North Carolina Department of Revenue v. First Petroleum Services, Inc. (NCBC – Feb. 23, 2018)

Pursuant to the authority granted to him under N.C. Gen. Stat. § 7A-45.4(b)(1), Judge Conrad of the North Carolina Business Court sat as an appellate court over a summary-judgment decision rendered in favor of Defendant First Petroleum Services, Inc. (“First Petroleum”) by an Administrative Law Judge (“ALJ”) of the Office of Administrative Hearings (“OAH”).

The OAH held that First Petroleum was not required to pay use tax on materials that it purchased and used to construct and install fuel tanks and equipment on publicly owned property pursuant to eleven contracts.  Pursuant to those contracts, First Petroleum was generally required to furnish all labor, materials, and equipment necessary to complete the jobs.  Upon an audit, the Department determined that First Petroleum had failed to pay the use taxes for the materials that First Petroleum used to perform the various contracts, assessed a use tax, and imposed penalties and interest on First Petroleum for its failure to pay the necessary taxes.  The Department petitioned for judicial review.

Notable Analysis:

  • North Carolina courts typically treat contractors as a user or consumer of building materials when performing a contract to construct buildings or improvements on real property, rather than as a re-seller of those building materials.
  • Because First Petroleum was a user of the building materials that it used to complete the construction contracts, the Department’s assessment of use tax was proper, justifying summary judgment in the Department’s favor.

Disposition (Motion(s)):

Final Decision of the OAH REVERSED and REMANDED to enter partial summary judgment in favor of the Department and for the OAH to determine the amount of tax due by First Petroleum.


For more detail, you can read the full opinion HERE.

Cite: N.C. Dep’t of Revenue v. First Petroleum Servs., No. 17 CVS 1663, 2018 WL 1060883 (N.C. Super. Ct. Feb. 23, 2018). 

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