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New York to Move Point of Taxation of Diesel to Terminal Rack Effective August 1, 2013

New York is moving the point of taxation for diesel to the terminal rack effective August 1, 2013.  Enacted as part of the 2013/2014 budget, the law provides for all sales between licensed distributors occurring above the terminal rack to be tax free – this applies to the diesel fuel tax, petroleum business tax and prepaid sales tax on fuel.  Sales within a terminal to any entity that is not properly licensed as a diesel fuel distributor will be taxable.  However, as the law provides that the tax cannot be imposed until the fuel has “come torest within the meaning of federal decisional law interpreting the United States constitution,” all sales above the rack that occur before diesel is delivered into a terminal – for example sales within a pipeline – should be tax free, regardless of whether all parties to the transaction are licensed in New York.   The law does not make any changes with respect to the tax on off-road diesel, or jet fuel sold to airlines.  Nor does it change the law with respect to gasoline which will continue to be taxed on import into New York.

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