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PYRAMID PETROLEUM CORP. v. UNITED STATES

April 20, 1994

PYRAMID PETROLEUM CORP., Plaintiff,
v.
UNITED STATES OF AMERICA, et al., Defendants.



The opinion of the court was delivered by: VINCENT L. BRODERICK

 VINCENT L. BRODERICK, U.S.D.J.

 I

 Plaintiff Pyramid Petroleum Corp. ("Pyramid") was a petroleum wholesaler and retailer which had been granted registration pursuant to 26 USC 4101(a) by the Internal Revenue Service under regulations designed to avoid evasion of fuel taxes otherwise due under 28 USC 4081, 4091. Registration may be denied if the Secretary of the Treasury determines that the petitioner is using the registration to postpone or interfere with the collection of taxes or if such denial is "necessary to protect the revenue." 28 USC 4101(c).

 Pyramid failed to furnish information required by the IRS concerning changes in ownership and management, including placement as an executive of a person who had recently been supported by public assistance. As a result of this reporting lapse, the IRS revoked the registration of Pyramid. Pyramid seeks injunctive relief requiring the United States to permit Pyramid to act as a registered tax-exempt fuel wholesaler and retailer to protect its ability to continue and in the case of wholesale activity, revive its business despite the revocation.

 Under amendments in the Omnibus Budget Reconciliation Act of 1993, 28 USC 4081 does not impose a tax on diesel fuel destined for a nontaxable use (such as home heating oil) and indelibly dyed and in compliance with other regulations (58 Fed Reg 63069, 63070-71 [November 30, 1993]). The parties agree that this change makes it no longer necessary for Pyramid to be registered to conduct its retail fuel business, and that aspect of the case is moot.

 Under current regulations, however, wholesalers who do not take delivery of fuel and act as traders must pay the tax unless registered under what is known as a Form 637; there is evidence that Pyramid engaged in large transactions of this type, and would accordingly require registration to avoid payment of the tax. See 58 Fed Reg 63070.

 Were Pyramid to apply for a new wholesale registration, the IRS takes the position that it "must take into account whether the applicant has been previously penalized for a wrongful act" under proposed regulations reprinted in 58 Fed Reg at 63076. Pyramid contends that this is improper and justifies injunctive relief to protect its ability to conduct wholesale fuel trading business.

 Pyramid has moved for a preliminary injunction under Fed.R.Civ.P. 65; the United States has moved to dismiss the complaint; since both parties have submitted factual material which has been considered, that motion is treated as one under Fed.R.Civ.P. 56.

  II

 Absent any other statutory barrier, jurisdiction would be available under 28 USC 1331 and the Administrative Procedure Act. See Platsky v. CIA, 953 F.2d 26, 28 (2d Cir 1991); see also United States v. Mitchell, 463 U.S. 206, 77 L. Ed. 2d 580, 103 S. Ct. 2961 (1983).

 The United States asks that the case be dismissed by virtue of the Tax Injunction Act, 26 USC 7421, which provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed."

 This Act has been applied to bar suits challenging denial of permits which would allow nonpayment of a tax. See United Petro/Energy Corp v. United States, Dkt No 93 - 6684-Civ, S.D. Fla March 9, 1994); Sears, Roebuck & Co v. Roddewig, 24 F. Supp. 321 (SD Ia 1938).

 The Supreme Court has held the Act inapplicable to a preliminary injunction where it is virtually certain that a plaintiff will prevail on the merits, and plaintiff will suffer irreparable injury for which there is no adequate legal remedy. Bob Jones University v. Simon, 416 U.S. 725, 742-48, 40 L. Ed. 2d 496, 94 S. Ct. 2038 (1974); Enochs v. ...


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