REVENUE ADMINISTRATIVE BULLETIN 1990-29

Approved: October 5, 1990

CONSIGNMENT SALES OF DIESEL FUEL

RAB-90-29. This bulletin defines the term "consignment sales" used by the Motor Fuel Cigarette, and Miscellaneous Taxes Division for determining whether a true consignment sale arrangement exists between a retail dealer and a distributor for purposes of chapter 2 of the motor fuel tax act.

Overview

A retail dealer is required to be licensed as a diesel dealer unless it has a bona fide consignment sale arrangement with a distributor. A retail dealer is relieved of licensing and filing requirements only if a bona fide consignment sale arrangement exists that allows the distributor holding a valid diesel dealer's license to assume responsibility for the diesel motor fuel tax. It appears, in some instances, that retail dealers are claiming a consignment sale arrangement to avoid licensing and the required filing of the dealer's diesel motor fuel tax report (form C-3579).

Law

MCL 207.121(d); MSA 7.316(1)(d) defines a dealer as "... any person selling and delivering diesel motor fuel into the fuel supply tanks of motor vehicles in this state, or any person withdrawing diesel motor fuel from bulk storage for consumption by motor vehicles on the public roads and highways of this state."

In addition, MCL 207.122(3); MSA 7.316(2)(3) states: "The tax on diesel motor fuel sold and delivered in this state by the seller into the fuel supply tanks of motor vehicles shall be collected by the seller from the purchaser and paid over monthly to the department of treasury."

Consignment Sale Defined

For a bona fide consignment sale arrangement to exist, all of the following conditions must be met:

1. The distributor retains ownership of the diesel fuel at all times through the sale to the consumer. The retail dealer never assumes ownership of the diesel fuel.

    

2. The retail dealer is never held liable for lost fuel.

    

3. The distributor sets the price for the diesel fuel.

    

4. The retail dealer receives a commission for selling the distributor's diesel fuel.

    

5. The distributor must be licensed as a diesel dealer.

    

6. The retail dealer must obtain diesel fuel exclusively from the distributor-consignor.

If a bona fide consignment sale arrangement exists, the distributor is responsible for payment of the diesel motor fuel tax.

The failure to meet any of these conditions shifts the responsibility for payment of the tax to the retail dealer who must become licensed as a diesel dealer.

A retail dealer claiming the existence of a consignment sale arrangement must provide the written consignment sale contract or a copy of the contract upon request.