Bill S2924-2011

Relates to exempting dyed Diesel motor fuel used in farming or manufacturing

Relates to exempting dyed Diesel motor fuel used in farming or manufacturing.

Details

Actions

  • Jan 4, 2012: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • Feb 3, 2011: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Memo

BILL NUMBER:S2924

TITLE OF BILL: An act to amend the tax law, in relation to exempting dyed Diesel motor fuel used in farming or manufacturing

PURPOSE: The purpose of this bill is to address an unintended taxation consequence on farms and other small businesses due to the recent implementation of federal regulations regarding the use of dyed non-highway, locomotive or marine (NRLM) diesel fuel.

SUMMARY OF PROVISIONS: Section one makes changes to section 282-a of tax law to allow those fuel vendors with a direct pay permit to purchase qualified dyed diesel motor fuel tax free from a fuel importer. In order to qualify for this exemption, the end use of the fuel needs to be either in farming or in manufacturing, processing or assembly.

Section two through five make technical changes regarding permit requirements and conforming definitions necessary to implement this policy change.

Section six establishes an effective date.

JUSTIFICATION: In the fall of 2007, the United States Environment Protection Agency implemented new regulations requiring that all non- road vehicles, including farm tractors and farm equipment utilize a lower sulfur diesel fuel than had been historically used in those vehicles. Due to existing New York State tax law, the new lower sulfur diesel fuel is considered enhanced diesel fuel and is taxed in a different manner than the higher diesel fuel. Previously, uses of the dyed higher sulfur diesel fuel were exempt from the State's three fuel taxes (the petroleum business tax, diesel motor fuel excise tax and sales tax) and fuel distributors were able to purchase the fuel without paying tax. The distributor then forward on the tax exemption directly to the exempt small businesses, such as farms.

The change in taxation status means that fuel distributors must pay all taxes on the fuel at the time of purchase, regardless of whether the end sale is an exempt use. This means small fuel distributors must layout almost $.40/gallon in taxes and then wait for four to five months for refund of those taxes. This creates a tremendous cash-flow issue for these small businesses. In fact, many of them cannot afford this cost and are now forwarding the up-front taxes to the exempt businesses, including farmers. Farms and small businesses must then front an additional $.40/gallon for four to five months until a refund can be obtained. This places a tremendous burden on these businesses and family farms.

The bill seeks to address this business climate issue by clarifying that none of the three state taxes will be required with the purchase

of dyed non-road diesel by a distributor where the end sales and uses of the diesel fuel will be by the specifically exempt categories, such as farms.

LEGISLATIVE HISTORY: 2010 - S.5122

FISCAL IMPLICATIONS: None to the state.

EFFECTIVE DATE: This act shall take effect on the first day of the sales tax quarterly period, as described in subdivision (b) of section 1136 of the tax law, next commencing at least ninety provided, however, that registered distributors days after this act becomes a law; of Diesel motor fuel may apply for direct payment permits thirty days after this act becomes a law.


Text

STATE OF NEW YORK ________________________________________________________________________ 2924 2011-2012 Regular Sessions IN SENATE February 3, 2011 ___________
Introduced by Sen. VALESKY -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations AN ACT to amend the tax law, in relation to exempting dyed Diesel motor fuel used in farming or manufacturing THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph (c) of subdivision 3 of section 282-a of the tax law, as added by chapter 302 of the laws of 2006, is amended to read as follows: (c) Limited exemptions for dyed Diesel motor fuel. (i) The tax imposed by this section shall not apply to: (A) the sale of dyed Diesel motor fuel by the importer to a purchaser under the circumstances and subject to the terms and conditions as follows: (1) the importer and purchaser are each registered under this article as a full Diesel motor fuel distributor; (2) such importer has imported the enhanced Diesel motor fuel, which is the subject of the sale, into the state and has dyed such fuel to comply with the provisions of 26 USC S 4082(a) and the regu- lations thereunder, as may be amended from time to time; (3) the purchaser is a holder of a currently valid direct payment permit issued pursuant to section two hundred eighty-three-d of this article; and (4)(I) such purchaser is primarily engaged in the retail heating oil business and such dyed Diesel motor fuel will be sold by such purchaser in a retail sale to a consumer for use [solely as] BY THAT CONSUMER DIRECTLY AND EXCLUSIVELY FOR residential or commercial heating [oil], OR (II) SUCH DYED DIESEL MOTOR FUEL WILL BE SOLD BY SUCH PURCHASER IN A RETAIL SALE TO A CONSUMER FOR USE BY THAT CONSUMER DIRECTLY AND EXCLU- SIVELY IN THE PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY FARM- ING, BUT ONLY IF ALL OF THAT FUEL IS DELIVERED ON THE FARMING SITE AND IS CONSUMED OTHER THAN ON THE HIGHWAYS OF THIS STATE (EXCEPT FOR USE OF THE HIGHWAY TO REACH ADJACENT FARMLANDS); PROVIDED, HOWEVER, THAT A
FARMER MAY PURCHASE NO MORE THAN FOUR THOUSAND FIVE HUNDRED GALLONS OF DIESEL MOTOR FUEL AND DYED DIESEL MOTOR FUEL COMBINED IN A THIRTY-DAY PERIOD FOR SUCH USE OR CONSUMPTION EXEMPT FROM THE MEASURE OF THE TAX IMPOSED BY THIS SECTION, EXCEPT IN ACCORDANCE WITH PRIOR CLEARANCE GIVEN BY THE COMMISSIONER, OR (III) SUCH DYED DIESEL MOTOR FUEL WILL BE SOLD BY SUCH PURCHASER IN A RETAIL SALE TO A CONSUMER FOR USE BY THAT CONSUM- ER DIRECTLY AND EXCLUSIVELY IN THE PRODUCTION OF TANGIBLE PERSONAL PROP- ERTY FOR SALE BY MANUFACTURING, PROCESSING, OR ASSEMBLY, BUT ONLY IF ALL OF THAT FUEL IS DELIVERED ON THE MANUFACTURING SITE AND IS CONSUMED OTHER THAN ON THE HIGHWAYS OF THIS STATE; (B) a first sale of the dyed Diesel motor fuel, which [as] WAS the subject of an exempt sale described in clause (A) of this subparagraph, by the purchaser described therein to a purchaser likewise holding a currently valid direct pay permit under the circumstances and subject to the terms and conditions as follows: (1) the sale [of] TO such second purchaser by such first purchaser is the first and only sale of such dyed Diesel motor fuel by such first purchaser; (2) (I) such second purchaser is primarily engaged in the retail heating oil business and such dyed Diesel motor fuel will be sold by such second purchaser in a retail sale to a consumer for use [solely as] BY THAT CONSUMER DIRECTLY AND EXCLUSIVELY FOR residential or commercial heating [oil], OR (II) SUCH DYED DIESEL MOTOR FUEL WILL BE SOLD BY SUCH SECOND PURCHASER IN A RETAIL SALE TO A CONSUMER FOR USE BY THAT CONSUMER DIRECTLY AND EXCLUSIVELY IN THE PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY FARMING, BUT ONLY IF ALL OF THAT FUEL IS DELIVERED ON THE FARMING SITE AND IS CONSUMED OTHER THAN ON THE HIGHWAYS OF THIS STATE (EXCEPT FOR USE OF THE HIGHWAY TO REACH ADJACENT FARM- LANDS); PROVIDED, HOWEVER, THAT A FARMER MAY PURCHASE NO MORE THAN FOUR THOUSAND FIVE HUNDRED GALLONS OF DIESEL MOTOR FUEL AND DYED DIESEL MOTOR FUEL COMBINED IN A THIRTY-DAY PERIOD FOR SUCH USE OR CONSUMPTION EXEMPT FROM THE MEASURE OF THE TAX IMPOSED BY THIS SECTION, EXCEPT IN ACCORD- ANCE WITH PRIOR CLEARANCE GIVEN BY THE COMMISSIONER, OR (III) SUCH DYED DIESEL MOTOR FUEL WILL BE SOLD BY SUCH SECOND PURCHASER IN A RETAIL SALE TO A CONSUMER FOR USE BY THAT CONSUMER DIRECTLY AND EXCLUSIVELY IN THE PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY MANUFACTURING, PROCESSING, OR ASSEMBLY, BUT ONLY IF ALL OF THAT FUEL IS DELIVERED ON THE MANUFACTURING SITE AND IS CONSUMED OTHER THAN ON THE HIGHWAYS OF THIS STATE; (3) on the sale to the second purchaser, such first purchas- er described in such clause (A) attaches to the invoice a copy of the invoice given by the importer on the exempt sale described in such clause (A), so as to identify the origin of the dyed Diesel fuel [which] THAT is the subject of the sale to such second purchaser; and (4) such second purchaser certifies that such dyed Diesel motor fuel is to be sold by it only to a consumer for use [solely as] BY THAT CONSUMER DIRECTLY AND EXCLUSIVELY (I) FOR residential or commercial heating [oil], (II) IN THE PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY FARMING, BUT ONLY IF ALL OF THAT FUEL IS DELIVERED ON THE FARMING SITE AND IS CONSUMED OTHER THAN ON THE HIGHWAYS OF THIS STATE (EXCEPT FOR USE OF THE HIGHWAY TO REACH ADJACENT FARMLANDS); PROVIDED, HOWEVER, THAT A FARMER MAY PURCHASE NO MORE THAN FOUR THOUSAND FIVE HUNDRED GALLONS OF DIESEL MOTOR FUEL AND DYED DIESEL MOTOR FUEL COMBINED IN A THIRTY-DAY PERIOD FOR SUCH USE OR CONSUMPTION EXEMPT FROM THE MEASURE OF THE TAX IMPOSED BY THIS SECTION, EXCEPT IN ACCORDANCE WITH PRIOR CLEARANCE GIVEN BY THE COMMISSIONER, OR (III) IN THE PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY MANUFACTURING, PROCESSING, OR ASSEMBLY, BUT ONLY IF ALL OF THAT FUEL IS DELIVERED ON THE MANUFACTURING SITE AND IS CONSUMED OTHER THAN ON THE HIGHWAYS OF THIS STATE. (ii) Prior to, or at the time
of, such sale of such dyed Diesel motor fuel described in clause (A) or (B) of subparagraph (i) of this paragraph, the purchaser shall give a certificate to the seller setting forth the intended use of the dyed Diesel motor fuel [which] THAT is sought to be qualified for exemption under this paragraph, that the purchaser has been issued a direct payment permit which is currently valid, that such permit has not been suspended or revoked and that the purchaser otherwise meets the quali- fications of this paragraph. (iii) The limited exemptions allowed under this paragraph, EXCEPT THE EXEMPTIONS FOR SALES OF DYED DIESEL MOTOR FUEL TO CONSUMERS FOR USE BY THOSE CONSUMERS IN THE PRODUCTION OF TANGI- BLE PERSONAL PROPERTY FOR SALE BY FARMING, shall in no event apply to any dyed Diesel motor fuel [which] THAT is delivered into a repository equipped with hose or other apparatus capable of being used to dispense fuel into the fuel tank of a motor vehicle, or where the purchaser's direct payment permit has been suspended or revoked and the commissioner has made generally available the identity of those persons whose direct payment permits have been suspended or revoked. S 2. The section heading and subdivision 1 of section 283-d of the tax law, as added by chapter 302 of the laws of 2006, is amended to read as follows: Direct payment permit with respect to dyed Diesel motor fuel [used as residential or commercial heating oil]. 1. The commissioner, upon the application of a person registered under this article as a distributor of Diesel motor fuel, may issue a direct payment permit to such person for the payment of tax liability under this article with respect to dyed Diesel motor fuel [which] THAT is certified to be used [solely] DIRECTLY AND EXCLUSIVELY for ONE OF THE FOLLOWING PURPOSES: residential or commercial heating [oil], PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY FARMING, OR PRODUCTION OF TANGIBLE PERSONAL PROPERTY FOR SALE BY MANUFACTURING, PROCESSING, OR ASSEMBLY if: (a) such person, at the time of application, meets all the requirements described in section two hundred eighty-two-a of this article and any other requirements under this article relating to Diesel motor fuel distributors, (b) there has been timely filing and payment of tax liability with respect to taxes under this chapter (excluding those taxes timely protested), by such person, any officer, director or partner of such person, shareholder directly or indirectly owning more than ten percent of the number of shares of stock of such person entitling the holder thereof to vote for the election of directors or trustees, or any shareholder or employee of such person under a duty to file a return under or pursuant to the authority of this article or pay the taxes imposed by or pursuant to the authority of this article on behalf of such person (the provisions of subdivision ten of section two hundred eighty-three of this article shall apply to the provisions of this paragraph), AND (c) [such person is engaged primarily in the retail sale of residential or commercial heating oil and does not make wholesale sales of Diesel motor fuel other than in the circumstances described in clause (B) of subparagraph (i) of paragraph (c) of subdivision three of section two hundred eighty-two-a of this article, and (d)] such person files a bond or other security covering potential tax liability under this chapter with respect to such dyed Diesel motor fuel. S 3. Clause (i) of subparagraph (C) of paragraph 1 of subdivision (c) of section 300 of the tax law, as added by chapter 190 of the laws of 1990, is amended to read as follows: (i) ["nonautomotive type diesel] "NONAUTOMOTIVE-TYPE DIESEL motor fuel" as used in relation to the rates of the tax imposed by section
three hundred one-a of this article means any diesel motor fuel, as described in subparagraph (A) of this paragraph, which would be excluded from the diesel motor fuel excise tax imposed by section two hundred eighty-two-a of this chapter solely by reason of the enumerated exclu- sions based on ultimate use of the product set forth in paragraph (b) of subdivision three of such section, AND ANY DYED DIESEL MOTOR FUEL, AS DESCRIBED IN SUBDIVISION EIGHTEEN OF SECTION TWO HUNDRED EIGHTY-TWO OF THIS CHAPTER, WHICH WOULD BE EXCLUDED FROM THE DIESEL MOTOR FUEL EXCISE TAX IMPOSED BY SECTION TWO HUNDRED EIGHTY-TWO-A OF THIS CHAPTER SOLELY BY REASON OF THE ENUMERATED EXCLUSIONS BASED ON ULTIMATE USE OF THE PRODUCT SET FORTH IN PARAGRAPH (C) OF SUBDIVISION THREE OF THAT SECTION, and (ii) "automotive-type diesel motor fuel" as used in relation to the rates of tax imposed by such section three hundred one-a means diesel motor fuel [which] THAT is not nonautomotive-type diesel motor fuel. S 4. Subdivision (m) of section 300 of the tax law, as added by chap- ter 309 of the laws of 1996, is amended to read as follows: (m) "Manufacturing gallonage" means residual petroleum product, DYED DIESEL MOTOR FUEL, or diesel motor fuel (which is not enhanced diesel motor fuel) THAT IS used and consumed directly and exclusively in the production of tangible personal property for sale by manufacturing, processing or assembly, but only if all of such fuel or product is delivered on the manufacturing site and is consumed other than on the highways of this state. "Manufacturing gallonage" shall in no event include diesel motor fuel OR DYED DIESEL MOTOR FUEL delivered at a fill- ing station or into a repository [which] THAT is equipped with a hose or other apparatus by which such fuel can be dispensed into the fuel tank of a motor vehicle. The commissioner shall require such documentary proof to substantiate the classification of product as "manufacturing gallonage" as the commissioner deems appropriate. S 5. Subdivision (j) of section 301-c of the tax law, as added by chapter 309 of the laws of 1996, is amended to read as follows: (j) Reimbursement for manufacturing gallonage. Commencing January first, nineteen hundred ninety-eight, a subsequent purchaser shall be eligible for reimbursement of any taxes imposed under this article with respect to gallonage of residual petroleum product, DYED DIESEL MOTOR FUEL, and diesel motor fuel (which is not enhanced diesel motor fuel), subsequently sold by such purchaser to a consumer as "manufacturing gallonage." This reimbursement may be claimed only where (1) any tax imposed pursuant to this article has been paid with respect to such gallonage and the entire amount of such tax has been absorbed by such purchaser, and (2) such purchaser possesses documentary proof satisfac- tory to the commissioner evidencing the absorption by it of the entire amount of such tax. Provided, however, that the commissioner shall require such documentary proof to qualify for any reimbursement of tax provided by this subdivision as the commissioner deems appropriate including a certificate by the consumer that such product is to be used and consumed exclusively as "manufacturing gallonage". S 6. This act shall take effect on the first day of the sales tax quarterly period, as described in subdivision (b) of section 1136 of the tax law, next commencing at least ninety days after this act becomes a law; provided, however, that registered distributors of Diesel motor fuel may apply for direct payment permits thirty days after this act becomes a law.

Comments

Open Legislation comments facilitate discussion of New York State legislation. All comments are subject to moderation. Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity or hate speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Comment moderation is generally performed Monday through Friday.

By contributing or voting you agree to the Terms of Participation and verify you are over 13.

Discuss!

blog comments powered by Disqus