax imposed on the purchase price by the federal
government.� Utah Supreme Court cases
have held that federal excise taxes cannot be part of the tax base, but not
because it is an excise tax. They have
stated that our statute did not the give the Tax Commission the statutory
authority necessary to include the federal tax in the tax base.

Sales tax is a tax on the
transaction, not a tax on the personal property. Were it a tax on the latter, it would appear that the fee would
not be included. But it is a tax on the
transaction. Part of the transaction
price is the fee. The definition of
purchase price in 59-12-102(17) would seem to include everything paid except
for the two exceptions.

Second
issue: The waste tire recycling fee and the environmental assurance fee have not
been included in the sales tax base in the past. I am recommending the new environmental fee be included in the
sales tax base. A tax bulletin on the
oil recycling fee directs the taxpayer not to include that fee in the sales tax
base of the first sale, but to include it in the tax base for all subsequent
sales. I talked with Lynn and Barry
about the difference between the first and subsequent sales for oil fee, and
none of us could see a point to this.
Anyway, we should probably handle all these excise taxes in the same
way, not in various ways. If changes
are made, we�ll need Rod and Lynn to implement any rule changes, tax bulletins,
etc.

^^