Signal Oil & Gas Co. v. State Board of Equalization

Opinion

BEACH, J. In two cases that were consolidated for trial, Signal Oil (Signal) sued the State Board of Equalization (Board) for recovery of motor vehicle fuel license tax paid after defendant Board collected deficiencies from Signal Oil. The deficiencies represent the difference between tax on temperature-corrected gallons of gasoline and volumetric gallons; Signal had used the former measure, and the Board claims it should have used a volumetric measure. Judgment was for the Board, and Signal appeals.

[552]Facts:

The case was heard on a stipulation of facts and the testimony of two witnesses for Signal. The volatile nature of gasoline, with its properties of expansion and contraction, is at the heart of this lawsuit. Signal tried to pay its tax based on “temperature-corrected” gallons of gasoline, a measure by which the gallonage delivered is decreased or increased from its actual (“volumetric”) gallonage to the gallonage it would be at 60 degrees Fahrenheit. Temperature-corrected gallonage is acceptable for tax purposes, but only if certain requirements are met; whether Signal met those requirements is the issue herein.

Signal delivered gasoline to its dealers,1 charging the temperature-corrected gallons at “posted delivery price” to each dealer’s account receivable. Signal retained the sales invoices but did inform the service station dealer of the quantity of product delivered through a delivery ticket and/or bill of lading, which only reflected the gallonage and did not deal with revenues. Appellant also provided dealers with a collection report that established the adjusted price of gasoline.

In collecting for the gasoline sold, however, Signal collected an amount for gallons sold through the pump meter. If the gasoline had expanded, the dealers would be selling more gallons than the temperature-corrected gallonage on which Signal had been taxed. The money received from the dealers was posted as a credit to each dealer’s account receivable. A monthly adjustment was made by taking the difference between the invoice price per gallon and the collection report price per gallon and multiplying it by the number of gallons metered through the dealer’s pumps; this adjustment was charged or credited to the dealer’s gasoline account receivable.

When a dealer went out of business, a physical inventory was taken of the volume of gasoline in the dealer’s tanks, and a credit was given the dealer and taken by appellant against its reported taxable distributions in the month the event took place. If a new dealer went in, he was charged for the same gallonage as was credited to the outgoing dealer, and this was reported by appellant as a taxable distribution.