Petroleum business tax: Tax expenditure estimates
Petroleum business tax: Tax expenditure estimates
This section provides tax expenditure estimates for 35 provisions of the petroleum business tax. Table 6 provides a list of expenditures based on the tax law as of January 1, 2025. The estimates are based on data for the 2023 calendar year (the latest complete year for which tax return data is available) and then extrapolated to the 2025 calendar year. Total petroleum business tax liability for calendar year 2023 is provided as a benchmark for the tax expenditure estimates.
Description of tax
Tax Law Article 13-A imposes a business privilege tax on petroleum businesses operating in New York State. The tax is measured by the quantity of various petroleum products refined or sold in the state or imported for sale or use in the state. Imposition of the tax occurs at different points in the distribution chain, depending upon the type of petroleum product. Motor fuel (gasoline) is subject to tax upon importation to New York State. Highway diesel motor fuel is taxable upon removal from an in-state registered fuel terminal. Nonhighway diesel motor fuel and residual petroleum products become taxable on the final sale or use of the product in New York.
The Article 13-A business privilege tax was added to the tax law in 1983 and was imposed on the gross receipts of such businesses. On September 1, 1990, the tax was restructured, converting the annual gross receipts tax to a monthly tax measured by gallons.
Some of the exemptions, credits, and reimbursements provided for in the restructuring applied to the prior gross receipts tax. Although these provisions already had been in place, the effective dates and estimates cited herein reflect the date on which they were restructured.
Data sources
The major sources of data used to compute the tax expenditure estimates under Article 13-A include:
- Petroleum Business Tax (PBT) Master File for 2019–2023. This is an unverified file of all taxpayers filing a return under Article 13-A.
- Refund data from the Department of Taxation and Finance’s Audit Division.
- Non-tax data sources such as: data from the U.S. Department of Energy and U.S. Department of Defense and New York State Energy Research and Development Authority.
Methodology
The projections of the tax expenditures from 2023 to 2025 are based, where possible, on forecasted consumption of various petroleum products. These forecasts were produced by the United States Department of Energy: Energy Information Agency. The remaining expenditure estimates used forecasts of appropriate economic variables.
Tax expenditures whose values are less than $0.1 million are considered minimal and are designated by an asterisk.
| * | Less than $0.1 million |
|---|---|
| -- | The tax expenditure was not applicable for these years |
| N/A | No data available |
Exemptions
The petroleum business tax allows certain exemptions for gallonage otherwise included in the calculation of tax.
Products
1. Kerosene
Citation: Tax Law § 301-b(a)(1)
Effective date: September 1, 1990
Description: Exemptions from tax apply to kerosene sold or used by a petroleum business registered as a diesel motor fuel distributor. The exemption applies to kerosene which has not been blended or mixed with any diesel motor fuel, motor fuel, or residual petroleum product and is not used by the petroleum business as fuel to operate a motor vehicle or sold to a consumer to use as fuel for operation of a motor vehicle.
2. Bunker fuel
Citation: Tax Law § 301-b(a)(4)
Effective date: September 1, 1990
Description: This section exempts from tax residual petroleum products sold by a business registered as a residual petroleum business to a consumer for exclusive use as bunker fuel, or, for use by the residual petroleum business as bunker fuel for its own vessels. Bunker fuel is petroleum fuel used in ships.
3. Liquid petroleum gases
Citation: Tax Law § 301-b(a)(5)
Effective date: September 1, 1990
Description: An exemption from tax is allowed for liquid petroleum gases such as butane, ethane, or propane.
Data source: Crude oil: U.S. Department of Energy; Liquid Petroleum Gases: Petroleum Business Tax Master File and U.S. Department of Energy
4. Compressed natural gas and hydrogen
Citation: Tax Law § 301-b(a)(8)
Effective date: September 1, 2006
Description: Exemptions from tax apply to compressed natural gas and hydrogen which are suitable for use in the engine of a motor vehicle. This provision sunsets on September 1, 2026.
5. E-85
Citation: Tax Law § 301-b(a)(6)
Effective date: September 1, 2006
Description: Exemptions from tax apply to sales of E-85 provided the E-85 is delivered to and placed in a storage tank of a filling station to be dispensed directly into a motor vehicle for use in the operation of the motor vehicle. This provision sunsets on September 1, 2026.
6. B-20
Citation: Tax Law § 301-b(a)(7)(i,ii)
Effective date: September 1, 2006
Description: A partial exemption from tax applies to sales of B-20 (20% biodiesel and 80% diesel motor fuel). The partial exemption is equal to a 20 percent reduction of the otherwise applicable petroleum business tax rates on diesel motor fuel. This provision sunsets on September 1, 2026.
Sales
7. Governments
Citation: Tax Law §§ 301-b(c), 301-e(e)(4)
Effective date: September 1, 1990
Description: The petroleum business tax exempts the sales of motor fuel, diesel motor fuel, or residual petroleum products to New York State, the United States of America, or any of their agencies, instrumentalities, or political subdivisions. The exemption applies where such fuel is used by these entities for its own use or consumption. An exemption from tax also exists for naphtha based aviation fuel used solely for propelling military jet aircraft of the United States Armed Forces.
8. Residential heating
Citation: Tax Law § 301-b(d)(1)
Effective date: September 1, 1990
Description: An exemption from tax applies to nonhighway diesel motor fuel and residual petroleum product sold by a registered distributor of the product to a consumer, exclusively for residential heating purposes.
9. Fuel used for manufacturing purposes
Citation: Tax Law §§ 301-a(f)(4), 301-a(g)(4)
Effective date: January 1, 1998
Description: The sale or use of residual fuel or nonhighway diesel fuel for use and consumption directly and exclusively in the production of tangible personal property for sale by manufacturing, processing, or assembly are exempt from the full petroleum business tax. Prior to January 1, 1998 (effective in September 1994), the above sales or uses of such fuels were exempt from the supplemental portion of the petroleum business tax. (See item 20: Fuel used for manufacturing purposes for reimbursement if the tax was paid on subsequent sales.)
10. Fuel used for farm production
Citation: Tax Law § 301-b(g)
Effective date: September 1, 1994
Description: The sale or use of nonhighway diesel motor fuel and residual petroleum product for off-highway farm production of goods for sale are exempt from the tax. However, the fuel must be delivered on the farm site. (See item 24: Fuel used for farm production.)
11. Not-for-profit organizations and veterans groups
Citation: Tax Law § 301-b(h)
Effective date: January 1, 1996
Description: Not-for-profit organizations and veterans’ groups purchasing and using residual fuel, nonhighway diesel motor fuel for their exclusive use are eligible for a full, up-front exemption from the tax. These organizations include not-for-profit groups organized for religious, charitable, scientific, testing for public safety, literary or educational purposes, to foster national or international amateur sports competition, for the prevention of cruelty to children or animals, or veteran groups as listed in Tax Law § 1116(a)(4) or (5). (See item 29: Not-for-profit organizations and veterans groups for a full credit/reimbursement of the tax.)
12. Fuel used for railroad purposes
Citation: Tax Law §§ 301-a(e)(4), 301-j(a)(3)
Effective date: January 1, 1997
Description: The sale of nonhighway diesel motor fuel for use or consumption directly and exclusively in the operation of a locomotive or a self-propelled vehicle run only on rails or tracks is exempt from the supplemental portion of the tax. Such fuel is also taxed at a preferential rate under the base portion of the tax which is computed as the automotive diesel base rate less 1.3 cents. (See item 25: Fuel used for railroad purposes for refund/reimbursement of tax.)
13. Certain commercial gallonage
Citation: Tax Law § 301-j(a)(2)
Effective date: March 1, 1997
Description: Commercial gallonage defined as nonhighway type diesel motor fuel and residual fuel that does not qualify for the utility credit/reimbursement or the manufacturing exemption or the not-for-profit exemption or the nonresidential heating rate or will not be used in a commercial vessel is exempt from the supplemental portion of the tax. This fuel is primarily used for electric generation purposes. (See item 21: Certain commercial gallonage for refund/reimbursement of tax.)
14. Fuel used for nonresidential heating purposes
Citation: Tax Law § 301-b(d)(2)
Effective date: April 1, 2001
Description: A partial exemption from tax applies to nonhighway diesel motor fuel and residual petroleum product sold by a registered distributor of the product to a consumer exclusively for nonresidential heating purposes. The rate of the partial exemption was calculated as the then-current petroleum business tax supplemental tax rate (imposed under § 301-j) plus 20 percent of the then current petroleum business tax base rate (imposed under § 301-a) for the applicable fuel above. Effective September 1, 2002, this partial exemption is calculated as the then-current supplemental tax rate plus 46 percent of the then-current petroleum business tax base rate.
Credit, refund, or reimbursement
A credit, refund, or reimbursement is allowed against taxes paid by certain petroleum businesses for particular petroleum products.
15. Residential heating fuel
Citation: Tax Law § 301-c(a)(1)
Effective date: September 1, 1990
Description: A reimbursement is allowed for taxes paid by subsequent purchasers of nonhighway diesel motor fuel purchased in the state and sold to a consumer for use exclusively for residential heating purposes.
16. Governments
Citation: Tax Law § 301-c(b)
Effective date: September 1, 1990
Description: This section provides a reimbursement for taxes paid pursuant to the petroleum business tax on motor fuel and diesel motor fuel purchased in the state and then sold by the purchaser to New York State, the United States of America, or any of their instrumentalities, agencies, or political subdivisions.
17. Omnibus carriers
Citation: Tax Law § 301-c(c)
Effective date: April 1, 1992
Description: A reimbursement is allowed for taxes paid on motor fuel and diesel motor fuel purchased in the state by an omnibus carrier. The reimbursement applies to fuel used in the operation of: i) an omnibus in local transit service pursuant to a certificate of convenience and necessity issued by the Commissioner of the Department of Transportation, or issued by the Interstate Commerce Commission of the United States, or pursuant to a contract, franchise, or consent with a city having a population of one million or more; and ii) as a school bus used for the transportation of children in the state pursuant to the education law.
18. Nonpublic school operators
Citation: Tax Law § 301-c(d)
Effective date: April 1, 1992
Description: This section provides a reimbursement for taxes paid on motor fuel and diesel motor fuel purchased in the state by a nonpublic school operator and consumed by the operator exclusively for education related activities.
19. Regulated electric utilities
Citation: Tax Law § 301-d
Effective date: September 1, 1990
Description: This section extends a credit, refund, or reimbursement for the tax surcharge and part of the basic tax for fuel used in the production of electricity. For periods July 1991 and August 1991, this credit was available only for petroleum used to produce residential electricity.
20. Fuel used for manufacturing purposes
Citation: Tax Law § 301-c(j)
Effective date: January 1, 1998
Description: Purchasers who subsequently sell residual fuel or nonhighway diesel fuel used and consumed for manufacturing purposes may be reimbursed for the full petroleum business tax. (See item 9: Fuel used for manufacturing purposes for the up-front exemption.) Prior to January 1, 1998 (effective in September 1994), the above purchasers making such sales were eligible for reimbursement of the supplemental portion of the petroleum business tax.
21. Certain commercial gallonage
Citation: Tax Law § 301-c(i)(1, 2)
Effective date: March 1, 1997
Description: Reimbursements are allowed to a consumer where such consumer purchased nonhighway type diesel fuel or residual fuel, absorbed the supplemental portion of the tax in the purchase price and used such gallonage as commercial gallonage. The reimbursement is calculated as the amount of such gallonage multiplied by the then-applicable supplemental tax rate. (See item 13: Certain commercial gallonage for refund/reimbursement of tax.) Prior to March 1997 (and subsequent to September 1994), commercial gallonage was eligible for a credit/reimbursement at a rate of one-half the then-applicable supplemental tax plus surcharge on the supplemental tax under § 301-k.
22. Fuel used by commercial fishers
Citation: Tax Law § 301-c(g)
Effective date: September 1, 1994
Description: A reimbursement is allowed for diesel motor fuel and motor fuel used in the operation of a commercial fishing vessel by commercial fishers while such vessel is engaged in harvesting fish for sale.
23. Fuel used by tugboats and towboats
Citation: Tax Law § 301-c(q)
Effective date: September 1, 2022
Description: A reimbursement is allowed for the use of motor fuel, diesel motor fuel, or residual petroleum product by tugboats and towboats. In addition, purchasers of motor fuel, diesel motor fuel, or residual petroleum product used by tugboats and towboats may claim a reimbursement of the full amount of tax that has been passed through to the purchaser.
24. Fuel used for farm production
Citation: Tax Law § 301-c(e), (f)
Effective date: September 1, 1994
Description: Reimbursements are allowed for nonhighway diesel motor fuel and residual fuel purchased in this state and sold by such purchaser to a consumer for farm use. In addition, a purchaser of motor fuel or highway diesel motor fuel who uses the fuel for farm production is eligible for a reimbursement of the petroleum business tax. The reimbursement is only allowed if it is not more than 1,500 gallons of gasoline or 4,500 gallons of highway diesel motor fuel purchased in a 30-day period, or for greater amounts with prior clearance by the Commissioner of Taxation and Finance. The motor fuel or highway diesel motor fuel must be delivered on the farm site and consumed off-highway in the production of goods for sale. (See item 10: Fuel used for farm production for the up-front exemption.)
25. Fuel used for railroad purposes
Citation: Tax Law § 301-c(k)(1, 2)
Effective date: January 1, 1997
Description: Reimbursements are allowed to subsequent purchasers, who are registered as distributors of diesel motor fuel, have absorbed the full petroleum business tax nonhighway diesel rate and then sell such fuel as railroad diesel. The amount of the reimbursement is equal to the difference between the full nonhighway diesel rate and the railroad diesel rate. (See item 12: Fuel used for railroad purposes for the exemption from tax.)
26. Fuel used for nonresidential heating purposes
Citation: Tax Law § 301-c(a)(2)
Effective date: April 1, 2001
Description: A partial reimbursement from tax applies to nonhighway diesel motor fuel purchased in the state and then sold by such purchaser to a consumer exclusively for nonresidential heating purposes. The partial reimbursement is provided only when such nonhighway diesel motor fuel is delivered into a storage tank (which is not equipped with a hose or other apparatus where such fuel can be dispensed into the tank of a motor vehicle)—and where such tank is attached to the heating unit burning such fuel. Additionally, the purchaser must possess documentary proof that it absorbed the full amount of the petroleum business tax.
The rate of the partial reimbursement was calculated as the then-current petroleum business tax supplemental tax rate (imposed under § 301-j) plus 20 percent of the then-current petroleum business tax base rate (imposed under § 301-a) applicable for the specific diesel motor fuel rate above. Effective September 1, 2002, this partial exemption is calculated as the then-current supplemental tax rate plus 46 percent of the then- current petroleum business tax base rate.
27. Fuel used for mining or extracting purposes
Citation: Tax Law § 301-c(l)
Effective date: April 1, 2001
Description: A purchaser may obtain a reimbursement of the petroleum business tax paid on nonhighway diesel motor fuel or residual petroleum product when such fuel is purchased exclusively for use and consumption directly and exclusively in the production of tangible personal property for sale by mining or extracting. The reimbursement is provided only where such fuel is delivered at the mining or extracting site and is consumed other than on the public highways of the State. Additionally, the purchaser must possess documentary proof that it absorbed the full amount of the petroleum business tax.
28. Bad debts
Citation: Tax Law § 301-l
Effective date: September 1, 1994
Description: A registered petroleum business or aviation fuel business may apply for a refund for petroleum business tax that it has paid with respect to gallonage sold in-bulk by the business for the purchaser’s own consumption. The same must then give rise to a debt that becomes worthless for federal income tax purposes. In addition, a sale of motor fuel and highway diesel motor fuel to a filling station is a sale in-bulk for such filling station’s own use and consumption. Sales by a filling station are not eligible for this refund.
29. Not-for-profit organizations and veterans groups
Citation: Tax Law § 301-c(h)
Effective date: January 1, 1996
Description: Purchasers who subsequently sell residual fuel or nonhighway diesel motor fuel used and consumed exclusively by certain not-for-profit organizations and veterans’ groups may apply for a full refund of the petroleum business tax. These organizations include the organizations listed in Tax Law § 1116(a)(4) or (5). (See item 11: Not-for-profit organizations and veterans groups for the full up-front exemption.)
30. Fuel used by passenger commuter ferries
Citation: Tax Law §301-c(m)
Effective date: December 1, 2000
Description: A reimbursement is allowed for nonhighway diesel motor fuel and residual petroleum product used and consumed by a passenger commuter ferry when such fuel is used exclusively in providing a mass transportation service.
31. E-85
Citation: Tax Law § 301-c(n)
Effective date: September 1, 2006
Description: A reimbursement of tax applies for purchases of E-85 where the tax was paid by the purchaser and the E-85 was delivered to and placed in a storage tank of a filling station to be dispensed directly into a motor vehicle for use in the operation of the motor vehicle. This provision sunsets on September 1, 2026.
32. B-20
Citation: Tax Law § 301-c(o)
Effective date: September 1, 2006
Description: A partial reimbursement of tax applies for purchases of B-20 where the tax was paid by the purchaser and subsequently resold. The partial reimbursement is equal to 20 percent of the petroleum business tax paid on diesel motor fuel. This provision sunsets on September 1, 2026.
Exempt Entities
33. Fuel used by volunteer ambulance services and volunteer fire departments
Citation: Tax Law § 301-c (p)
Effective date: June 1, 2013
Description: A reimbursement is allowed for petroleum business tax paid on motor fuel and diesel motor fuel purchased by volunteer ambulance services [as defined in Public Health Law § 3001], volunteer fire companies and volunteer fire departments [as defined in Volunteer Firefighters’ Benefit Law § 3] and volunteer rescue squads. To qualify, the entity must be the purchaser, user or consumer of the motor fuel or diesel motor fuel and use it in a vehicle owned and operated by such entity exclusively for its purposes.
34. Governments, the United Nations, and certain not-for-profit organizations
Citation: Tax Law § 305
Effective date: July 1, 1983
Description: Organizations exempt under the Sales Tax Law § 1116(a) that import petroleum into New York exclusively for their own use and consumption are not considered petroleum businesses and are exempt from the petroleum business tax. These organizations include: New York State, the United States of America and any of its agencies, instrumentalities, or political subdivisions; the United Nations; or any international organization of which the United States is a member; any trust, corporation, association, fund, or foundation operated exclusively for religious, charitable, or scientific purposes, or to foster international amateur sports competition, for the prevention of cruelty to children or animals, or veteran’s groups; certain Indian nations or tribes; and certain not-for-profit health maintenance organizations.
35. Certain airlines
Citation: Tax Law § 301-e(f)
Effective date: June 1, 2005
Description: Aviation fuel businesses (for example, airlines) which service four or more cities in the State with direct nonstop flights between these cities are fully exempt from the petroleum business tax. This provision will allow these airlines to burn jet fuel on take-offs in New York State without paying the petroleum business tax whether the associated flights or legs of flights are intra or interstate in destination.