BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1485|
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THIRD READING
Bill No: SB 1485
Author: Kehoe (D)
Amended: 4/19/12
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 4/17/12
AYES: DeSaulnier, Gaines, Harman, Kehoe, Lowenthal,
Pavley, Rubio, Simitian, Wyland
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Fuel Taxes: blended fuels
SOURCE : California Independent Oil Marketers
Association
DIGEST : This bill clarifies that gasoline used to make
blended fuels (e.g., E85, which is 85% ethanol blended with
15% gasoline) is exempt from Californias 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
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paid on a gallon of gasoline is 35.7 cents per gallon and
on July 1, 2012 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 nine
cents per gallon on blended fuels, such as ethanol, which
are those that are not more than 15% gasoline in content.
The use fuel tax is collected at the point of retail sale.
This bill 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.
Comments
Purpose of this bill . 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
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Estimated costs of approximately $288,000 (Motor Vehicle
Fuel Tax Fund) in 2012-13 to pay refunds of excise taxes
paid from January 1, 2011 through June 30, 2012.
Ongoing estimated costs of $194,000 annually (Motor
Vehicle Fuel Tax Fund), beginning in 2012-13, for
continued refunds of excise taxes.
SUPPORT : (Verified 5/24/12)
California Independent Oil Marketers Association (source)
JJA:kc 5/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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