First Licensed Distributors and Flash Title Transfers

The first licensed distributor who receives petroleum products at a fuel terminal destined for Minnesota is responsible to pay Petroleum Tax. They are the consignee.

For tax purposes, a distributor “receives” petroleum products when the supplier passes the title to them, even if that distributor never takes physical ownership of the products.

Petroleum products are not considered “received” until they are withdrawn from a refinery or terminal for sale, use, delivery, or shipment in this state. See Minnesota Statute 296A.01, subdivision 44 for a complete definition of “Received”.

Any later sale or title transfer must include Minnesota state excise tax on the sale.

A manifest or bill of lading (BOL) is issued whenever petroleum products are dispensed from a fuel terminal. It must include the following information:

• Manifest or BOL number (state tax number)
• Date shipped
• Name of carrier
• Origin (point of loading)
• Name of supplier
• Name and address of distributor who will report and pay the tax (consignee)
• Destination
• Type of petroleum product
• Number of gallons

If the manifest lists the wrong distributor as consignee, the first licensed distributor must:

• File a diversion to correct the manifest.  See Petroleum Taxes FAQs to learn more about diversion.
• Report and pay the excise tax for the load of fuel on their monthly gasoline or special fuel tax return

Fuel terminals send monthly reports to the Minnesota Department of Revenue. Terminal reports indicate the supplier and first licensed distributor (consignee) who received the fuel.

It is crucial that anyone who enters tax and shipping information at the terminal correctly indicates the first licensed distributor to avoid confusion during petroleum tax audits.

The first licensed distributor (consignee) may sell or transfer title without taking physical ownership of the fuel. When this occurs, the title is transferred immediately after the fuel is dispensed. This is known as a flash title transfer (FTT).

FTT transactions are common and are not shown on the manifest or BOL.

 

A supplier sells gasoline to Distributor 1 at a fuel terminal. Before the fuel is physically transferred from the terminal, Distributor 1 sells the product to Distributor 2. Immediately after the fuel is dispensed, a flash title transfer occurs from Distributor 1 to Distributor 2.

Distributor 1 was the first licensed distributor to receive the petroleum product from the supplier, even without taking physical ownership of the fuel. Distributor 1 must be listed as the consignee on the manifest and must report and pay Petroleum Tax on the fuel.