State Taxation: Use Tax

摘要

After Pursue purchases the former Shell Oil sour gas processing facility it begins using its own processed gas in both production and processing operations. Pursue does not pay the state use tax on either the "Plant Fuel" or the "Lease Fuel." Pursue pays royalty on the volumes of both Plant Fuel and Lease Fuel. It also uses the processing costs in its netback calculation upon which it bases its royalty payments. In 2001, the Commission audits Pursue to determine use tax liability. The audit leads to an assessment for underpaid use taxes of nearly $313,000. After exhausting the administrative appeals process, the Commission upholds the assessment. Pursue then pays the full amount of the assessment. Instead of appealing the Commission's decision upon payment, Pursue files for Chapter 11 bankruptcy protection. The Bankruptcy Court has no jurisdiction to deal with the appeal of the use tax assessment since the assessment was fully adjudicated by the Commission and paid by the taxpayer. Eventually Pursue seeks judicial review of the Commission's decision in 2004.