Rev. Rul. 82-77

ISSUE

Is the payment provided by section 6424 of the Internal Revenue Code available to the ultimate purchaser of lubricating oil that is used as such in a highway vehicle in its trade or business?

FACTS

X Corporation purchased from a dealer lubricating oil on which the federal manufacturers excise tax had been paid, and put the oil in the crankcase of a truck it used in its delivery business. X subsequently took a credit on its federal income tax return in the amount of the federal excise tax paid on the manufacturer's sale of the oil, citing the provisions of section 6424 of the Code as authority for the credit.

LAW AND ANALYSIS

Section 4091 of the Code imposes a 6 cents a gallon manufacturers excise tax on lubricating oil (other than cutting oils). Under section 6424, as amended by the Energy Tax Act of 1978, section 233(b), 1978-3 (Vol. 2) C.B. 1, 17, if lubricating oil (other than cutting oil or used oil) is used in a qualified business use, as defined in section 6421(d)(2), the Secretary shall pay to the ultimate purchaser of the oil an amount equal to 6 cents a gallon for each gallon of lubricating oil so used.

Under section 6421(d)(2) of the Code, the term "qualified business use" includes any use by a person in a trade or business other than as a fuel in a registered highway vehicle.

Because lubricating oil is not used as a fuel, sections 6421 and 6424 could be read to allow a credit or refund of an amount of equal to the manufacturers excise tax for any tax paid oil used in a highway vehicle used for business purposes. However, the legislative history of the Energy Tax Act of 1978 indicates that the Act merely limited the then-existing credit or refund available for all non-highway uses of lubricating oil to only business related non-highway use. See S. Rept. No. 95-1324, 95th Cong., 2d Sess. (1978), 1978-3 (Vol. 2) C.B. 309, 322.

HOLDING

The payment provided by section 6424 of the Code is not available to the ultimate purchaser of lubricating oil that is used as such in a highway vehicle in its trade or business.