Opinion 88-10

This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

TAXES -- Gross Receipts Tax (liability of municipality for)

PUBLIC CONTRACTS -- Modification (addition of amount of gross receipts tax on petroleum products)

TAX LAW, §300 et seq.; GENERAL MUNICIPAL LAW, §103: A petroleum business awarded a municipal contract for fuel oil may not add on the amount of the gross receipts tax imposed under article 13 of the Tax Law to its bid price unless the contract so provides.

You have asked whether the successful bidder on a county contract for fuel oil may add on to his bid price, as a separate line item on his bill, an amount for the gross receipts tax on petroleum products.

Article 13-A of the Tax Law (§§300, et seq., added by L 1983, ch 400) contains provisions of law relative to the imposition of a gross receipts tax upon petroleum businesses. The purpose of this article was to consolidate "existing gross receipts taxes imposed on the petroleum industry into a single gross receipt tax on all petroleum businesses..." (memorandum of the Assembly Rules Committee, ch 400, Laws of 1983).

In interpreting predecessor provisions to article 13-A (Tax Law, §182-a, imposing a gross receipts tax on oil companies), this Office had stated that, since the tax is levied on oil companies and not on consumers of petroleum products, municipalities are not directly subject to the tax. We also noted that there was no statutory restriction on the companies passing along the amount of the tax to their customers either in the form of a separately listed item or by calculating it as part of the basic selling price (cf. Shell Oil v Tax Commission, 91 AD2d 81, 458 NYS2d 938; Mobil Oil v Tully, 639 F2d 912, vacated on other grounds, 455 US 245, 102 S Ct 1047, 71 LEd2d 120, declaring former anti-pass through provision unconstitutional). It was also our opinion, however, that when a municipality and a company have agreed to a contract price, the amount of the tax imposed under the former provisions could not be added on by the company, unless the contract provided for such an addition. We further stated that when a contract was subject to competitive bidding under General Municipal Law, §103, a contract could not allow the amount of the tax to be added on to the bid price unless the bid specifications provided therefor. Finally, we noted that the limited exemption in the law for sales made to the State and its political subdivisions only applied to contracts awarded or entered into prior to July 11, 1981, or contracts awarded or entered into after that date pursuant to bids submitted prior to that date (1982 Opns St Comp No. 82-353, p 447; 1982 Opns St Comp No. 82-233, p 293; 1981 Opns St Comp No. 81-316, p 343).

Since the above-cited opinions were rendered, as noted, a new consolidated gross receipts tax in article 13-A was enacted as a successor to section 182-a. Several courts have interpreted this new article 13-A and, based in part on the above opinions of this Office, have reached conclusions similar to those reached in our opinions. The courts have concluded that there was no legislative intent to exempt sales to the State or a political subdivision from the tax (Manhattan & Queens Fuel v County of Nassau, 113 AD2d 595, 497 NYS2d 843, affd 68 NY2d 833, 508 NYS2d 175; Belcher v County of Nassau, 126 AD2d 504, 510 NYS2d 624). Some of these same courts have also held that, while the amount of the tax may be passed on to a municipal purchaser, a petroleum business awarded a contract may add on the amount of the gross receipts tax to its bid price only if the contract between the petroleum business and the municipality provides therefor (Belcher v County of Nassau, supra; Manhattan & Queens Fuel v Village of Rockville Centre, 126 AD2d 523, 510 NYS2d 646). Absent such a contractual provision, the tax must "... be borne by the ... oil company upon which it was directly imposed." (Manhattan & Queens Fuel v Rockville Centre, 126 AD2d at 524, 510 NYS2d at 648).

Based on the above, it is clear that whether the vendor, in the instant situation, may add on the amount of the gross receipts tax to his bid price, depends upon whether the terms and conditions of the contract provides for such an addition. Obviously, this determination involves a question of fact (see Belcher, supra; Burnside Coal and Oil v City of New York, 131 Misc 2d 149, 502 NYS2d 622) which must, in the first instance, be determined by the parties to the contract and not by this Office.

March 1, 1988
Charles E. Drake, Esq., County Attorney
County of Hamilton