Original Notice.

     Preproposal statement of inquiry was filed as WSR 00-15-004.

     Title of Rule: WAC 458-20-260 Oil spill response and administration tax.

     Purpose: To provide guidance to taxpayers necessary to meet the requirements set forth in chapter 82.23B RCW, Oil spill response tax.

     Statutory Authority for Adoption: RCW 82.23B.050 and 82.32.300.

     Statute Being Implemented: Chapter 82.23B RCW.

     Summary: This rule explains the provisions of chapter 82.23B RCW, Oil spill response tax. The rule explains the imposition of the tax, when a taxable event occurs, and how to take exemptions and credits applied against the tax.

     Reasons Supporting Proposal: To amend the current rule to reflect legislative changes (chapter 449, Laws of 1997) and to recognize current business practices to assist taxpayers in complying with the law.

     Name of Agency Personnel Responsible for Drafting: Anne Solwick, 1025 Union Avenue S.E., Suite #400, Olympia, WA, (360) 570-6129; Implementation: Claire Hesselholt, 1025 Union Avenue S.E., Suite #400, Olympia, WA, (360) 570-6124; and Enforcement: Russell W. Brubaker, 1025 Union Avenue S.E., Suite #400, Olympia, WA, (360) 570-6131.

     Name of Proponent: Department of Revenue, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: Chapter 82.23B RCW imposes the oil spill response and oil spill administration tax on the privilege of receiving crude oil or petroleum products at a marine terminal within this state from a waterborne vessel or barge operating on the navigable waters of Washington. This rule provides pertinent definitions; explains the imposition and base of the tax; advises of the reporting requirements; explains that the tax is collected and paid by the marine terminal operator or, in the alternative, paid by a holder of a direct pay permit; explains the exemptions and credits allowed by law against the tax; and explains and provides examples on computing the credit amount. The purpose of the rule is to provide guidance to those required to pay the oil spill response and administration tax. The effect of the rule is that those required to pay the oil spill response and administration tax will have a reference to assist them in complying with the law.

     Proposal Changes the Following Existing Rules: This proposal is to amend an existing rule (WAC 458-20-260). The proposal explains the imposition of the tax with respect to increase in volume of previously taxed product and clarifies and provides examples on computing and documenting previously taxed product. Additionally, the proposal strikes outdated and/or unnecessary information.

     The proposed rule changes presumptions regarding whether tax was previously paid on product received at a marine terminal from a waterborne vessel or barge. Rule 260 currently explains that it is presumed, subject to rebuttal, that all product received from in-state locations was previously taxed and that all product received from out-of-state locations are subject to tax. The proposed rule provides that any receipt of product in Washington is presumed, subject to rebuttal, to be subject to tax.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The rule and the amendments do not impose any performance requirement or duty upon any business that is not already imposed by statute.

     RCW 34.05.328 does not apply to this rule adoption. This is an interpretive rule as defined in RCW 34.05.328.

     Hearing Location: Capitol Plaza Building, 4th Floor, Large Conference Room, 1025 Union Avenue S.E., Olympia, WA, on April 12, 2002, at 1:00 p.m.

     Assistance for Persons with Disabilities: Contact Sandy Davis no later than ten days before the hearing date, TTY 1-800-451-7985, or (360) 570-6175.

     Submit Written Comments to: Anne Solwick, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail annes@dor.wa.gov, by April 12, 2002.

     Date of Intended Adoption: April 30, 2002.

February 26, 2002

Claire Hesselholt, Rules Manager

Legislation and Policy Division

OTS-4892.3

AMENDATORY SECTION(Amending WSR 92-24-049, filed 11/30/92, effective 12/31/92)

WAC 458-20-260   Oil spill response and administration tax.   (1) Introduction. This ((section)) rule explains ((and implements)) the provisions of chapter 82.23B RCW which imposes an oil spill response tax and an oil spill administration tax((, effective October 1, 1991, and as amended by chapter 73, Laws of 1992, effective October 1, 1992)). The taxes are imposed upon the privilege of receiving crude oil or petroleum products at a marine terminal in this state from a waterborne vessel or barge operating ((through or upon)) on the navigable waters of this state. ((This section provides applicable definitions, the rate and measure of the tax, the tax payment and reporting procedure, and describes an exemption and a credit against tax.))

     (2) Definitions. For purposes of this ((section)) rule, the following terms will apply.

     (a) "Tax" means the oil spill response and oil spill administration taxes imposed by chapter 82.23B RCW.

     (b) "Barrel" means a unit of measurement of volume equal to forty-two United States gallons of crude oil or petroleum product.

     (c) "Crude oil" means any naturally occurring liquid hydrocarbon at atmospheric temperature and pressure coming from the earth, including condensate and natural gasoline.

     (d) "Department" means the department of revenue.

     (e) "Marine terminal" means a facility of any kind, other than a waterborne vessel, that is used for transferring crude oil or petroleum products to or from a waterborne vessel or barge.

     (f) "Navigable waters" means those waters of the state and their adjoining shorelines, that are subject to the ebb and flow of the tide, including the Columbia and Snake rivers.

     (g) "Person" has the meaning provided in RCW 82.04.030.

     (h) "Petroleum product" means any liquid hydrocarbons at atmospheric temperature and pressure that are the product of the fractionation, distillation, or other refining or processing of crude oil, and that are used as, useable as, or may be refined as fuel or fuel blendstock, including but not limited to, gasoline, diesel fuel, aviation fuel, bunker fuel, and fuels containing a blend of alcohol and petroleum.

     (i) "Taxpayer" means the person owning crude oil or petroleum products immediately after receipt of the same into the storage tanks of a marine terminal in this state from a waterborne vessel or barge and who is liable for the tax.

     (j) "Waterborne vessel or barge" means any ship, barge, or other watercraft capable of travelling on the navigable waters of this state and capable of transporting any crude oil or petroleum product in quantities of ten thousand gallons or more for purposes other than providing fuel for its motor or engine.

     (k) "Previously taxed product" means any crude oil or petroleum product which has been received in this state in a manner subject to the tax and upon which the tax has been paid.

     (((l) "Offloading" means the physical act of moving crude oil or petroleum product from a waterborne vessel or barge to a marine terminal.))

     (3) ((Tax rate and measure.)) Imposition, base, and reporting of tax. The tax is imposed on the privilege of receiving crude oil or petroleum products at a marine terminal within this state from a waterborne vessel or barge operating ((through or across)) on the navigable waters of this state. The tax is levied upon the owner of the crude oil or petroleum products immediately after receipt of the same into the storage tanks of a marine terminal from a waterborne vessel or barge.

     (a) ((The oil spill response tax is imposed at the rate of two cents per barrel of crude oil or petroleum product received.)) The tax is due for payment together with the timely filing of the return upon which it is reported, on or before the twenty-fifth day of the month following the month in which the taxable receipt occurs. In case any receipt commences on the last day of any month and extends past midnight, the receipt at the election of the marine terminal may be deemed to have occurred during the following month or may be deemed to have been completed at midnight and commenced at the instant after midnight. However, once a marine terminal has elected a timing option such election remains in effect until permission is obtained from the department to elect otherwise.

     (b) ((The oil spill administration tax is imposed at the rate of three cents per barrel of crude oil or petroleum product received.

     (c))) The number of barrels received ((shall)) must be computed as the net barrels received by the marine terminal operator. Net barrels ((shall)) must be computed by using an industry standard adjustment to gross barrels ((offloaded)) received to account for variations in temperature and content of water or other nonpetroleum substances.

     (4) Tax collection by the marine terminal operator. Unless the taxpayer has been issued a direct payment certificate as provided in subsection (5) of this ((section)) rule, the operator of any marine terminal located in this state where crude oil or petroleum products are received and placed into storage tanks is responsible for the collection of the tax from the taxpayer.

     (a) Failure to collect the tax from the taxpayer and remit it to the department will cause the marine terminal operator to become personally liable for the tax, unless the marine terminal operator has billed the taxpayer for the tax or notified the taxpayer in writing of the imposition of the tax.

     (i) The tax has been billed to a taxpayer when an invoice, statement of account, or notice of imposition of the tax is mailed or delivered to the taxpayer by the terminal operator within the operator's normal billing cycle and separately states the dates of receipt, rate of tax, number of barrels received and placed into storage tanks, and the amount of the tax required to be collected.

     (ii) A taxpayer has been notified of the imposition of the tax when, within twenty days from the date of receipt, a notice is mailed or delivered to the taxpayer, or to an agent of the taxpayer authorized to accept notices of this type other than the marine terminal operator((, which)). This notice must separately state((s)) the dates of receipt, rate of tax, number of barrels received into storage tanks, and the amount of the tax required to be collected.

     (iii) Marine terminal operators ((shall)) must maintain a record of the names and addresses of taxpayers billed for the tax, or in cases where taxpayers are sent written notification of the imposition of the tax, the names and addresses of the persons to whom notice is sent. Such records ((shall)) must indicate those persons billed or notified from whom the tax has been collected. Upon request, the records shall be made available for inspection by the department.

     (b) The tax collected ((shall)) must be held in trust by the terminal operator until paid to the department. (((c))) The tax ((collected shall be)) is due from the marine terminal operator, along with reports and returns on forms prescribed by the department, within twenty-five days after the end of the month in which the tax is collected.

     (((d))) (c) A terminal operator who relies in good faith upon a direct payment certificate (see subsection (5) of this rule) issued to a taxpayer ((shall be)) is relieved from any liability for the collection of the tax from the taxpayer. A marine terminal operator ((shall)) is likewise ((be)) relieved from liability for collection of the tax from a taxpayer if the marine terminal operator relies in good faith upon a current roster of certificate holders published by the department which bears the name of a taxpayer.

     (5) Direct payment to the department. Any taxpayer may apply to the department in writing for permission to pay the tax directly to the department. Upon approval of the department, any taxpayer making application for direct payment ((shall)) will be issued a direct payment certificate entitling the taxpayer to pay the tax directly to the department.

     (a) In order to qualify for direct payment, the taxpayer must meet the following requirements:

     (i) The taxpayer must be registered with the department.

     (ii) The taxpayer must file a bond with the department in an amount equal to two months estimated liability for the tax, but in no event less than ten thousand dollars. The bond ((shall)) must be executed by the taxpayer as principal, and by a corporation approved by the department and authorized to engage in business as a surety company in this state, as surety. Two months estimated tax liability shall be the total number of barrels received and placed into the storage tanks of a marine terminal in this state by the taxpayer during the two months in the immediately preceding twelve-month period with the highest number of barrels received multiplied by the total tax rate. If the department determines that the result of the foregoing calculation does not represent a fair estimate of the actual tax liability which the taxpayer is expected to incur, it may set the bond requirement at such higher amount as the department determines in its judgment will secure the payment of the tax. The bond requirement may be waived upon proof satisfactory to the department that the taxpayer has sufficient assets located in this state to insure payment of the tax.

     (iii) The taxpayer must be current in all of its tax obligations to the state having filed all returns as required by Title 82 RCW.

     (b) The department may, from time to time, review the amount of any bond filed by a taxpayer possessing a direct payment certificate and may, upon twenty days written notice to the taxpayer, require such higher bond as the department determines to be necessary to secure the payment of the tax. The filing of a substitute bond in such higher amount ((shall be)) is a condition to the continuation of the right to make direct payment under this section.

     (c) A direct payment certificate issued under this section may be revoked by the department if the taxpayer fails to maintain a current registration, fails to file a substitute bond within twenty days from a written request, or becomes delinquent in the payment of the tax.

     (d) The department ((shall)) maintains a current roster of all taxpayers who have a direct payment certificate. Copies of the roster ((shall be)) are made available on a monthly basis to any interested person requesting to be placed on the roster subscription list. Requests to be placed on the subscription list should be mailed to the ((Miscellaneous Tax Division,)) Department of Revenue, Taxpayer Services, attn: Public Records, P.O. Box ((47470)) 47478, Olympia, WA 98504-((7470)) 7478.

     (e) Applications for a direct payment certificate shall be in writing and shall include the name and address of the applicant, the applicant's registration number if currently registered, and the name and phone number of a contact person. The application shall also contain a statement that if the application is approved, the taxpayer consents to the public disclosure that the taxpayer has been granted a direct payment certificate, or if the certificate is later revoked, the taxpayer consents to the public disclosure of the fact of revocation. Applications should be mailed to the ((Miscellaneous Tax Division,)) Department of Revenue, Taxpayer Account Administration, P.O. Box ((47470)) 47476, Olympia, WA 98504-((7470)) 7476.

     (6) Exemption - previously taxed crude oil or petroleum products. The tax applies only to the first receipt of crude oil or petroleum products ((into the storage tanks of)) at a marine terminal in this state. RCW 82.23B.030 provides an exemption ((is available)) for the subsequent receipt ((into storage tanks)) at a marine terminal in this state of previously taxed crude oil or petroleum products. This exemption applies even though the previously taxed ((product is)) crude oil or petroleum products are refined or processed prior to subsequent transportation and receipt ((into storage tanks)).

     (((a) Crude oil or petroleum products received and placed into storage tanks for the first time at a marine terminal in this state which have been commingled with previously taxed product present a special problem in determining the amount of tax properly due. In such cases the amount of tax due is equal to the difference between the total number of barrels received and placed into storage tanks and the number of barrels of previously taxed product multiplied by the total tax rates. Due to the difficulty of determining the amount of tax due under such circumstances the following rebuttable presumptions shall apply:

     (i) All crude oil or petroleum products loaded on a vessel and shipped from a point within this state will be presumed, subject to rebuttal, to be previously taxed product. The subsequent receipt at a point within this state of such product will be treated as exempt from the tax.

     (ii) All crude oil or petroleum products loaded on a vessel and shipped from a point outside this state will be presumed to be crude oil or petroleum products received for the first time in this state. The subsequent receipt at a point within this state of such crude oil or petroleum products will be treated as subject to the tax.

     (b) The presumptions in this subsection may be rebutted upon proof of the number of barrels of previously taxed product received into storage tanks in this state.

     (c) Example. The presumptions in this subsection (6) can be illustrated by the following example:

     A previously taxed petroleum product is loaded on an ocean-going barge at a marine terminal located on Puget Sound in Washington. The barge is towed to Portland, Oregon where the petroleum product is offloaded and commingled with a similar product which has not been subjected to the tax. Later, commingled product is loaded onto a barge which is towed up the Columbia River to a marine terminal located in Pasco, Washington and, where it is offloaded and placed into storage tanks. The petroleum products loaded onto the barge in Portland would be presumed, subject to rebuttal, to be subject to the tax when received in Pasco.))

     (7) Presumption. Any receipt of crude oil or petroleum products at a marine terminal within this state from a waterborne vessel or barge operating on the navigable waters of this state is presumed to be subject to the tax.

     (a) A person may rebut this presumption by documenting that the crude oil or petroleum products received were previously subject to the tax. The proof may be in the form of information on the invoice from the seller stating that all or a specific, stated portion of the crude oil or petroleum products were previously subject to the tax.

     (b) Example. Crude oil is received at a marine terminal in this state and the tax is remitted. The crude oil is then commingled with crude oil from a source not involving a receipt at a marine terminal such as a receipt from a pipeline or a tank car. The commingled crude oil is refined into two petroleum products such as jet kerosene and unleaded gasoline. The petroleum products are then placed on separate waterborne vessels or barges and are shipped to a second marine terminal in this state. The receipt of petroleum products at the second marine terminal is presumed to be subject to the tax. The presumption may be rebutted by proof of what portion of each product of the shipment was previously subject to tax. Proof may be made by means of information on the invoice.

     (c) Example. Petroleum product is received at a marine terminal in this state and the tax is remitted. Substances that were not previously subject to the tax are added to the petroleum product resulting in an increase of the volume of the petroleum product. The petroleum product is then placed on a waterborne vessel or barge and received at a second marine terminal in this state. Upon receipt at the second marine terminal the tax is due on the incremental increase in volume of the petroleum product caused by the addition of the substances.

     (8) Export credit. A credit is allowed against the tax ((imposed)) for any crude oil or petroleum products ((previously received in a manner subjected to the tax and subsequently)) exported from or sold for export from the state.

     (a) An export credit may be taken by any person ((exporting)) who exports or ((selling)) sells for export any previously taxed product ((who has paid the tax on such product to a marine terminal operator or the department. An export credit may also be taken by any person who has purchased previously taxed product and who subsequently exports the product or sells the product for export, provided that such person has been invoiced for and has paid the tax to its seller. Any such invoice must state the amount of the tax passed on to the purchaser and identify the product to which the tax amount relates by type and quantity)). When the person taking the export credit is not the person who remitted the tax, the proof of payment of tax may be made by information on an invoice that conforms to the requirements set forth in subsection (7)(a) of this rule.

     (b) A person exports ((previously taxed)) product when ((they)) he or she actually transports the product beyond the borders of this state for purposes of sale, or delivers the product to a common carrier for delivery and subsequent sale or use at a point outside this state. Documentation of export is described in (d) of this subsection.

     (c) A person sells ((previously taxed)) product for export when as a necessary incident to a contract of sale the seller agrees to, and does deliver previously taxed product:

     (i) To the buyer at a destination outside this state;

     (ii) To a carrier consigned to and for transportation to a destination outside this state;

     (iii) To the buyer alongside or aboard a vessel or other vehicle of transportation under circumstances where it is clear that the process of exportation of the product has begun; or

     (iv) Into a pipeline for transportation to a destination outside this state.

     In all circumstances there must be a certainty of export evidenced by some overt step taken in the export process. A sale for export will not necessarily be deemed to have occurred if the product is merely in storage awaiting shipment, even though there is reasonable certainty that the product will be exported. The intention to export, as evidenced for example, by financial and contractual relationships does not indicate certainty of export if the product has not commenced its journey outside this state. The product must actually enter the export stream. Sales of petroleum products by delivery into the fuel tank of a vessel or other vehicle in quantities greater than one hundred gallons will be considered placed into the export stream, provided the vessel or vehicle is immediately destined for a point outside this state and the seller obtains and keeps the documentary evidence provided in (d) of this subsection.

     (d) ((A person claiming credit for sales for export under this subsection (7) must document the fact the product was placed into the export process. This fact)) A person who takes the credit for export must show that the previously taxed product was exported or sold for export. An export or a sale for export may be shown by obtaining and keeping any of the following documentary evidence:

     (i) A bona fide bill of lading in which the seller is the shipper/consignor and by which the carrier agrees to transport the product to the buyer at a destination outside this state; or

     (ii) A written certification in substantially the following form:

     (A) Purchase orders or contracts of sale which show that the seller is required to place the product into the export stream, e.g., "f.a.s. vessel"; and

     (B) Local delivery receipts, tripsheets, waybills, warehouse releases, etc., reflecting how and when the product was delivered into the export stream; and

     (C) When available, records showing that the products were packaged, numbered or otherwise handled in a way which is exclusively attributable to products sold for export.

     (e) Only the export or sale for export of crude oil or petroleum products will qualify for the export credit. Crude oil or petroleum products will not be eligible for the export credit if, prior to export, they are subject to further processing or used as ingredients in other compounds unless the resulting products are themselves crude oil or petroleum products.

     (f) Crude oil or petroleum products delivered to purchasers in other states pursuant to location exchange agreements will not qualify for the export credit unless the crude oil or petroleum products were previously subject to the tax and credit has not yet been taken. A location exchange agreement is any arrangement where crude oil or petroleum products located in this state are exchanged through an accounts crediting system, or any other method, for like substances located in other states. Any person acquiring previously taxed product in this state for which no credit has been taken may claim a credit on any such product subsequently exported or sold for export, provided all of the requirements set forth in ((this)) subsections (((7))) (8) and (9) of this rule have been met.

     ((Example. An oil company enters into a location exchange agreement with a competitor which provides for the delivery of one thousand barrels of petroleum products to a local storage facility owned by the competitor. In exchange for the petroleum products delivered in Washington the competitor delivers one thousand barrels of like petroleum products to the oil company's storage facilities in California. The delivery of petroleum products in California would not constitute an export or sale for export of the products delivered in Washington even though the products are of like quality and quantity. If the competitor delivers products which have been previously subject to the tax and no credit has been taken, the delivery of products in California may qualify for the credit. The subsequent export of the petroleum products received by the competitor in Washington would qualify for the credit if the competitor has been invoiced for and has paid the tax to the exchanging oil company.))

     (g) Persons claiming this credit must maintain records necessary to verify that the credit taking qualifications have been met. For this purpose any person claiming a credit who maintains those records required by WAC 458-20-19301 (Multiple activities tax credit), subsection (9), will be considered to have satisfied the requirements of this subsection.

     (((8))) (9) Amount of credit. The amount of the credit will be equal to the tax previously paid ((by the person claiming the credit)) on the crude oil or petroleum product exported or sold for export and for which credit has not already been taken. In no event will a credit be allowed in excess of the tax paid on the product exported or sold for export.

     (a) In the case of a person claiming credit who is not the taxpayer, the credit will be equal to that portion of the tax billed on an invoice which relates to the particular product exported or sold for export.

     In order to determine the amount of tax reflected on an invoice which relates to a particular product exported or sold for export, it may be necessary to convert the tax paid from a rate per barrel to a rate per gallon or some other unit of measurement. This conversion is computed by taking the total amount of tax paid on an invoice for a particular product and dividing that figure by the total quantity of the product expressed in terms of the unit of measurement used for export. The credit is then computed by multiplying the converted rate times the quantity of product exported or sold for export. ((In no event will a credit be allowed in excess of the tax paid on the product exported or sold for export.))

     (b) ((Due to the fungible nature of crude oil and petroleum products it will sometimes be impossible for a person claiming a credit to determine exactly the rate of tax invoiced for a specific quantity of oil being exported or sold for export. The physical handling of oil or petroleum products requires that products of like kind be stored in bulk. This commingling results in product bearing tax passed on at different rates making it difficult to determine the amount of credit applicable to an export sale. Under such circumstances)) When the product exported is previously taxed product commingled with untaxed product, a person claiming the export credit may compute the ((tax)) amount of previously taxed product using one of the following methods:

     (i) First-in, first-out method. Under this method the export credit is computed by treating existing inventory as sold before later acquired inventory.

     (ii) Average of tax paid method. Under this method the export credit is determined by calculating the average rate of tax paid on all inventory. This method requires computing the tax by making adjustments in the rate of tax paid on all product on hand as it is removed from or added to storage.

     (iii) Any other method approved by the department.

     (c) The use of one of the methods set forth in this subsection (((8))) (9) to account for tax paid on commingled crude oil or petroleum products ((shall)) constitutes an election to continue using the method selected. Once selected, no change in accounting method ((will be)) is permitted without the prior consent of the department.

     (d) Examples. The following are examples of the way in which the credit is to be computed:

     (i) A petroleum products distributor purchases 100 barrels each of premium unleaded gasoline and regular unleaded gasoline. The invoice from the refiner separately states that the invoice includes $5.00 of tax for each of the two types of products. The distributor pays the invoiced amount and later sells 2,000 gallons of the premium unleaded and 4,000 gallons of the regular unleaded to a retailer located outside Washington. In order to compute the amount of credit on the export sales the distributor must convert the tax paid from barrels to gallons. Since there are 42 US gallons in a barrel and 200 barrels purchased, the number of gallons equals 8400 (42 × 200). The per gallon tax paid on both products is equal to .119 cents per gallon ($10.00 ÷ 8400). The distributor would be eligible for credit equal to $2.38 for the premium unleaded (2,000 × $.00119) and $4.76 for the regular unleaded (4,000 × $.00119).

     (ii) Example. A petroleum products distributor purchases 100 barrels of unleaded gasoline on which ((it will use to blend with 30 barrels of ethanol to produce gasohol)) the tax has been remitted for a portion. The invoice for the unleaded separately states that the total price includes $4.00 of tax. This previously taxed product is commingled with 30 barrels of gasoline received through a pipeline, that is, product that is not subject to tax. The distributor ((pays the invoiced amount and)) sells 2,940 gallons of ((gasohol)) commingled product to a retailer for sale outside Washington. The tax paid on the ((unleaded)) previously taxed product is equal to .095 cents per gallon ($4.00 ÷ 4200). Since the exported product has been blended with ((a component)) product that has not been taxed, only 76.9% of the exported product is eligible for credit (100 ÷ 130). The credit ((would be)) is $2.15 (2,940 × .769 × $.00095).

     (iii) Example. A petroleum distributor purchases 100 barrels of gasoline and receives from the seller an invoice that states that the tax has been paid on 90% of the shipped product. The distributor exports the 100 barrels. The petroleum distributor may claim an export credit of $4.50. (90% of 100 barrels equals 90 barrels times the tax rate of $.05 equals $4.50.)

     (iv) Example. A petroleum distributor purchases 100 barrels of unleaded gasoline from refinery A and later purchases 100 barrels from refinery B. The distributor stores all of its unleaded gasoline in a single storage tank. The invoice from refinery A separately states the amount of tax on the gasoline as $5.00 and the refinery B invoice states the tax as $4.00. The distributor pays the two invoiced amounts and sells 2,100 gallons of the commingled unleaded to a retailer located outside Washington. The distributor then purchases 100 more barrels of unleaded gasoline from distributor C. Distributor C's invoice separately states the tax as $3.00. Following payment of the invoice, the distributor exports an additional 2,100 gallons of unleaded. The distributor could choose to calculate the tax using one of the methods of accounting described in (b) of this subsection.

     (A) Under the first-in, first-out method the distributor would treat all 4,200 gallons sold as if it was the unleaded gasoline purchased from refinery A. Under this method, the credit would be equal to .119 cents per gallon ($5.00 ÷ 4,200) or $5.00 total ($.00119 × 4,200).

     (B) Under the average of tax paid method the distributor would recompute the tax paid on average for the entire commingled amount making adjustments as gasoline is sold or gasoline is added. Prior to the addition of the purchases from refinery B or distributor C, the rate would be .119 cents per gallon ($5.00 ÷ 4,200). Following the addition of the 100 barrels from refinery B the tank contains 8,400 gallons. The rate of tax would now be .107 cents per gallon (($5.00+ $4.00) ÷ 8,400). Out of this amount 2,100 gallons is exported in the first sale. The credit for this sale would be equal to $2.25 ($.00107 × 2,100). ((After the addition of the 100 barrels from distributor C, the tank contains 10,500 gallons (8,400 - 2,100+ 4,200). In order to recompute the tax, the total tax paid on the remaining gasoline after the first sale must be computed. After withdrawal of the 2,100 gallons of unleaded for the first sale, the total tax paid on the remainder would be $6.74 ((8,400 -2,100) × $.00107). The addition of the 100 barrels from distributor C causes the total tax for the stored amount to rise to $9.74 ($6.74+ $3.00). The average rate of tax is now .093 cents per gallon ($9.74 ÷ 10,500). The credit for the second export sale would be $1.95 ($.00093 × 2,100).

     (9) Credit for use of petroleum products. Effective March 26, 1992, any person having paid the tax imposed by this chapter may claim a refund or credit for the following:

     (a) The use of petroleum products, as a consumer, for a purpose other than as a fuel. For this purpose, the term consumer shall be defined as provided in RCW 82.04.190; or

     (b) The use of petroleum products as a component or ingredient in the manufacture of an item which is not a fuel.

     (c) The amount of refund or credit claimed may not exceed the amount of tax paid by the person making such claim on the petroleum products so consumed or used.

     (10) How and when to pay tax. The tax must be reported on special return forms prescribed by the department. The tax is due for payment together with the timely filing of the return upon which it is reported, on the twenty-fifth day of the month following the month in which the taxable receipt into storage tanks occurs. In case any offloading commences on the last day of any month and extends past midnight, the receipt will be deemed to have occurred during the following month.

     (11) How and when to claim credits. Persons who pay tax under a direct payment certificate and persons who are both taxpayers and marine terminal operators should claim credits as an offset against tax liability reported on the same return when possible. The tax return form provides a line for reporting the tax and a line and supporting schedule for taking credits as an offset against the tax reported. Persons claiming credit who are not required to file returns reporting liability for the tax may claim credits on forms provided by the department for this purpose. It is not required that any documents or other evidences of entitlement to credits be submitted with the report. Such proofs must be retained in permanent records for the purpose of verification of credits taken.

     (12) Sales to United States government. The tax does not apply to the receipt into storage tanks of crude oil or petroleum products owned by the United States government. The United States government is also not required to collect the tax as a marine terminal operator when the United States government owns the facilities where crude oil or petroleum products are received. However, owners of crude oil or petroleum products received and placed into the storage tanks of marine terminals owned by the United States government remain liable for the tax. In such instances the taxpayer is required to report the tax on forms supplied by the department. The tax is due for payment along with a completed return on the twenty-fifth day of the month following the month in which receipt into storage tanks occurred.))

[Statutory Authority: RCW 82.23B.050 and 82.32.300. 92-24-049, § 458-20-260, filed 11/30/92, effective 12/31/92. Statutory Authority: RCW 82.23B.050. 92-10-006, § 458-20-260, filed 4/24/92, effective 5/25/92.]

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