From Staff Reports
State Rep. Doug Overbey worked overtime on Christmas Eve to help keep the tax Grinch from adding a tax on kerosene used for home heating.
The issue came to light with an interpretation by the state Department of Revenue on a Technical Corrections Bill passed by the legislature in June. The revenue department’s interpretation concluded that the bill gave them the authority to tax all kerosene sales.
Calloway Oil President and Maryville city council member Tommy Hunt was told by the Tennessee Department of Revenue that his company must charge sales tax on kerosene bought for home heating purposes, and he owed back taxes for his sales since June. Hunt said he received an email in mid-November saying he was suppose to be charging sales tax on the kerosene. Prior to the email, which came about because of an audit, the state had not informed Hunt of the new interpretation.
Overbey said he was immediately concerned when Hunt and others informed him of the interpretation and immediately corresponded with Tennessee Department of Revenue Commissioner Reagan Farr.
In a letter to the commissioner regarding the Technical Corrections bill, Overbey wrote, “There is absolutely no mention that there is an intent to tax kerosene sold to consumers to keep their homes warm in the winter. And, I believe if such an intent had been stated in the summary, the House Finance, Ways and Means Committee would have not approved Section 39. I know for one that I would not have.”
Overbey said Section 39 was intended to “close a loophole” that applied to propane gas sold in small tanks.
“While this matter has been brought to my attention by a retailer, this letter is written for my constituents who, under the Department’s current interpretation, will have to pay sales tax on a heating fuel for their homes. This interpretation hits these citizens unnecessarily hard at this time of the year. This is neither right nor fair nor in keeping with the explanation for Section 39 given to me and other members of the legislature.”
After contacting Farr again on Christmas Eve, Overbey received an email and revised guideline that changed the revenue department’s position.
In the email, Farr wrote, “Attached please find the Important Notice that the department sent out this past week regarding the new tax treatment of energy fuels. As you can see, we have incorporated our discussion in the department’s final position on this matter. I would still like to clarify this position via new legislation next session but feel that we can justify maintaining the kerosene exemption provided that the kerosene is dispensed from a pump and used for home heating purposes.”
The new guideline said that “Energy fuels sold over-the-counter are taxable. Propane in a container of 100 pounds or more is exempt when purchased for residential use. Kerosene is exempt when purchased at a pump for residential use. Documentation is required to support exempt sales. All energy fuels are exempt from local sales tax.”
The ruling is a win for the taxpayers, Overbey said. “I think we can chalk one up for the taxpayers of this state who purchase kerosene to heat their homes. I’m thrilled that the Commissioner re-examined the Department’s interpretation and has agreed with me that kerosene purchased by consumers to heat their homes is not subject to sales tax. This is indeed good news at this time of year.”