BILL ANALYSIS �
AB 2757
Page 1
ASSEMBLY THIRD READING
AB 2757 (Revenue and Taxation Committee)
As Amended April 10, 2014
Majority vote
REVENUE & TAXATION 9-0 APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Bocanegra, Harkey, Beth |Ayes:|Gatto, Bigelow, |
| |Gaines, Gordon, Mullin, | |Bocanegra, Bradford, Ian |
| |Nestande, Pan, | |Calderon, Campos, |
| |V. Manuel P�rez, Ting | |Donnelly, Eggman, Gomez, |
| | | |Holden, Jones, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Provides that, where tax is not imposed on dyed
blended biodiesel fuel upon removal from the terminal rack, if
tax was previously imposed on the biodiesel fuel portion, then a
claim for refund is allowed for the tax paid on that biodiesel
fuel. Specifically, this bill :
1)Provides that the claim for refund shall only be allowed to
the extent a supplier can show that the tax on that biodiesel
fuel has been paid by the same supplier.
2)Makes other technical and conforming changes to the Diesel
Fuel Tax Law.
EXISTING LAW :
1)Imposes a tax, under the Diesel Fuel Tax Law, upon the
removal, entry, sale, delivery, or specified use of diesel
fuel, at a specified rate per gallon.
2)Provides for a reimbursement of the amount of the tax to
persons who have used tax-paid fuel for specified nontaxable
uses, which is allowed through a claim for refund.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
AB 2757
Page 2
1)Minor and absorbable costs to the Board of Equalization (BOE).
2)BOE estimates that had this bill been in effect for the fiscal
year (FY) 2011-12 and FY 2012-13, potential refunds to
taxpayers would have been $395,000 and $800,000, respectively.
COMMENTS : Assembly Revenue and Taxation Committee staff
comments:
1)The Diesel Fuel Tax Law: Under the Diesel Fuel Tax Law, a per
gallon excise tax is imposed on the removal of diesel fuel at
the refinery or terminal rack, upon entry into California, or
upon sale to an unlicensed person.
Existing law defines a "terminal" as a distribution facility
supplied by pipeline or vessel, from which the diesel fuel may
be removed at the rack. The term also includes a diesel fuel
production facility (i.e., a refinery) with storage facilities
not supplied by pipeline or vessel. These diesel fuel
production facilities have the same licensing and reporting
requirements as those terminals supplied by pipeline or
vessel.
Generally, a "supplier" of diesel fuel owes the excise tax at
the time the fuel is removed from the terminal rack. However,
if the diesel fuel enters California outside of the bulk
transfer/terminal system (i.e., "below the rack" by train or
truck), the excise tax is due upon entry into California.
The term "supplier" includes, among others, a person owning fuel
in a terminal (i.e., a "position holder"), a refiner, an
importer, a blender, and a terminal operator. The BOE
requires suppliers to be licensed and to file monthly returns
or information reports detailing the amount of fuel entered,
received, removed, and stored.
2)Exemptions and Refunds: Certain sales by diesel fuel
suppliers are exempt from the excise tax, including sales for
use outside California, and sales of dyed diesel fuel. Thus,
certain parties may claim a credit or refund for tax paid on
fuel that is subsequently used in a nontaxable manner.
3)Biodiesel: Under California law, biodiesel is considered to
AB 2757
Page 3
be a diesel fuel and is subject to the excise tax on diesel
fuel. The fuel industry generally describes biodiesel
according to the applicable percentage of biodiesel blended
with petroleum diesel. For example, "B5" would represent a
blend comprised of 95% petroleum diesel and 5% biodiesel.
Most domestically produced biodiesel comes from the Midwest.
Because distribution of this biodiesel occurs outside of the
normal bulk transfer/terminal system, the excise tax applies
upon the fuel's entry into California. As such, the "enterer"
is responsible for the diesel fuel tax when the fuel enters
the state. Biodiesel that is produced in California, on the
other hand, is generally taxed upon removal from the fuel
production facility.
In either case, when another supplier makes a subsequent
purchase of this tax-paid biodiesel to create a blended diesel
fuel, the tax-paid biodiesel fuel is blended with "ex-tax"
diesel fuel. When this blended fuel is subsequently removed
from the terminal rack, it results in tax being assessed twice
on the biodiesel portion. In such cases, the state allows the
supplier to claim a credit on their return.
Some suppliers, however, have been unable to obtain a credit or
refund for taxes paid on biodiesel that enters the state, or
is produced in-state, and is delivered into their terminals as
tax-paid, but is subsequently removed at the terminal rack for
a nontaxable purpose. In other words, while current law
allows reimbursement for tax paid on diesel fuel that has been
taxed more than once, the current statutory regime does not
account for tax-paid diesel fuel that is taxed coming into the
terminal but removed for nontaxable purposes (i.e., dyed
biodiesel blends). In such cases, the supplier is unable to
recover the tax from the customer and is also unable to seek
reimbursement for the tax from the BOE. Since the tax-paid
biodiesel portion is blended with ex-tax dyed diesel fuel, it
is not subject to taxation when removed from the terminal
rack. Because there is no subsequent taxable event with which
to claim the credit, the current statute does not provide for
a reimbursement of the tax-paid portion of the biodiesel.
4)What would this Bill Do? This bill allows a diesel fuel tax
refund to a supplier for that portion of tax-paid biodiesel
fuel removed from the terminal rack as a dyed biodiesel blend.
AB 2757
Page 4
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098 FN:
0003685