Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2010
 

Sales And Use Tax Law

CHAPTER 5. DETERMINATIONS

Article 1.5. Prepayment of Sales Tax on Motor Vehicle Fuel Distributions *

Section 6480.1

6480.1. Prepayments. (a) At any time that motor vehicle fuel tax or diesel fuel tax is imposed or would be imposed, but for the dyed diesel fuel exemption in paragraph (1) of subdivision (a) of Section 60100, or the train operator exemption in paragraph (7) of subdivision (a) of Section 60100 or paragraph (11) of subdivision (a) of Section 7401, or, pursuant to subdivision (f) of Section 6480, would be deemed to be imposed, on any removal, entry, or sale in this state of motor vehicle fuel, aircraft jet fuel, or diesel fuel, the supplier shall collect prepayment of retail sales tax from the person to whom the motor vehicle fuel, aircraft jet fuel, or diesel fuel is sold. However, if no sale occurs at the time of imposition of motor vehicle fuel tax or diesel fuel tax, the supplier shall prepay the retail sales tax on that motor vehicle fuel, aircraft jet fuel, or diesel fuel. The prepayment required to be collected by the supplier constitutes a debt owed by the supplier to this state until paid to the board, until satisfactory proof has been submitted to prove that the retailer of the fuel has paid the retail sales tax to the board, or until a supplier or wholesaler who has consumed the fuel has paid the use tax to the board. Each supplier shall report and pay the prepayment amounts to the board, in a form as prescribed by the board, in the period in which the fuel is sold. On each subsequent distribution of that fuel, each seller, other than the retailer, shall collect from his or her purchaser a prepayment computed using the rate applicable at the time of sale. Each supplier shall provide his or her purchaser with an invoice for, or other evidence of, the collection of the prepayment amounts which shall be separately stated thereon.

(b) (1) A wholesaler shall collect prepayment of the retail sales tax from the person to whom the motor vehicle fuel, aircraft jet fuel, or diesel fuel is sold. Each wholesaler shall provide his or her purchaser with an invoice for or other evidence of the collection of the prepayment amounts, which shall be separately stated thereon.

(2) Each wholesaler shall report to the board, in a form as prescribed by the board and for the period in which the motor vehicle fuel, aircraft jet fuel, or diesel fuel was sold, all of the following:

(A) The number of gallons of fuel sold and the amount of sales tax prepayments collected by the wholesaler.

(B) The number of tax-paid gallons purchased and the amount of sales tax prepayments made by the wholesaler.

(C) In the event that the amount of sales tax prepayments collected by the wholesaler is greater than the amount of sales tax prepayments made by the wholesaler, then the excess constitutes a debt owed by the wholesaler to the state until paid to the board, or until satisfactory proof has been submitted that the retailer of the fuel has paid the tax to the board.

(c) A supplier or wholesaler who pays the prepayment and issues a resale certificate to the seller, but subsequently consumes the motor vehicle fuel, aircraft jet fuel, or diesel fuel, shall be entitled to a credit against his or her sales and use taxes due and payable for the period in which the prepayment was made, provided that he or she reports and pays the use tax to the board on the consumption of that fuel.

(d) The amount of a prepayment paid by the retailer or a supplier or wholesaler who has consumed the motor vehicle fuel, aircraft jet fuel, or diesel fuel to the seller from whom he or she acquired the fuel shall constitute a credit against his or her sales and use taxes due and payable for the period in which the sale was made. Failure of the supplier or wholesaler to report prepayments or the supplier's or wholesaler's failure to comply with any other duty under this article shall not constitute grounds for denial of the credit to the retailer, supplier, or wholesaler, either on a temporary or permanent basis or otherwise. To be entitled to the credit, the retailer, supplier, or wholesaler shall retain for inspection by the board any receipts, invoices or other documents showing the amount of sales tax prepaid to his or her supplier, together with the evidence of payment.

(e) The rate of the prepayment required to be collected during the period from July 1, 1986, through March 31, 1987, shall be four cents ($0.04) per gallon of motor vehicle fuel distributed or transferred.

(f) On April 1 of each succeeding year, the prepayment rate per gallon for motor vehicle fuel, rounded to the nearest one-half of one cent ($0.005), of the required prepayment shall be established by the board based upon 80 percent of the combined state and local sales tax rate established by Sections 6051, 6051.2, 6051.3, 6051.5, 7202, and 7203.1, and Section 35 of Article XIII of the California Constitution on the arithmetic average selling price (excluding sales tax) as determined by the State Energy Resources Conservation and Development Commission, in its latest publication of the "Quarterly Oil Report," of all grades of gasoline sold through a self-service gasoline station. In the event the "Quarterly Oil Report" is delayed or discontinued, the board may base its determination on other sources of the arithmetic average selling price of gasoline. The board shall make its determination of the rate no later than November 1 of the year prior to the effective date of the new rate. Immediately upon making its determination and setting of the rate, the board shall each year, no later than January 1, notify by mail every supplier, wholesaler, and retailer of motor vehicle fuel. In the event the price of fuel decreases or increases, and the established rate results in prepayments which consistently exceed or are significantly lower than the retailers' sales tax liability, the board may readjust the rate.

(g) On April 1 of each succeeding year, the prepayment rate per gallon for aircraft jet fuel, rounded to the nearest one-half of one cent ($0.005), shall be established by the board based upon 80 percent of the combined state and local sales tax rate established by Sections 6051, 6051.2, 6051.3, 6051.5, 7202, and 7203.1, and Section 35 of Article XIII of the California
Constitution on the arithmetic average selling price (excluding sales and state excise tax) as determined by the board. The board shall make its determination of the rate no later than November 1 of the year prior to the effective date of the new rate. The rate of the prepayment required to be collected for aircraft jet fuel shall be equal to 80 percent of the arithmetic average selling price of aircraft jet fuel as specified by industry publications. Immediately upon making its determination and setting of the rate, the board shall each year, no later than January 1, notify by mail every supplier, wholesaler, and retailer of aircraft jet fuel. In the event the price of aircraft jet fuel decreases or increases, and the established rate results in prepayments that consistently exceed or are significantly lower than the retailers' sales tax liability, the board may readjust the rate.

(h) On April 1 of each succeeding year, the prepayment rate per gallon for diesel fuel, rounded to the nearest one-half of one cent ($0.005), shall be established by the board based upon 80 percent of the combined state and local sales tax rate established by Sections 6051, 6051.2, 6051.3, 6051.5, 7202, and 7203.1, and Section 35 of Article XIII of the California Constitution on the arithmetic average selling price (excluding sales and state excise tax) as determined by the board. The board shall make its determination of the rate no later than November 1 of the year prior to the effective date of the new rate. The rate of the prepayment required to be collected for diesel fuel shall be equal to 80 percent of the arithmetic average selling price of diesel fuel as specified by industry publications. Immediately upon making its determination and setting of the rate, the board shall each year, no later than January 1, notify by mail every supplier, wholesaler, and retailer of diesel fuel. In the event the price of diesel fuel decreases or increases, and the established rate results in prepayments that consistently exceed or are significantly lower than the retailers' sales tax liability, the board may readjust the rate.

(i) (1) Notwithstanding any other provision of this section, motor vehicle fuel sold by a supplier or wholesaler to a qualified purchaser who, pursuant to a contract with the State of California or its instrumentalities, resells that fuel to the State of California or its instrumentalities shall be exempt from the prepayment requirements.

(2) A qualified purchaser who acquires motor vehicle fuel for subsequent resale to the State of California or its instrumentalities pursuant to this subdivision shall furnish to the supplier or wholesaler from whom the fuel is acquired an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe. The supplier or wholesaler shall retain the certificate in his or her records in support of the exemption. To qualify for the prepayment exemption, both of the following conditions shall apply:

(A) The qualified purchaser does not take possession of the fuel at any time.

(B) The fuel is delivered into storage tanks owned or leased by the State of California or its instrumentalities via facilities of the supplier or wholesaler, or by common or contract carriers under contract with the supplier or wholesaler.

(3) For purposes of this subdivision, "qualified purchaser" means a broker as defined in Section 7308 who does not have or maintain a storage facility or facilities for the purpose of selling motor vehicle fuel.

History.—Stats. 1987, Ch. 210, in effect July 23, 1987, added the last sentence of subdivision (f). Stats. 1989, Ch. 768,
in effect January 1, 1990, added ", in the period in which the fuel is distributed" after "by the board" in subdivisions (a) and (b), substituted "a prepayment computed using the rate applicable at the time of distribution" for "an amount equal to the amount of the prepayment paid by the seller to the person from whom he or she acquired the fuel" in subdivision (a), substituted "distribution" for "prepayment" and added ", distributor," after "retailer" in subdivision (d). Stats. 1992, Ch. 1336, in effect January 1, 1993, inserted a comma after "amounts to the board" in the third sentence of subdivision (a) and the first sentence of the second paragraph of subdivision (b); and added ", 6051.2, 6051.3," after "6051" in the first sentence of subdivision (f). Stats. 1995, Ch. 555, in effect January 1, 1996, added "of this code . . . Constitution" after "7202" in the first sentence of subdivision (f). Stats. 1996, Ch. 1087, in effect January 1, 1997, deleted "of this code" after "7202", and added second sentence in subdivision (f). Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, substituted "any" for "the first" after "board, on" in subdivision (a). Stats. 2000, Ch. 256 (SB 2174), in effect January 1, 2001, added subdivision (g). Stats. 2001, Ch. 429 (AB 309), in effect October 2, 2001, operative January 1, 2002, substituted "At any time . . . the supplier" for "After service of written notification by the board, on any distribution in this state of motor vehicle fuel subject to the motor vehicle fuel license tax, the distributor" after "(a)", added ", aircraft jet fuel, or diesel fuel" after "motor vehicle fuel", and substituted "sold" for "distributed" after "diesel fuel is" in the first sentence; added second sentence; substituted "supplier" for "distributor" after "collected by the" and substituted "supplier or wholesaler" for "distributor or broker" in the third sentence; substituted "supplier" for "distributor" after "Each", substituted "in" for "on" after "to the board,", added "as" after "a form", and substituted "sold" for "distributed" in the fourth sentence; deleted "motor vehicle" after "distribution of that", and substituted "sale" for "distribution" in the fifth sentence; substituted "supplier" for "distributor" after "Each" and substituted "an" for "a receipt or" after "purchaser with", added ", or other evidence of," after "invoice for" in the sixth sentence of subdivision (a); added paragraph designation (1) after "(b)", substituted "A wholesaler" for "After service of written notification by the board, the
broker" after "(b)(1)", added ", aircraft jet fuel, or diesel fuel" after "motor vehicle fuel", and substituted "sold" for "transferred" after "diesel fuel" in the first sentence; deleted former second sentence which provided, "The prepayment required to be collected by the broker constitutes a debt owed by the broker to the state until paid to the board, or until satisfactory proof has been submitted to prove that the retailer of the fuel has paid the tax to the board."; substituted "wholesaler" for "broker" after "Each", substituted "an" for "a receipt or" after "purchaser with", added "or other evidence" after "invoice for", and added a comma after "prepayment amounts" in the third sentence of paragraph (1); substituted "wholesaler" for "broker" after "Each", deleted "and pay the prepayments amounts" after "shall report", substituted "in" for "on" after "to the board," added "as" after "a form", substituted ", in" for "and for", added "motor vehicle" after "period in which the", and substituted ", aircraft jet fuel, or diesel fuel was sold, all of the following:" for "is distributed."; added subparagraphs (A), (B), and (C) to paragraph (2) of subdivision (b); and deleted former second sentence of paragraph (2) therein which provided, "The amount of prepayment paid by the broker to his or her vendor shall constitute a credit against the amount of prepayment required to be collected and remitted by the broker to the board."; substituted "supplier or wholesaler" for "distributor or broker" after "(c) A", added "motor vehicle" after "consumes the", added "aircraft jet fuel, or diesel fuel," after "fuel," in subdivision (c); substituted "supplier or wholesaler" for "distributor or broker" after "retailer or a", added "motor vehicle" after "has consumed the", added ", aircraft jet fuel, or diesel fuel" after "fuel", and substituted "sale" for "distribution" in the first sentence; substituted "supplier on wholesaler" after "distributor or broker" after "Failure of the", substituted "supplier's or wholesaler's" for "distributor's or broker's" after "prepayments or the", and substituted "supplier, or wholesaler" for "distributor, or broker" after "to the retailer," in the second sentence; substituted "To" for "The retailer, distributor, or broker shall' after "or otherwise", and substituted ", the retailer . . . of payment" for "to the extent of the amount prepaid to his or her supplier as evidenced by purchase documents, invoices, or receipts stating separately the amount of tax prepayment" in the third sentence of subdivision (d); added "prepayment" after "year, the", added "for motor vehicle fuel" after "rate per gallon", and added "($0.005)" after "of one cent" in the first sentence, and substituted "supplier, wholesaler," for "distributor, broker" after "by mail every" in the fourth sentence of subdivision (f); added subdivisions (g) and (h); relettered former subdivision (g) as (i), substituted "supplier or wholesaler" for "distributor or broker" after "sold by a" in paragraph (1), substituted "supplier or wholesaler" for "distributor or broker" after "furnish to the" in the first sentence, and substituted "supplier or wholesaler" for "distributor or broker" after "prescribe. The" in the second sentence of paragraph (2); substituted "supplier or wholesaler" for "distributor or broker" after "facilities of the" and after "contract with the" in subparagraph (B) of paragraph (2); and substituted "wholesaler" for "broker as defined in Section 7308" in paragraph (3) of subdivision (i). Stats. 2004, Ch. 527 (SB 1881), in effect January 1, 2005, substituted "6051.5, 7202, and 7203.1" for "and 7202" after "6051.2, 6051.3" in the first sentence of subdivisions (f), (g), and (h), and added a comma after "fuel" in the first sentence of subdivisions (g) and (h).

* Article 1.5 was added by Stats. 1986, Ch. 214, Operative on July 1, 1986.