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REVENUE ADMINISTRATIVE BULLETIN 1990-33
Approved: December 21, 1990
ENVIRONMENTAL PROTECTION REGULATORY FEE
(Replaces Revenue Administrative Bulletin 1989-67)
RAB-90-33. This bulletin expands upon the discussion of the environmental protection regulatory fee contained in Revenue Administrative Bulletin 1989-67 to reflect the impact of 1990 P.A. 51 (“the amendment”). The amendment establishes the fee base for light and heavy petroleum products and provides for the imposition of the fee when product exchange agreements are involved. This bulletin also announces the revocation of Letter Ruling 89-69.
1989 P.A. 152 amended the Michigan Underground Storage Tank Financial Assurance Act (“the Act'') [MCL 299.801 et seq.; MSA 13.29 (201) et seq.] and established an environmental protection regulatory fee to fund the federally mandated cleanup of leaking underground storage tanks. This fee applies to petroleum products refined or imported into the State of Michigan for resale or consumption within the state. [MCL 299.808(2); MSA 13.29(208)(2)].
Beginning August 1, 1989, refiners of petroleum and importers of refined petroleum must pay the regulatory fee of 7/8 of 1 cent on each gallon of refined petroleum sold in Michigan. [MCL 299.808(1); MSA 13.29(208)(1)]. The Sales, Use and Withholding Taxes Division collects this fee on the same form as the gasoline sales tax prepayment paid by refiners, terminal operators and importers (Form C-3237 Report of Environmental Protection Regulatory Fee and Gasoline Sales Tax Prepayment). Returns are due twice monthly and must be filed even if no payment is due.
Petroleum Products Subject to Regulatory Fee
The regulatory fee is imposed at the time the refined petroleum is sold by the refiner or importer for resale or consumption in this state. The Act defines refined petroleum as aviation gasoline, middle distillates, jet fuel, kerosene, gasoline, and residual oils. [MCL 299.805(4); MSA 13.29(205)(4)].
For the purpose of this Act, the term “middle distillates” means any product used as a heating fuel, internal combustion engine fuel or turbine engine fuel. The term “residual oils” means #4, #5, and #6 fuels.
Products commonly referred to as middle distillates, but not used as heating fuel, internal combustion engine fuel, or turbine engine fuel, are not subject to the fee.
Example: Raffinate used as a fuel is subject to the fee; however, when it is sold or used as feed stock, it is not subject to the fee.
The volume of oil fluctuates due to constant changes in temperature. “Light” petroleum products are sold on a gross gallonage, or metered gallons, basis. The regulatory fee shall be calculated and paid on the gross or metered gallons for “light” petroleum products. [MCL 299.808a(1); MSA 13.29(208a)(1)].
''Heavy” petroleum products (#4, #5 and #6 residual oils) are sold on a “temperature-corrected” basis. The regulatory fee shall be calculated and paid on the net or temperature-corrected gallons for “heavy” petroleum products. [MCL 299.808a(1); MSA 13.29(208a)(1)].
An exchange agreement is defined as “an agreement between buyers and sellers of refined petroleum products in which refined petroleum products in bulk quantity are made available to a person solely in consideration of that person making available a like volume of refined petroleum products to the other party at some other location.” [MCL 299.808a(2); MSA 13.29(208a)(2)].
A person receiving refined petroleum products in Michigan in accordance with an exchange agreement is considered the taxpayer and must pay the regulatory fee. [MCL 299.808a(2); MSA 13.29(208a)(2)].
Importers of Petroleum
For the purpose of administering this fee, the Department of Treasury considers an importer to be the person having legal ownership of the refined petroleum at the time it is brought into Michigan. With respect to product imported into Michigan but given up to another refiner/importer under a product exchange agreement, the taxpayer receiving the product in Michigan under the exchange agreement will be the importer responsible for the fee. [MCL 299.808a(2); MSA 13.29(208a)(2)].
Example: A company refines petroleum in another state and sells it to a purchaser in Michigan. The refiner is considered to be the importer when title to the refined petroleum passes to the Michigan purchaser in Michigan. This will occur in the following situations:
- The refined petroleum is brought into Michigan in the refiner's truck.
- The refiner hires a contract carrier to haul the refined petroleum into Michigan.
- A common carrier transports the refined petroleum and title passes in Michigan rather than another state.
The Michigan purchaser is considered to be the importer of refined petroleum when title passes to the Michigan purchaser in another state. This will occur in the following situations:
- The refined petroleum is transported to Michigan in the purchaser's trucks.
- Title to the refined petroleum passes in another state and a common carrier transports the refined petroleum to the Michigan purchaser.
Sales for Immediate Export. MCL 299.808; MSA 13.29(208) imposes the environmental protection regulatory fee on refined petroleum sold for resale or consumption in Michigan. Sales for resale of refined petroleum for immediate export are not subject to the fee.
When the customer is claiming exemption from the fee because the product is for export, the purchaser must provide an exemption claim to the seller identifying the specific load by invoice number or load number. A statement that the load being purchased is for immediate export to a specific destination and that the petroleum will not be returned to: Michigan must be included. This exemption claim must be made for each load being exported. However, an exemption claim made by a purchaser to a seller with a card system verifying that all purchases made with a specific card are to be exported may be considered valid.
Sales made to an out-of-state purchaser and delivered by the seller to the out of-state location are sales in interstate commerce and are not subject to the fee.
Public Utility. A public utility with more than 500,000 Michigan customers is exempt from this fee if the petroleum is used by the public utility for the generation of steam or electricity. To claim this exemption, a public utility must present an exemption certificate to the seller at the time of the purchase. [MCL 299.808(3); MSA 13.29(208)(3)]. The exemption certificate shall be as follows:
CERTIFICATE TO BE EXECUTED WHEN SALE EXEMPT FROM REGULATORY FEE IS MADE TO A PUBLIC UTILITY
The undersigned hereby certifies that petroleum being purchased by the above public utility is used by the public utility for the generation of steam or electricity, and that the public utility has more than 500,000 customers in the State of Michigan. In the event this claim is disallowed, the transferee promises to reimburse the seller for the amount of the regulatory fee involved.
Name of Utility
Signature and Title of Claimant
Revocation of Letter Ruling 89-69
In Letter Ruling 89-69, the Department of Treasury took the position that the environmental protection regulatory fee was to be based on the gross gallonage of any petroleum product subject to the fee. Section 8a of 1990 P.A. 51 provides that the fee will be based on gross gallonage only for “light” petroleum products, and that the fee for “heavy” petroleum products will be calculated and paid on a temperature corrected basis. In light of the amendment, Letter Ruling 89-69 is revoked.