Grassley, Baucus Get Clarification on Refund Claims for Fuel Taxes
WASHINGTON – In a February 25 letter, Sen. Chuck Grassley, chairman of the Committeeon Finance, and Sen. Max Baucus, ranking member, sought to clarify the tax treatment of gasoline purchased by exempt entities such as states and colleges that purchase fuel using credit cards. Anearlier notice by the Treasury Department, 2005-4, questioned whether the existing credit card rule had continuing applicability in light of a new provision enacted as part of the American Jobs Creation Act. That provision allows the ultimate vendor of gasoline to request a refund from the IRS. The Treasury notice extended the credit card rule, which allowed the person who paid the tax to claim a refund, through February 28, 2005. Grassley and Baucus said in the letter that their intentwas to retain the existing treatment with respect to sales on an oil company credit card. House Waysand Means Committee Chairman Bill Thomas also signed the letter. In response to the letter, Treasury issued Notice 2005-24, which maintains indefinitely the existing rule for oil company credit card purchases.
The text of their Feb. 25, 2005, letter to the Treasury Department follows.
February 25, 2005
Mr. Eric Solomon
Acting Assistant Secretary
Office of Tax Policy
Room 3120 Main Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Mr. Solomon:
This letter responds to Notice 2005-4 as it relates to the treatment of credit card purchases ofgasoline by exempt entities. In Notice 2005-4, Treasury stated:
(ii) Sales on oil company credit cards.-Under the rules in effect prior to 2005, a salecharged on an oil company credit card issued to an exempt person is not considereda direct sale by the person actually selling the gasoline to the ultimate purchaser (i.e.,the person selling the gasoline is not the ultimate vendor) if the person actuallyselling the gasoline receives a reimbursement from the oil company based on a pricethat excludes the tax. Treasury and the Service are considering whether this rule hascontinuing applicability under new § 6416(a)(4) but, while considering the issue, willcontinue generally to apply the rule with respect to sales before March 1, 2005.
Therefore, in the case of a sale of gasoline before March 1, 2005, on an oil companycredit card issued to a state or nonprofit educational organization, the person thatactually paid the tax is treated as the only person eligible to make the claim under §§6402 and 6416. ... Congress may wish to address this issue prior to March 1, 2005,and Treasury and the Service will assist Congress in designing an administrablealternative.
We hope this letter provides sufficient clarification of Congressional intent so that theTreasury Department can continue to administer these rules as in effect prior to 2005. The confereesto the American Jobs Creation Act ("JOBS Act") removed language from section 865 of the bill that would have changed the administration of refund claims for gasoline sales charged on a credit card.
By removing this language, the intent was to retain the pre-JOBS Act treatment of these claims and not to effect any changes with respect to sales on oil company credit cards. Our committees are continuing to investigate this area.
To the extent you conclude that a technical correction is needed to preserve the rules in effectprior to 2005 and currently in effect, we stand ready to work with you in crafting such language. Wewill facilitate the enactment of such technical legislation at the earliest opportunity.
We continue to review whether changes need to be made in this area to prevent erroneousclaims, including changes in the proper party to administer these claims on behalf of an exempt entity. In this regard, section 871 of the JOBS Act required that the Treasury report to our committees regarding Internal Revenue Service findings with respect to erroneous claims of taxexempt status for sales of taxable fuel and recommendations to address such erroneous claims. We would like to address this area in connection with the Highway Trust Fund reauthorization and urgeyou to provide us with the statutorily required report as soon as possible. If you cannot provide acomplete response, we request that you provide responsive information as it becomes available.
Charles E. Grassley, Chairman
Committee on Finance
Max Baucus,Ranking Member
Committee on Finance
William M. Thomas, Chairman
Committee on Ways and Means
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