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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Lykes Bros. Steamship Co., Inc. v. State Board of Equalization … (1994)
Actual and Not Estimated Fuel-Usage Figures Determine Tax Liability
When plaintiff purchased fuel for its steamship common carrier operations, it claimed an exemption under Revenue and Taxation Code section 6385 with respect to fuel it estimated would not be used to reach its first out-of-state destinations. It did not issue corrected bills of lading to reflect the actual fuel used to reach its first out-of-state destinations, as required by Regulation 1621. Since plaintiff relied on estimates, sometimes the fuel usage to reach the first out-of-state destination, which was taxable, was greater than the estimate, and sometimes it was less than the estimate. This means that tax was sometimes overpaid with respect to the sales to plaintiff, and sometimes was underpaid.
The Board assessed tax with respect to the underpayments of tax, but did not offset the overpayments of tax, because plaintiff had not issued corrected bills of lading as required by Regulation 1621. Plaintiff argued that estimated bills of lading were authorized. The court of appeal agreed with the decision in Delta Air Lines, Inc. v. State Board of Equalization (1989) 214 Cal.App.3d 518, and held that corrected bills of lading were required in order to qualify for the exemption. Section 6385 and Regulation 1621 require that the tax be paid with respect to fuel actually consumed by a carrier to reach its first out-of-state destination. Although carriers were authorized by Regulation 1621 to issue estimated bills of lading "to begin with," they were required to issue corrected bills of lading within the time period specified in the regulation in order to complete qualification for the exemption. Since plaintiff had not done so, the court of appeal held in favor of the Board. Lykes Bros. Steamship Co., Inc. v. State Board of Equalization (1994) 23 Cal.App.4th 1421.