The opinion of the court was delivered by: PARKER
MEMORANDUM DECISION AND OPINION
BARRINGTON D. PARKER, JR., U.S.D.J.
Plaintiff A. Tarricone, Inc. ("Tarricone"), who owns and operates a gasoline terminal in Yonkers, New York, and distributes gasoline to retail stations, has sued the United States, pursuant to 26 U.S.C. § 7427 and 28 U.S.C. § 1346(a)(1), seeking a refund of gasoline excise taxes on the grounds that the statutes on which the taxes were levied are unconstitutionally retroactive. The United States has counterclaimed, seeking the payment of Tarricone's outstanding balance of $ 1,290,171.44 in excise tax liability, and has moved for judgment on the pleadings under Fed. R. Civ. P. 12(c). For the reasons stated below, the government's motion is granted.
The tax liability that is the subject of this litigation arises from changes to the Internal Revenue Code and Regulations that were made in response to the perceptions of the IRS and Congress that substantial evasion of gasoline excise taxes was occurring. See Janus Petroleum Co., Inc. v. United States, 915 F. Supp. 556 (E.D.N.Y 1996).
Under the Tax Reform Act of 1986 ("1986 Act"), Congress provided that the gasoline excise tax would be imposed at the earlier of the removal of the gasoline from a terminal or its sale by a refiner, importer, or terminal operator. See 26 U.S.C.A. § 4081(a) (West 1989) (before 1990 amendment).
The statute did not specifically identify, however, who would be liable for payment of the tax. In 1987, the IRS published proposed regulations implementing the 1986 Act. See 52 Fed. Reg. 44141 et seq. Under those proposed regulations, a registered person owning the gasoline at the time that the excise tax applied was liable for the tax. A "registered" person is an entity whose participation in the wholesale or retail gasoline market is made known to the Federal Government through the filing of a Certificate of Registry (Form 637) with the IRS. See 26 C.F.R. § 48.4101-1. If an unregistered person removed gasoline from a terminal, the terminal operator would be liable for the excise tax. The 1987 proposed regulations were never issued in final form.
Effective July 1, 1991, Congress amended the 1986 Act ("1990 Act"), increasing the number of points at which the tax could be imposed. The applicable portion of the 1990 Act provided:
There is hereby imposed a tax . . . on . . . (i) the removal of a taxable fuel from any refinery, (ii) the removal of a taxable fuel from any terminal, (iii) the entry into the United States of any taxable fuel for consumption, use, or warehousing, and (iv) the sale of a taxable fuel to any person who is not registered . . . unless there was a prior taxable removal or entry of such fuel under clause (i), (ii), or (iii).
26 U.S.C. § 4081(a). In August 1991, the IRS published proposed regulations implementing the 1990 Act, with a proposed effective date of January 1, 1992 ("1991 proposed regulations"). 56 Fed. Reg. 42287 et seq.
Under the 1991 proposed regulations, the entity contracting with the terminal operator for the use of the gasoline storage facilities ("position holder") would be liable for the tax imposed on the gasoline at its removal from the storage facilities. Id. at 42289. The regulations also provided that the terminal operator was jointly and severally liable for the tax if the position holder was not registered. Id.
Because of the six-month gap between the effective date of the 1990 Act and the proposed regulations that implemented it, Congress provided that liability for the excise tax would be determined "under existing administrative guidance" from July 1, 1991 through December 31, 1991. That "guidance" included the 1987 proposed regulations that were never formally implemented.
The 1991 proposed regulations were not published in final form until July 22, 1992, and had an effective date of January 1, 1993 ("1991 final regulations"). 57 Fed. Reg. 32424 et seq. (currently codified at 26 C.F.R. § 48.4081-1 et seq.) Because they were not effective until January 1, 1993, the 1991 final regulations provided for transitional rules that would apply to the 1990 Act's amendments during the period from July 1, 1991 through December 31, 1992, the months at issue in this litigation. These rules provided that the owner of the gasoline immediately before the taxable event was liable for the tax. Id. They also provided that a terminal operator was secondarily liable for the tax if it permitted an unregistered owner of gasoline to remove the gasoline from its terminal. Id.
From July 1, 1991 through March 31, 1992, Tarricone purchased gasoline from a company called ZYZ Enterprises, Inc. ("ZYZ"). ZYZ is a non-registered gasoline distributor that had an "oral agreement" with Tarricone to store gasoline in Tarricone's terminal in Yonkers, New York. During the period in question, ZYZ allegedly removed its gasoline from Tarricone's terminal and sold the gasoline to Tarricone after it was removed. Tarricone then delivered the gasoline for retail resale at its own gas stations.
On September 24, 1996, the Internal Revenue Service ("IRS") assessed $ 1,348,502.44 against Tarricone in excise taxes for the periods ending 9/30/91, 12/31/91, and 3/31/92. The IRS's assessment was based on the grounds that at the time of the gasoline's removal from its terminal, Tarricone, not ZYZ, owned the gasoline. On or about January 28, 1997, Tarricone paid the IRS $ 58,331 and filed an administrative claim for a refund. The IRS denied the refund ...