BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 1485
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: kehoe
VERSION: 2/24/12
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: April 17, 2012
SUBJECT:
Fuel taxes: blended fuels
DESCRIPTION:
This bill clarifies that gasoline used to make blended fuels
(e.g., E85, which is 85% ethanol blended with 15% gasoline) is
exempt from California's motor vehicle fuel tax provided it is
taxed under the use fuel tax law.
ANALYSIS:
Existing law imposes an 18-cent per gallon excise tax on each
gallon of gasoline sold in the state of California. In
addition, state law, known as the "gas tax swap," imposes an
additional excise tax on gasoline that adjusts annually to equal
the amount of state sales tax that the state would charge on
gasoline sales if they were subject to the sales tax.
Currently, the total excise tax paid on a gallon of gasoline is
35.7 cents per gallon and on July1 of this year will be 36
cents.
Existing law exempts gasoline used for purposes other than
operating motor vehicles upon the public streets and highways
from the state gasoline excise tax. Typically, the state
collects the gasoline excise tax when a tanker truck picks up
the gasoline from a refinery or distribution terminal (known as
"the rack"). Those who buy the gasoline after that point, but
do not use the gasoline to operate a vehicle on California's
public highways, are eligible for a refund of the amount of tax
paid. To receive the refund, a taxpayer applies to the State
Controller, who processes and issues the refunds.
Existing law also imposes a use fuel tax at a rate of 9 cents
per gallon on blended fuels, such as ethanol, which are those
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that are not more than 15% gasoline in content. The use fuel
tax is collected at the point of retail sale.
This bill :
1.Exempts gasoline from the gasoline excise tax that is used for
producing a blended fuel, such as E85, provided that the
resulting blended fuel is taxed under the use fuel tax (i.e.,
nine cents per gallon) at the point of retail sale and is used
to operate a vehicle on the public highways.
2.Is a tax levy that takes effect immediately.
COMMENTS:
1.Purpose . Blended fuels, most commonly E-85, make their way to
retail gas stations in two ways. They arrive either already
blended at the terminal rack or delivered separately as
ethanol and gasoline that are then "splash blended." In this
second instance, the person removing the gasoline from the
rack has already paid the gasoline excise tax on the gasoline
component of the blended fuel. Retailers who sell the splash
blended fuel, however, also remit the use fuel tax of nine
cents per gallon, thus the gasoline component in splash
blended fuel is taxed twice: once at the rack and once at the
point of retail sale. This would appear to make the marketer
or retailer eligible for a refund of the gasoline excise tax
paid.
The State Controller's office, however, has expressed that it
believes it lacks the statutory authority to issue these
refunds. The author and sponsor report that several fuel
marketers who are blending E85 have applied and not received
refunds when they have paid this double tax. In response,
they have introduced this bill.
2.Author's amendment . The author would like to make those who
have paid the gasoline excise tax since the beginning of 2011
eligible for refunds of the tax on purchases of gasoline used
for blending. The author will offer an amendment in committee
to make the bill's provisions retroactive to January 1, 2011.
3.Technical amendment . On page 3, delete "or Part 31
(commencing with Section 60001) of Division 2" to ensure that
this bill applies only to gasoline fuel blends and not fuels
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subject to the excise tax on diesel.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 11,
2012)
SUPPORT: California Independent Oil Marketers Association
(sponsor)
OPPOSED: None received.