SB 1 Gas Tax FAQ
CIOMA’s SB 1 Summary
SB 1 eliminates, starting July 1, 2019, the annual adjustment required by the "Gas Tax Swap," from 2010, and instead imposes re-establishes the Price Based Excise tax (PBET) at its original rate of $0.173 per gallon. This requires revenues generated from the PBET adjustment to be allocated under the existing statutory framework with 44% for the State Transportation Improvement Program (STIP), 44% for cities and counties for local streets and roads, and 12% for the State Highway Operations and Protection Program (SHOPP).
Also, it requires that the tax rates and fees specified in this bill, other than the diesel sales tax, are adjusted annually based on the California Consumer Price Index (CPI).
SB 1 is expected to generate an amount equivalent to $52.4 billion in transportation revenues over a ten-year period, approximately $26.6 billion of which would be dedicated for local expenditures and $25.8 billion for state purposes. Overall revenues are estimated at $2.78 billion in 2017-18, $4.55 billion in 2018-19, and $4.88 billion in 2019-20.
1) Increases the excise tax on gasoline by $0.12 per gallon, starting November 1, 2017.
2) Increases the excise tax on diesel fuel by $0.20 per gallon, starting November 1, 2017.
3) Increases the sales tax on diesel fuels by an additional 4% increment, starting November 1, 2017.
4) Creates a new annual Transportation Improvement Fee (TIF), starting January 1, 2018, based on the market value of the vehicle
with the fee range described below:
- $25 per year for vehicles with a market value of $0- $4,999;
- $50 per year for vehicles with a market value of $5,000 - $24,999;
- $100 per year for vehicles with a market value of $25,000 - $34,999;
- $150 per year for vehicles with a market value of $35,000 - $59,999;
- $175 per year for vehicles with a market value of $60,000 and higher
Q: When does the Gas Tax take effect?
A: The increased taxes on gasoline and diesel will take effect at midnight on November 1, 2017. The Board of Equalization plans to send out a letter in mid-August to inform affected businesses of the implementation of SB 1 and another letter in October.
Q: What happens to gas and diesel in the tanks on November 1, 2017? Source: Board of Equalization
A: BOE has stated, “Two returns will be required for anyone that holds tax-paid inventory for sale of both diesel fuel and motor vehicle fuel. The storage tax is due on fuel held for storage at the prior tax rate that was in effect on October 31, 2017. The person that owns the tax-paid inventory at 12:01 a.m. on November 1, 2017, owes the additional tax. This brings their tax-paid inventory held for sale to the current rate as of 12:01 a.m. November 1, 2017.”
Q: How much money will be raised through SB 1? Source: www.fixcaroads.com
10-Year Revenue by Type
Gas Excise $24.4 billion
Diesel Excise $7.3 billion
Diesel Sale $3.5 billion
Vehicle -Based Fees
Value Based Transportation Fee $16.3 billion
ZEV Fee Commencing in 2020 $0.2 billion
One-Time Repayment of Transportation Loans
Repaying Outstanding Loans
from General Fund $706 million
Total $52.4 billion
Q: What will this money be spent on? Source: www.fixcaroads.com
A: $5 billion annually in new Transportation Funds for the following purposes:
- $3 billion to fix state and local roads, split “50/50” between state and local governments.
- $750 million for transit operations and capital improvements
- One-time loan repayments with $236 million for transit capital, $225 million for state highway maintenance, and $225 million for local streets and roads maintenance
- $400 million for bridge repair and maintenance
- $300 million for Trade Corridors
- $250 million for Congested Commute Corridors
- $200 million for Local Partnerships for “self-help” counties
- $100 million for the Active Transportation Program
- $25 million for Freeway Service Patrol
- $25 million for SB 375 regional and local planning
- $7 million for UC and CSU Transportation Research
Q: CIOMA’s summary of SB 1 states that the Gas Tax Swap will be eliminated in July of 2019. Does this mean the Gas Tax Swap and SB 1 fees and taxes will overlap from November 2017 to July 2019?
A: Yes. Between November 1, 2017 and June 30, 2019, the Gas Tax Swap will still exist. It will increase to about 16.9 cents per gallon prior to becoming a fixed excise tax at 17.3 cents per gallon.
Q: How can we guarantee the tax dollars are spent responsibly?
A: Senate Constitutional Amendment (SCA) 2 (Newman-D) and Assembly Constitutional Amendment (ACA) 5 (Frazier-D) place an initiative on the November 6, 2018 ballot to prevent the use of transportation funds for anything other than transportation and infrastructure projects, as described in the bill.
This means the Governor and the Legislature may be able to divert these funds for their pet projects for a year before Californians can stop them. It is extremely important for the people of California to vote for these “lock-box” measures to ensure our fuel tax dollars are spent on roads and infrastructure.
Q: Is there an effort to repeal SB 1?
A: Assemblyman Travis Allen (R-Huntington Beach) is sponsoring a 2018 ballot initiative to repeal SB 1. In order to appear on the November 6, 2018 ballot, 365,880 signatures must be gathered by the measure’s supporters by January 8, 2018 and certified by the California Secretary of State.
Q: Does SB 1 change any of the use, road, or sales taxes for Clean Natural Gas?
A: SB 1 makes no changes or adjustments to Clean Natural Gas.
Q: Does the excise tax increase affect all types of diesel equally (including biodiesel and renewable)?
A: Yes, the increase affects all type of diesel including biodiesel and renewable diesel. Under Revenue and Taxation Code section 60022, "Diesel fuel" means any liquid that is commonly or commercially known or sold as a fuel suitable for use in a diesel-powered highway vehicle. Biodiesel and renewable diesel are included in this definition.
Q: Are all types of fuel subject to the storage tax?
A: Yes, biodiesel and biofuel are considered diesel fuel in California and are subject to diesel fuel tax including the storage tax.
Q: Is the storage tax the difference between the old rate vs new?
A: Yes, the storage tax represents the increase in the excise tax rate on fuel. Storage tax is $0.12 per gallon on MVF and $0.20 per gallon on diesel fuel.
Q: Does the increase in the sales tax prepayment rate affect the calculation of the storage tax?
A: No, the increase in the sales tax prepayment rate on diesel fuel does not impact the calculation of the storage tax. The sales tax prepayment rate increased due to the increase of the additional sales tax rate on retail sales of diesel fuel on November 1, 2017. The storage tax amount is based on the number of gallons held for sale in inventory for sale at 12:01 a.m. on November 1, 2017.
Q: Who does the storage tax apply to?
A: The storage tax applies to retailers, wholesalers and suppliers owning 1,000 or more gallons of MVF or diesel fuel held in inventory for sale. If an end user does not own 1,000 gallons or more of MVF or diesel fuel in inventory for sale, then the storage tax does not apply.
Q: When should I record my inventory for the storage tax return?
A: 12:01 a.m. on November 1, 2017. This includes all motor vehicle fuel and diesel in transit or storage below the terminal rack for sale as of 12:01 a.m. on November 1, 2017.
Q: When is the storage tax due?
A: You must file and pay the tax by January 1, 2018. Motor vehicle fuel and diesel must be filed separately. If you sell both motor vehicle fuel and diesel, you should have received two returns.
Q: I have not received my storage tax return, who should I contact?
A: If you have not received your storage tax return by late October 2017, please contact the California Department of Tax and Fee Administration at 1-800-400-7115 (TTY: 711). Failure to receive a storage tax return does not relieve you of your responsibility to report and pay the storage tax.
Q: If I have a facility that has both fuel for sale and for business use, am I able to set an amount aside for personal use and not pay the November 1 tax increase?
A: “There is no way to store fuel for personal use and for sale in commingled inventory, so all fuel stored in inventory would be considered available for sale and subject to the storage tax. If you use the fuel in an exempt manner, you can file a claim for refund in the normal manner, with either the State Controller for motor vehicle fuel, or the CDTFA for diesel fuel.” Source: Department of Tax and Fee Administration
Q: Will the prepaid sales tax rate be increasing as well?
A: Yes, the sales tax prepayment rate for diesel will increase from 18 cents per gallon to 25 cents per gallon.
Q: How will off-highway, red-dyed diesel be affected by the tax increase?
A: There are two types of partial exemptions from the sales and use tax on diesel sales. These partially exempt rates are not impacted by the SB 1 rate increases:
- Qualified farming and food processing activities will remain at 2.25%
- Off-Highway activities, including exempt bus operations, will remain at 7.25%