Legality of Federal Government's Payment to National Oil Companies for Taxes Imposed by Certain States on Purchases of Gasoline

Several requests were received for a decision concerning the legality of the federal government's payment to the national oil companies for the taxes imposed by certain states on purchases of gasoline. Except for company-owned stations, the government's liability for state taxes on gasoline is generally dependent upon whether the incidence thereof, by State law, is on the service station or on the government as the purchaser of gasoline from the service station. Although through the use of credit cards the government pays the national oil companies for gasoline from independent service stations, the oil companies are not the vendors but merely participants in the credit arrangements. The fuel use taxes in California and New Mexico are imposed on the purchaser, and the government is immune from payment of the taxes. Fuel use taxes in Pennsylvania and Hawaii, on the other hand, are imposed on the dealer-users of the fuel, and the United States is not constitutionally immune from those taxes. However, the Pennsylvania law exempts the United States from payment of the tax when sales are supported by documentary evidence.