Information Release

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PAT 2014-07 - Petroleum Activity Tax: Transfers in the Distribution System – Issued September, 2014 

The purpose of this information release is to provide guidance to suppliers who receive gross receipts from a sale of motor fuel back into the distribution system.

The incidence of the petroleum activity tax (PAT) occurs when the supplier receives gross receipts from the initial sale of motor fuel outside the distribution system in this state. When this occurs, a supplier must include these gross receipts in its PAT base. The statute defines “in the distribution system” as a bulk transfer or terminal system for the distribution of motor fuel consisting of refineries, pipelines, marine vessels, and terminals. The statute further describes a location that is “outside the distribution system” as a fuel storage facility, including, but not limited to, a bulk plant that is not part of a refinery or terminal, the fuel supply tank of an engine or motor vehicle, a marine vessel transporting motor fuel to a fuel storage facility that is not in a distribution system, or a tank car, rail car, trailer, truck, or other equipment suitable for ground transportation. Once a product has left a refinery, pipeline, marine vessel or terminal, the product will be “outside the distribution system”.

It has come to the Department’s attention that many additives or blend stocks1, such as ethanol, are transported from the production facility of the product (i.e., refinery2) and delivered back to a terminal or another refinery for blending purposes. A sale of motor fuel with the destination and sale of the motor fuel to a point in the distribution system is not considered by the Department to be a sale outside of the distribution system. Consequently, the gross receipts received from the sale of motor fuel in this manner are not included in the base of the PAT until it is initially sold to a destination outside the distribution system in this state. Any facts and circumstances surrounding the sale may impact this analysis.

Currently, the statute is silent as to transportation of motor fuel back into the distribution system (i.e., a refinery, pipeline, or terminal). Am. Sub. H.B. 492 of the 130th General Assembly revised the definition of “distribution system” so as to codify the Department’s interpretation described above. This language makes it clear that the transportation of the motor fuel back into the distribution system is not the first sale of motor fuel “outside the distribution system”.

Effective July 1, 2015, the definition of “distribution system” found in R.C. 5736.01(B) will be modified to the following:

(B) "Distribution system" means a bulk transfer or terminal system for the distribution of motor fuel consisting of refineries, pipelines, marine vessels, and terminals. For the purposes of this section, motor fuel that is in a refinery, pipeline, terminal, or marine vessel or that is en route to a refinery, pipeline, or terminal via any method of transportation is in a "distribution system." [Emphasis added]. Motor fuel is "outside of a distribution system" if the fuel is in a fuel storage facility, including, but not limited to, a bulk plant that is not part of a refinery or terminal, is in the fuel supply tank of an engine or motor vehicle, or is being transported by a marine vessel, tank car, rail car, trailer, truck, or other suitable equipment to a fuel storage facility that is not in a distribution system.

The attached document has been created by the Department for the convenience of taxpayers to assist in proving that the sale was not the initial sale of motor fuel outside of the distribution system. Although this form is not mandatory, the completed document will assist the supplier with their burden of documenting that the receipts from the sale should not be included in its PAT base. It is recommended that both the transferring (supplying) supplier and the receiving supplier retain a copy of this completed document in their records. Please do not submit this form to the Department.

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

1Additives or blend stocks that are sold for blending with gasoline (other than those typically sold in containers of five gallons or less) themselves meet the definition of “gasoline”. The definition of “motor fuel” found in R.C. 5735.01 includes gasoline. Therefore, gross receipts received from the sale of additives or blend stocks are considered motor fuel for purposes of the PAT. 

2For purposes of the PAT, “refinery” means a facility used to produce motor fuel and from which the motor fuel may be removed by pipeline, by vessel, or at a rack.

Petroleum Activity Tax

Notice of Delivery of Motor Fuel into a Distribution System

 

Receiving Terminal/Refinery Name:

 

Terminal/Refinery Address:

 

Terminal/Refinery Number (TCN):

 

PAT Account Number:

 

Contact Name:

 

Phone Number:

 

 

          

Supplying Terminal/Refinery Name:

 

Terminal/Refinery Address:

 

Terminal/Refinery Number (TCN):

 

PAT Account Number:

 

Contact Name:

 

Phone Number:

 

 

 

 

Product

Bill of Lading (BOL) #

Bill of Lading (BOL) Date

Ship Date

Carrier of Product

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

           

___________________________                     ________________________

Name of Receiving Supplier                                  Title

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___________________________                    ________________________

Signature of Receiving Supplier                          Date