A Washington court recently ruled that fuel card issuers owe retailing business and occupation tax on fuel that their cardholders purchase in Washington state.

The court also ruled that station operators owe wholesaling B&O tax when purchasers present a fuel card for payment.

The Thurston County Superior Court recently affirmed a tax assessment imposing retailing B&O tax on Washington fuel purchases made by holders of fuel cards issued by Jubitz Corporation, including purchases that cardholders made at more than 900 Washington stations with whom Jubitz had no contractual relationship. Because the court applied this treatment to sales by stations that accept cards with the Fuelman logo, the stations at which the court held that Jubitz was making retail sales of fuel were not limited to traditional card lock sites but also included national branded and independent retail stations, as well as commercial truck stops.

In treating the card issuer as the retail seller of the fuel purchased by its cardholders, the court also affirmed the DOR's imposition of wholesaling B&O tax on fuel sales at Jubitz's Washington stations when the purchaser presented a fuel card for payment.

According to the court, whenever a card with a Fuelman logo is used to purchase fuel, the station operator sells the fuel at wholesale to the card issuer, who simultaneously resells the fuel to its card holder. During the four-year audit period, according to the DOR and the court, more than 100 different out-of-state, unregistered card issuers made retail sales of fuel at Jubitz's Washington stations when their cardholders used a fuel card to fill up at Jubitz's Washington stations.

The court's ruling (like the DOR's assessment) directly conflicts with WAC 458-20-129, which provides that "Persons operating gas stations are subject to retailing B&O tax on their sale of tangible personal property." Despite acknowledging that fuel is tangible personal property, the court held that the rule did not apply. We are confident that many card issuers and fuel stations will be astonished by this absurd ruling that simultaneously imposes B&O twice on a single transaction.

The Superior Court's Order was entered January 30.

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