Maryland Tax Notices

With the distribution report for this quarter, we are providing each subdivision with a list of taxpayers who have filed for any period during the quarter and have remitted any admissions and amusement tax for activities taking place in that subdivision. Although we periodically remind taxpayers through a message on the tax return that the admissions and amusement tax rates are controlled by the jurisdiction where the taxable activities occur, we occasionally find during routine audits that a taxpayer has reported the jurisdiction incorrectly.

Such errors can have a significant budget impact on a subdivision, since a typical audit covers a four year period. This could result in the transfer of a substantial amount of money from one jurisdiction to another to correct an error.

We're asking officials in each jurisdiction to review the information provided on the report and bring any errors to our attention. Errors should be reported to the Revenue Administration Division at 410-260-7756.

Established businesses with admissions and amusement activities must register with our office and file periodic tax returns. Organizations not involved in ongoing business activities subject to the tax occasionally hold isolated events subject to the admissions and amusement tax. A permanent admissions and amusement tax account is not established for each such event, and, therefore, will not appear on the enclosed list. The tax from these events is, instead, consolidated and reported under a single account identified as "One Time Affairs." For more information on "One Time Affairs" call 410-767-1540 / 410-767-1531 (e-mail: templicense@marylandtaxes.gov).

Effective July 1, 1998, the Internal Revenue Service (IRS) changed the way kerosene is treated for federal excise tax purposes. The following information should help you comply with the law.

Low sulfur kerosene, commonly referred to as 1-K kerosene, has historically been "clear and water white." This is the type of kerosene you would find at a service station or convenience store available for purchase in 5-gallon cans. Service stations and other retail sales points have had STATE exemption numbers permitting state tax-free purchase and sale of this fuel for non-highway purposes. The STATE tax process has not changed for kerosene.

Effective July 1, 1998, IRS applied the federal excise tax of $.244 on each gallon of undyed (clear) kerosene sold to any retailer or end-user. Therefore, the retailer who has been selling clear 1-K kerosene will see a cost increase in the amount of the federal excise tax on all purchases from the supplier. The supplier can not sell any undyed kerosene to a retailer without collecting the federal tax.

In order for any retailer to sell undyed kerosene, without having to absorb the cost of the federal tax, the retailer will have to qualify and apply for a Federal 637 registration as an "Ultimate Vendor-Blocked Pump" registrant. In the end, the retailer will be able to apply to IRS for a refund of the taxes paid on kerosene. In order to qualify, the retail kerosene pump must:

1. Not be on any fuel island with any other pump (gasoline or diesel);
2. Be set off to the side away from traffic;
3. Be blocked, to prevent any vehicle getting near the pump (use of permanently imbedded steel pipes or concrete barriers as an example);
4. Have a short hose - one that will not reach beyond, over or through the barrier; and
5. Display the required federal label.

Chain operators selling kerosene at more than one location must qualify at ALL of their locations before they can qualify for a Federal 637 registration.

After the retailer has received notice of 637 registration from IRS, the retailer will need to follow federal guidelines for filing refund requests.

Key points to remember regarding kerosene as of July 1ЕЕ.

1. The cost of undyed kerosene to the retailer will include $.244 federal tax.
2. There is no change to the state tax status of kerosene.
3. Undyed kerosene, purchased without the state or federal motor fuel tax, cannot be used in any taxable use.
4. Dyed kerosene can not be used in any motor vehicle and it cannot be used as a winter blend stock for undyed, low-sulfur diesel fuel.
5. It is very strongly recommended that dyed kerosene NOT be sold for use in kerosene space heaters.

If a retailer does not receive 637 registration, only federal tax-paid undyed kerosene should be available at the retailer for kerosene customers. Once the retail customer purchases kerosene with the $.244 per gallon tax included, the customer cannot apply for a tax credit or refund of the kerosene tax paid.

If you need a 637 registration form, you may phone IRS at 1-800-TAX-FORM (1-800-829-3676) and ask for this form to be mailed to you.

Please note this form has not been updated to reflect the new classification of "Ultimate Vendor-Blocked Pump." IRS has advised that any person applying for the new registration, write the "Ultimate Vendor-Blocked Pump" phrase in the Activities section on the first page of the application.

Publication #3-98
July 24, 1998v

To: Service Station Dealers

Senate Bill 605, passed by the 1998 General Assembly, suspends the voluntary allowance uniformity provision for producers, refiners and wholesalers of motor fuel products for a two-year period. The legislation also requires that the Maryland Comptroller's Office conduct a study on the effects of temporary voluntary allowances on pricing practices in the gasoline market between July 1, 1998 and December 31, 1998.

The House Committee on Economic Matters has decided that the WMDA Service Station Association should act as a clearinghouse for dealers to report on the effects of the legislation. Therefore, please provide Roy Littlefield or Harry Murphy at the Association with the particulars of any nonuniform price adjustments or abnormal pricing situations that come to your attention. They will compile the information to send to us.

Roy Littlefield or Harry Murphy
WMDA Service Station and Automotive Repair Association
9420 Annapolis Road, Suite 307
Lanham, MD 20706
FAX: (301) 306-0523
Phone: (301) 577-2875 or (800) 492-0329

If you have any questions, please contact Mr. Littlefield or Mr. Murphy at the Service Station Association, or Richard Carey, Director, Motor Fuel Tax Unit, at (410) 974-3131 or toll free at 1-888-784-0142.

Distribution: Retail Service Station Dealers