TJSP upholds ruling voiding ICMS infraction notice against aviation fuel distributor for R$ 8.4 million

The São Paulo State Court of Justice (TJSP) reported yesterday, 4 August, that the 11th Chamber of Public Law of the TJSP upheld a ruling by the 5th Public Treasury Court of the Capital which declared an infraction notice null and recognised the unenforceability of the tax credit against an aviation fuel distribution company.

Background: ICMS by tax substitution on aviation kerosene (2017–2019)

According to the case, the company failed to pay ICMS due under the tax substitution regime totalling R$ 8.4 million, between 2017 and 2019, in transactions involving the sale of kerosene for the refuelling of nationally flagged aircraft bound for international destinations.

After the tax assessment was issued, the claimant brought proceedings alleging unequal treatment under São Paulo state legislation. It argued that, whereas refuelling foreign aircraft is treated as equivalent to an export transaction and therefore immune from the tax charge, supplying nationally flagged aircraft - even on international flights - is classified as a domestic transaction, creating an obligation to collect ICMS.

The TJSP’s reasoning on equal treatment and competition

In his vote, the reporting judge on the appeal, Márcio Kammer de Lima, noted that the Federal Constitution prohibits establishing unequal treatment between taxpayers in equivalent situations. He stated that the distinction adopted breaches the principle of equality and discourages competition. He also stressed that, for tax purposes, the kerosene supplied to national or foreign aircraft has identical characteristics in the relevant respects.

“By way of example, the aviation kerosene supplied to a LATAM aircraft on the São Paulo–Miami route is, from every angle that matters for taxation, identical to that supplied to an American Airlines aircraft on the same journey: the goods are the same, the distributing establishment is the same, consumption will likewise occur beyond national territory. The only variable is the nationality of the carrier company, which, evidently, does not change the economic nature of the transaction nor the material destination of the product,” he wrote. He added that, by classifying the dispatch of aviation kerosene (QAV) as an exemption or as an export equivalence depending on the origin of the purchasing airline, “the State of São Paulo not only ignores the material identity of the transactions, but also elevates a constitutionally inadequate criterion to the understanding of the tax’s rule-matrix borne by the supplier”.

Supreme Federal Court precedent cited in the judgment

Finally, the judge observed that the Supreme Federal Court has already examined a controversy with the same constitutional foundation and, on that occasion, declared the levy unconstitutional, “holding that the coexistence of disparate regimes - full burden for the national company and relief for the foreign one - even if grounded in international reciprocity agreements, did not remove the constitutional prohibition on unequal treatment between taxpayers in equivalent situations, constituting, in the words of the eminent Justice Ellen Gracie, true ‘reverse protectionism’, elevating the foreign company to a more favourable competitive position than that afforded to the national company in the very market in which both operate”.

The panel, which decided the matter unanimously, was also composed of Judges Jarbas Gomes and Oscild de Lima Júnior.

Appeal No. 1095686-66.2025.8.26.0053

Information from the TJSP