senate Bill S2924

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

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 03 / Feb / 2011
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 04 / Jan / 2012
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Summary

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

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Bill Details

See Assembly Version of this Bill:
A5751
Versions:
S2924
Legislative Cycle:
2011-2012
Current Committee:
Senate Investigations And Government Operations
Law Section:
Tax Law
Laws Affected:
Amd ยงยง282-a, 283-d, 300 & 301-c, Tax L
Versions Introduced in 2009-2010 Legislative Cycle:
S5122, A7919, S5122

Sponsor 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.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  2924

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            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

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD08917-01-1

S. 2924                             2

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

S. 2924                             3

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

S. 2924                             4

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.

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