Laws, Regulations and Annotations

Business Taxes Law Guide—Revision 2024

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Regulation 1598. Motor Vehicle and Aircraft Fuels.

Reference: Sections 6011, 6012, 6051.8, 6201.8, 6245.5, 6357, 6357.3, 6357.5, 6357.7, and 6423, Revenue and Taxation Code.

(a) In General. Sales tax or use tax applies to the sale or use of fuel for propelling motor vehicles or aircraft or for other purposes, except as stated below.

(b) Exceptions.

(1) Neither the sales tax nor the use tax applies to the sale or use of motor vehicle fuel used in propelling aircraft, the distribution of which in this state is subject to the tax imposed by Part 2 (commencing with Section 7301) of Division 2 of the Revenue and Taxation Code. This type of fuel includes gasoline and similar fuels but does not include aircraft jet fuel.(See subdivision (i) for requirements for supporting aircraft fuel exemptions.)

(2) Neither the sales tax nor the use tax applies to the sale or use of aircraft fuel sold to an air common carrier for immediate consumption or shipment in its business as an air common carrier on a flight whose final destination is a foreign destination (see Regulation 1621, Sales to Common Carriers).

(c) Measure of Tax.

(1) The measure of tax includes:

(A) The tax imposed by the United States upon importers or producers of gasoline, diesel, and jet fuel, except as provided in (c)(2)(D) and (c)(2)(E),

(B) The tax imposed upon distributors of gasoline and similar fuels by the State of California pursuant to Part 2 of Division 2 of the Revenue and Taxation Code, and which has not been refunded, and

(C) The tax imposed by the State of California on aircraft jet fuel pursuant to Chapter 2.5 of Part 2 of Division 2 of the Revenue and Taxation Code.

(2) The measure of tax does not include:

(A) The use fuel tax, including the annual flat rate fuel tax, imposed by the State of California pursuant to Part 3 of Division 2 of the Revenue and Taxation Code on the following fuels:

1. Compressed natural gas.

2. Liquid natural gas.

3. Liquefied petroleum gas.

4. Ethanol or methanol containing not more than 15 percent gasoline or diesel fuel.

5. All other fuels not taxed under Parts 2 or 31 of Division 2 of the Revenue and Taxation Code.

(B) The diesel fuel tax, imposed by the State of California pursuant to Part 31 of Division 2 of the Revenue and Taxation Code.

(C) The federal retailer's excise taxes on:

1. Gasoline used as a fuel in noncommercial aircraft.

2. Jet fuel used as a fuel in noncommercial aircraft.

3. Diesel fuel.

4. Special motor fuels.

(D) Prior to July 1, 1995, the federal excise tax imposed pursuant to Section 4091 of the Internal Revenue Code with respect to diesel fuel and jet fuel for which the purchaser certifies that he or she is entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid. (See subdivision (j) for requirements for supporting claimed exclusions.)

(E) Beginning July 1, 1995, the federal excise tax imposed pursuant to Sections 4081 or 4091 of the Internal Revenue Code with respect to gasoline, diesel, and jet fuels for which the purchaser certifies that he or she is entitled to either a direct refund or credit against his or her income tax for the federal excise tax paid. (See subdivision (i) for requirements for supporting claimed exclusions.)

(F) Beginning January 1, 2001, the federal excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code with respect to gasoline, diesel, and jet fuels for which the purchaser provides a valid certificate pursuant to subdivision (k).

(d) Partial Exemption for Motor Vehicle Fuel. Operative July 1, 2010, section 6357.7 of the Revenue and Taxation Code provides a partial exemption from sales and use tax for the sale of, and the storage, use, or other consumption in this state of motor vehicle fuel. "Motor vehicle fuel" means gasoline and aviation gasoline and does not include jet fuel, diesel fuel, kerosene, liquefied petroleum gas, natural gas in liquid or gaseous form, alcohol, or racing fuel, as defined in the Motor Vehicle Fuel Tax Law.

For the period commencing on July 1, 2010, and ending on June 30, 2011, the partial exemption applies to the taxes imposed by sections 6051, 6051.3, 6051.7, 6201, 6201.3, and 6201.7 of the Revenue and Taxation Code (cumulative statewide 6% sales and use tax rate), but does not apply to the taxes imposed or administered pursuant to sections 6051.2, 6051.5, 6201.2, or 6201.5 of the Revenue and Taxation Code, the Bradley-Burns Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law, or section 35 of article XIII of the California Constitution.

For the period commencing on July 1, 2011, and ending on December 31, 2012, the partial exemption applies to the taxes imposed by sections 6051, 6051.3, 6201, and 6201.3 of the Revenue and Taxation Code (5%), but does not apply to the taxes imposed or administered pursuant to sections 6051.2, 6051.5, 6201.2, or 6201.5 of the Revenue and Taxation Code, the Bradley-Burns Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law, or section 35 of article XIII of the California Constitution.

For the period commencing on January 1, 2013, and ending on December 31, 2016,the partial exemption applies to the taxes imposed by section 36 of article XIII of the California Constitution and sections 6051, 6051.3, 6201, and 6201.3 of the Revenue and Taxation Code (5.25%), but does not apply to the taxes imposed or administered pursuant to sections 6051.2, 6051.5, 6201.2, or 6201.5 of the Revenue and Taxation Code, the Bradley-Burns Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law, or section 35 of article XIII of the California Constitution.

For the period commencing on January 1, 2017, the partial exemption applies to the taxes imposed by sections 6051, 6051.3, 6201, and 6201.3 of the Revenue and Taxation Code (5%), but does not apply to the taxes imposed or administered pursuant to sections 6051.2, 6051.5, 6201.2, or 6201.5 of the Revenue and Taxation Code, the Bradley-Burns Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law, or section 35 of article XIII of the California Constitution.

(e) Additional Tax on Sale of Diesel Fuel.

(1) Operative July 1, 2011, an additional state sales and use tax is imposed on the sale and the storage, use, or other consumption of "diesel fuel" as defined in section 60022 of the Revenue and Taxation Code. As defined in this section, diesel fuel does not include gasoline, kerosene, liquefied petroleum gas, natural gas in liquid or gaseous form, or alcohol.

(2) The additional state sales and use tax is imposed at the following rates:

(A) 1.87 percent for the period July 1, 2011, through June 30, 2012;

(B) 2.17 percent for the period July 1, 2012, through June 30, 2013;

(C) 1.94 percent for the period July 1, 2013, through June 30, 2014; and

(D) 1.75 percent for the period July 1, 2014 through October 31, 2017; and

(E) 5.75 percent on or after November 1, 2017.

(3) Exemptions and Exemption Certificates.

(A) An exemption from the additional state sales and use tax is provided for diesel fuel purchased for use or used in a manner that is exempt from the taxes imposed pursuant to Part 31 (commencing with section 60001) of Division 2 of the Revenue and Taxation Code and not subject to the back up tax imposed by section 60058 or the payment requirement specified in section 60108 of the Revenue and Taxation Code.

(B) Exempt bus operators. An exemption from the additional state sales and use tax is provided for diesel fuel subject to the payment requirement specified in section 60502.2 of the Revenue and Taxation Code.

(C) Sellers of diesel fuel for which the purchaser claims exemption from the measure of tax under this subdivision shall secure from the purchaser and retain a certificate in substantially the form prescribed below. The certificate shall relieve the seller from liability for any tax due only if it is timely taken in good faith. A certificate will be considered timely if it is taken at any time before the seller bills the purchaser for the property, or any time within the seller's normal billing and payment cycle, or any time at or prior to delivery of property to the purchaser. The certificate will be valid until revoked in writing by the purchaser.

 

(f) Sales of Motor Vehicle Fuel on Sales Tax-Included Basis. Sales tax reimbursement will be deemed included in the total price per gallon of gasoline dispensed through an apparatus on which there is a price per gallon display including all taxes as required by Business and Professions Code Section 13470. Sales tax reimbursement will be deemed included in the total price per gallon of other motor vehicle fuel if the retailer posts on the premises a notice reading substantially as follows:

"The price per gallon of all motor vehicle fuel includes reimbursement for applicable sales taxes computed to the nearest mill."

Following are examples of prices computed on a tax-included basis:

(A)

(B)

* The rates used are for purposes of this example only. The rates in effect at the time of the sale and at the place where the business is located must be used in computing the tax-included selling price of fuel.

(g) Application of Sales or Use Tax to Fuel Furnished with Leased Vehicles or Aircraft. The lessor is the retailer of fuel furnished to a lessee of a vehicle or an aircraft if the sales price of the fuel is separately stated from the rental charge for the vehicle or aircraft. The lessor is also the retailer of fuel furnished to a lessee under a lease which is a "sale" or "purchase" (see Regulations 1660 and 1661) and under which the rental charge includes fuel for the operation of the vehicle or aircraft (such arrangements are sometimes called "wet rentals"). The lessor may purchase such fuel for resale.

The lessor is the consumer of fuel furnished to a lessee of a vehicle or an aircraft under a lease which is not a "sale" or "purchase" (see Regulations 1660 and 1661) and under which the rental charge includes fuel for the operation of the vehicle or aircraft. If a lessor of mobile transportation equipment elects under Regulation 1661 to report and pay use tax measured by the "fair rental value" of the mobile transportation equipment leased, the "fair rental value" does not include the sale price to the lessor of fuel which is furnished under the lease to the lessee.

(h) Refunds of Excise Tax.

(1) Federal Excise Taxes. The refund of the federal excise tax on gasoline, diesel or jet fuel (either by direct refund or as a credit against income tax) is an adjustment to the sales price of the gasoline, diesel or jet fuel. Accordingly, the retailer who paid the sales tax or the purchaser who paid use tax measured by the sales price of the gasoline, diesel, or jet fuel which included that federal excise tax may file with the Department a claim for refund of tax measured by the amount of the federal excise tax so refunded or credited. The claim must be supported by proof of the exempt use of the gasoline, diesel, or jet fuel and of the refund or credit of the federal excise tax to the purchaser.

(2) Sales or Use Tax Refunds. If the sales or use tax refund is made to a person other than the consumer, the person receiving the refund must pay it to the consumer.

(i) Supporting Data for Aircraft Fuel Exemptions. Sellers of motor vehicle fuel which, at the time of sale, is exempt from sales and use tax under subdivision (b)(1), shall secure and retain documentary evidence to support their exempt sales.

(1) The exemption with respect to motor vehicle fuel sold and delivered directly into the fuel supply tank of aircraft may be supported either by a properly completed sales invoice or an aircraft fuel exemption certificate in the form prescribed in subdivision (i)(2). If a sales invoice is used, it must show the purchaser's name and address, the aircraft identification number, the number of gallons sold, the price per gallon, the amount of sale, the date of sale, and the name and address of the seller.

(2) The exemption with respect to retail sales of motor vehicle fuel delivered into the purchaser's storage facilities or receptacles other than the fuel tanks of aircraft, for use in propelling aircraft shall be supported by an aircraft fuel exemption certificate and an invoice. An exemption certificate in substantially the following form and signed by the purchaser shall be retained by the seller as evidence to support such exempt sales. The exemption certificate will be valid until revoked in writing by the purchaser.

 

(j) Certificate for Exclusion of Federal Excise Taxes from Measure of Tax. Sellers of gasoline, diesel, or jet fuel for which the purchaser claims exclusion from the measure of tax under subdivision (c)(2)(D) or (c)(2)(E) shall secure from the purchaser and retain a certificate in substantially the form prescribed in subdivision (j)(1).

(1) The certificate prescribed below shall relieve the seller from liability for any tax due only if it is timely taken in good faith. A certificate will be considered timely if it is taken at any time before the seller bills the purchaser for the property, or any time within the seller's normal billing and payment cycle, or any time at or prior to delivery of property to the purchaser. The certificate will be valid until revoked in writing by the purchaser.

 

(2) Any person, including any officer or employee of a corporation who gives the certificate described in subdivision (j)(1) and who knows at the time of purchase that he or she is not entitled to either a direct refund or credit against his or her income tax is liable to the state for the amount of sales or use tax that would be due had he or she not given the certificate. In addition to the tax, interest, and other penalties, the person is liable for a penalty of 10 percent of the tax or five hundred dollars ($500), whichever is greater, for purchases made for personal gain or to evade payment of taxes.

(k) Alternate Certificate for Exclusion of Federal Excise Taxes from Measure of Tax. On and after January 1, 2001, a purchaser of gasoline, diesel, or jet fuel who is qualified under subdivision (k)(1) may issue a certificate in substantially the form set forth in subdivision (k)(3) to the seller of that fuel. A seller who takes and retains such certificate shall be relieved of liability for tax due measured by the federal excise taxes imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code on the fuel sold under the certificate, provided the certificate is timely taken in good faith. A certificate will be considered timely if it is taken at any time before the seller bills the purchaser for the property, or any time within the seller's normal billing and payment cycle, or any time at or prior to delivery of property to the purchaser. The certificate will be valid until revoked in writing by the purchaser.

(1) A purchaser is qualified and may issue a certificate under subdivision (k) if satisfying all the following requirements:

(A) The purchaser was entitled to either a direct refund or credit against his or her income tax for the federal excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for more than 50 percent of all the purchaser's purchases of gasoline, diesel, and jet fuel during the prior calendar year on an aggregate basis. A purchaser who was entitled to a direct refund or credit against his or her income tax for the federal excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for more than 50 percent of that purchaser's purchases of one type of fuel, e.g., diesel, but not more than 50 percent of all that purchaser's purchases of gasoline, diesel, and jet fuel on an aggregate basis is not a qualified purchaser, and may not issue a certificate under this subdivision, for any of that purchaser's purchases of fuel.

(B) The purchaser's business remains substantially the same as during the prior calendar year whereby the purchaser reasonably expects to be entitled to either a direct refund or credit against his or her income tax for the federal excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code for more than 50 percent of the purchaser's purchases of gasoline, diesel, and jet fuel on an aggregate basis.

(C) The purchaser holds a valid California seller's permit.

(2) With respect to any fuel purchased under the certificate which is used in a manner whereby the purchaser is not entitled to a direct refund or credit against his or her income tax of the federal excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code, the purchaser is liable for use tax on the amount of that federal excise tax. The purchaser must report and pay such use tax with the purchaser's return for the period in which the fuel was used. A certificate may not be issued under this subdivision when the purchaser knows that all of the fuel that would be purchased under the certificate will be used in a manner whereby the purchaser is not entitled to a direct refund or credit against his or her income tax of the federal excise tax imposed pursuant to Section 4081 or 4091 of the Internal Revenue Code.

(3) A certificate issued under this subdivision shall be in substantially the following form:

 

History—Amended and adopted December 8, 1970, as a restatement of Ruling 1325 (Use Fuel Tax Law), effective January 15, 1971.

Amended June 9, 1972, effective July 15, 1972.

Amended July 31, 1972, effective August 2, 1972.

Amended September 14, 1972, effective September 15, 1972.

Amended January 18, 1973, effective January 26, 1973.

Amended May 9, 1973, effective June 17, 1973.

Amended November 19, 1975, effective January 1, 1976. Deleted (b)(2) due to expiration of Section 6357 of the Revenue and Taxation Code, amended (c)(2)(A) to reflect the annual flat rate fuel tax authorized by Section 8651.7 of the Revenue and Taxation Code, and amended (d) to reflect increased tax rate and prices.

Amended June 22, 1976, effective July 25, 1976. Added Santa Clara County Transit District transaction and use tax.

Amended December 7, 1978, effective January 28, 1979. Amends subsection (f)(1); deletes section (d)(2) and amends subsection (d) to establish the presumption that sales tax will be considered included in the price per gallon of gasoline or diesel fuel sold if proper notice is posted.

Amended April 2, 1981, effective August 19, 1981. In (b) added last sentence re "gasohol." Added (e) "Partial Exemption of Gasohol." Relettered remaining subsections. Added 6357.5 to references.

Amended July 28, 1982, effective December 8, 1982. Deleted (e) (1) (D), gasohol color requirement; added the last sentence of (e) (2) (C), referring to Los Angeles and San Mateo transit taxes; and made various technical changes.

Amended July 27, 1983, effective November 13, 1983. Amended subdivision (c) to reflect current tax rates; deleted listing of transit districts imposing the ½ of 1 percent transit tax.

Amended March 27, 1984, effective April 24, 1984. In subsection (c)(2)(B)1 changed number 12 to 3.

Amended May 1, 1985, effective May 31, 1985. Subdivision (b), has deleted from its reference to the partial gasohol exemption which existed and expired December 31, 1983. Subdivision (c) specifies how the sales tax applies to various state and federal taxes on fuel based on tax rates in effect as of October 1, 1984. Subdivision (e), has been deleted in its entirety. Subdivisions (f), (g), and (h), have been renumbered to (e), (f), and (g), respectively.

Amended April 30, 1990, effective July 7, 1990. Added paragraphs (b)(2) and (b)(3) to clarify the two exceptions to the application of the sales and use tax to the sale of aircraft fuel to air common carriers under certain circumstances and added reference to Regulation 1621. Added paragraph (c)(1)(A) to explain measure of tax includes federal excise taxes on diesel and jet fuel, except as provided in (c)(2)(C) which was added to identify the exclusion of federal importer's or producer's excise tax for which a certification is obtained that a credit or refund is due against income tax from the measure of the sales and use tax. Added paragraph (h) to assist in preparation of the certificate for claiming the exemption.

Amended August 1, 1991, effective August 29, 1991. Amended pursuant to Chapter 85, Statutes of 1991, and Chapter 88, Statutes of 1991, to provide for repeal of the exemption from sales tax for the sale of aircraft fuel to air common carriers for immediate shipment outside California consumed by the common carrier in the conduct of its business after reaching the first out-of-state destination. Chapter 85, Stats. 1991, repealed the exemption effective July 1, 1991; Chapter 88, Stats. 1991, changed the effective date to July 15, 1991.

Amended June 23, 1993, effective October 13, 1993. Added paragraph (b)(2) to provide that sales tax does not apply to certain manufacturers' or importers' federal excise tax imposed under Section 4091 of the Internal Revenue Code. Amended paragraph (b)(2) to extend the exemption from the sale or use of aircraft fuel sold to an air common carrier for immediate consumption or shipment in its business as an air common carrier on a flight whose first destination is a foreign destination to similarly sold fuel for immediate consumption or shipment on a flight whose final destination is a point outside the United States. Amended paragraph (f) to explain refund procedures with regard to manufacturer's excise tax which has been refunded and added paragraph (b)(1)(B) to clarify the refund procedures for federal importer's or producer's excise tax which has been refunded or credited by the federal government.

Amended January 10, 1996, effective March 28, 1996. Added new subdivision (c)(2)(B) and renumbered the following sub-subdivisions of subdivision (c)(2); amended new subdivision (c)(2)(D); added new subdivision (c)(2)(E); and deleted subdivision (f)(1)(A) and denominated former subdivision (f)(1)(B) as subdivision (f)(1). Deleted gender-based language from subdivision (e) and corrected clerical errors in subdivisions (c)(1)(B), (d), (e), and (h).

Amended June 14, 1996, effective August 23, 1996. Corrected the California Code of Regulations as amended effective March 28, 1996 to add subdivision (c)(2)(E).

Amended August 1, 2001, effective December 1, 2001. Word "subparagraph" changed to "subdivision" throughout. Phrase "importer's or producer's" before word "excise" deleted throughout. Subdivision (c)(2): (E) word "and" changed to "or" ; (F) added. Subdivison (f): (1) phrase "which included that federal excise tax" deleted; words "OR USE" added to title of (2). Subdivision (g)(2)—last sentence added. Exemption Certificate—new first unnumbered paragraph added; second unnumbered paragraph—words "aircraft fuel (gasoline)" replaced with "motor vehicle fuel"; phrase "and … Law" deleted and phrase "and … refund" added; third unnumbered paragraph—words "Motor vehicle" added and "(gasoline)" deleted; fourth unnumbered paragraph—certificate format changed for ease of use. Subdivision (h)(1)—last sentence added. Exemption Certificate—new title and new first unnumbered paragraph; third unnumbered paragraph—last sentence added; format of certificate rewritten for clarity. New subdivision (i) added.

Amended July 15, 2010, effective August 26, 2010. Added new subdivision (d) regarding partial exemption for sale of motor vehicle fuel operative July 1, 2010. Renumbered existing subdivisions (d) through (i) as subdivisions (e) through (j), respectively and corresponding references to subdivisions throughout. Revised selling price and tax rates used in examples of tax-included prices for gasoline and diesel fuel in subparagraphs (d)(A) and (d)(B), respectively.

Amended July 26, 2011, effective October 26, 2011. The amendments added new subdivision (e); renumbered prior subdivisions (e) through (j) as subdivisions (f) through (k); revised subdivision (b)(1) so that it cross-references renumbered subdivision (i), instead of subdivision (h); revised subdivisions (c)(2)(D) and (E) so that they cross-reference renumbered subdivision (j), instead of subdivision (i); revised subdivision (c)(2)(F) so that it cross-references renumbered subdivision (k), instead of subdivision (j); updated the amount of "state excise tax" and the "total tax-included price per gallon" used in example (B) in renumbered subdivision (f); revised renumbered subdivision (i)(1) so that it cross-references renumbered subdivision (i)(2), instead of subdivision (h)(2); added a comma after the word "diesel" in the first sentence of renumbered subdivision (j); revised the first sentences of renumbered subdivisions (j) and (j)(2) so that both sentences cross-reference renumbered subdivision (j)(1), instead of subdivision (i)(1); revised the first sentence of renumbered subdivision (k) so that the sentence cross-references renumbered subdivisions (k)(1) and (k)(3), instead of subdivisions (j)(1) and (j)(3), respectively; revised renumbered subdivision (k)(1) so that it cross-references renumbered subdivision (k), instead of subdivision (j); corrected the spelling of the word "calendar" in renumbered subdivision (k)(3); and added citations to Revenue and Taxation Code sections 6051.8, 6201.8, and 6357.3 to and deleted the citation to section 6385 from the reference note.

Amended March 13, 2013, effective July 11, 2013. Amended subdivision (d) to add third paragraph to reflect the decrease in the partial exemption rate to 5% on July 1, 2011 caused by the expiration of sections 6051.7 and 6201.7 on June 30, 2011. Additionally, added fourth paragraph to reflect the increase in the partial exemption rate to 5.25% on January 1, 2013 caused by the addition of section 36 to article XIII of the California Constitution.

Amended January 25, 2017, effective March 9, 2017. In subdivision (d), in the fourth paragraph inserted "and ending on December 31, 2016," after "January 1, 2013," and added a fifth paragraph to reflect the one-quarter percent decrease in the partial exemption rate on January 1, 2017 caused by the expiration of the 0.25% sales and use tax imposed by section 36 of article XIII of the California Constitution.

Effective January 3, 2019. In subdivision (e)(2)(D) replaced "on or after July 1, 2014." with "for the period July 1, 2014, through October 31, 2017; and", and added a new subdivision (e)(2)(E) "5.75 percent on or after November 1, 2017." to reflect the 4 percent increase in the rate of the sales and use taxes imposed on diesel fuel by RTC section 6051.8 and 6201. In subdivision (h)(1) replaced "Board" with "Department".