Federal Oil Spill Liability Tax Update

On December 31, 2017, the federal Oil Spill Liability Tax (OSLT) expired. The OSLT is imposed on a barrel of crude oil at a rate equal to 9 cents per barrel. The tax is imposed on the barrel at the refinery gate and refiners are the only party liable for the remittance of the OSLT.

For downstream marketers like PMCI members, the OSLT is reflected as a pass-through cost on finished product. Accounting practices differ among parties, but many suppliers break out the OSLT as an individual line item on a bill of lading or an invoice. For PMCI members marketing downstream of a terminal, there is no requirement that you separate out the OSLT as a line item on an invoice or bill lading that you provide to one of your customers. Once the tax has been paid on the barrel of crude oil by the refiner, liability for the tax ceases and the OSLT is not required to be indicated on an invoice or bill of lading. The OSLT simply becomes a pass-through cost of the product.

Last week PMCI received calls from our membership about notices received from suppliers regarding the OSLT. Most suppliers have indicated that they are planning to continue passing the cost of the OSLT through to their customers despite the OSLT expiring. The reason for this position is that a one-year OSLT reauthorization is included in the tax extenders package being worked on by Congress. Most experts believe that Congress will pass the tax extenders package sometime later this month.

For PMCI members it is important to note that you are not required to include the federal OSLT as a line item on an invoice or bill of lading that you provide to your customer. Additionally, if your supplier is not continuing to charge the OSLT as Congress works on its tax extenders package, you are encouraged to contact your supplier representative to gauge whether they will be charging the fee retroactively if the OSLT is reinstated as part of the tax extenders package.