Information Release

PAT 2014-05 - Petroleum Activity Tax: Who Is a Supplier that Is Liable for the Tax – Issued February, 2014 

The purpose of this information release is to provide guidance to suppliers as to their responsibilities with regard to who is a supplier that is liable for the petroleum activity tax (PAT).

The PAT is imposed on a “supplier”. For purposes of the PAT, a “supplier” is any person that meets either of the following: 

(1)   Sells, transfers, or otherwise distributes motor fuel from a terminal or refinery rack to a location in this state and that point is outside the distribution system; or 

(2)   Imports or causes the importation of motor fuel for sale, exchange, transfer or other distribution by the person to a location in this state and that point is outside of a distribution system.

Multiple persons in the motor fuel supply chain may meet the definition of a supplier; however, not all suppliers will be paying the PAT. The PAT is levied on a supplier’s gross receipts from the first sale of motor fuel outside of the distribution system in this state. The “first sale of motor fuel within this state” is defined as the initial sale of motor fuel when sold for delivery to Ohio. Generally, a terminal, refinery rack, or position holder (regardless of its physical location) will be the supplier of the motor fuel that is first sold for delivery to Ohio. As a starting point, the Department will look to the shipping documents that are required for purposes of R.C. 5735.21 when determining whether the motor fuel was sold for delivery to Ohio. The following examples illustrate who is a supplier that is liable for the PAT.

Example 1

An Ohio licensed motor fuel dealer purchases motor fuel from a terminal in Ohio and, pursuant to a bill of lading, transports motor fuel in its bulk lot vehicles to convenience stores in Ohio. The person who sells the motor fuel from the terminal is subject to the PAT as a supplier. The Ohio licensed motor fuel dealer in this example will not be subject to the PAT as a supplier because the dealer’s gross receipts result from a subsequent sale, not from the initial sale of motor fuel delivered to a location in Ohio. Additionally, the Ohio convenience store does not meet the definition of a supplier.

Example 2

An Ohio licensed motor fuel dealer purchases motor fuel from a position holder at a rack located in Indiana and, pursuant to a bill of lading, transports motor fuel to its bulk storage plant in Ohio. The position holder of the motor fuel is considered a supplier, as the position holder is distributing the motor fuel from the rack to a location in Ohio that is outside the distribution system. Additionally, the Ohio licensed motor fuel dealer that purchases the motor fuel is also a supplier because the dealer is importing the motor fuel to a location in Ohio. However, the position holder at the rack is subject to the PAT because it is the person with gross receipts derived from the first sale of motor fuel to a location in Ohio. The Ohio licensed motor fuel dealer is not subject to the PAT in this example.

The Ohio licensed motor fuel dealer, in this situation, does not have any gross receipts that would be included in the base of the PAT. Therefore, if this was the motor fuel dealer’s only activity, they would not be required to register as a supplier for purposes of PAT.

Example 3

An Ohio licensed motor fuel dealer purchases motor fuel from another out-of-state licensed motor fuel dealer and sells it to a convenience store in Ohio. The Ohio licensed motor fuel dealer obtains the motor fuel from the out-of state licensed motor fuel dealer in its own trucks. The Ohio licensed motor fuel dealer is a supplier because the dealer imported motor fuel into Ohio, and the dealer is subject to the PAT. Additionally, the Ohio licensed motor fuel dealer’s (the supplier’s) gross receipts are derived from the initial sale of motor fuel that is delivered to a location in Ohio.

Example 4

An Ohio licensed motor fuel dealer, in an attempt to avoid the PAT, has the seller deliver its purchased motor fuel from the terminal to a bulk storage facility in Pennsylvania. Within two days of the delivery to that storage facility, the Ohio licensed motor fuel dealer imports the same fuel to a bulk storage facility in Ohio. The Ohio licensed motor fuel dealer is a supplier because it is importing the motor fuel into the state from outside of the distribution system. Pursuant to R.C. 5736.03, the Ohio licensed motor fuel dealer would include in its gross receipts the value of the motor fuel the Ohio licensed motor fuel dealer transfers into Ohio from Pennsylvania.

Please contact the Department at 1-888-722-8829 with any questions regarding the CAT or the PAT.