SB 1 – Fuel Tax Increase and Storage Tax Requirement – Frequently Asked Questions (FAQ)
The following questions and answers pertain to the Road Repair and Accountability Act of 2017 provisions enacted by Senate Bill 1 (SB 1) (Statutes of 2017, Chapter 5) that increased motor vehicle fuel (MVF) and diesel fuel excise tax rates, created a fuel storage tax reporting requirement, and increased the sales and use tax rate on retail sales of diesel fuel.Open All Close All
SB 1 increased the excise tax rates for MVF, (excluding aviation gasoline), and diesel fuel, and also increased the additional statewide sales and use tax rate imposed on retail sales and purchases of diesel fuel effective November 1, 2017. The excise tax rates on MVF and diesel fuel will be subject to an annual Consumer Price Index (CPI) adjustment beginning July 1, 2020. The current and historical MVF and diesel fuel tax rates are available at the Tax Rates – Special Taxes and Fees webpage. A summary of the sales tax rate, sales tax prepayment amount, and excise tax rates on fuel can be found on the Sales Tax Rates for Fuels page.
SB 1 also required suppliers, wholesalers, and retailers owning 1,000 or more gallons of tax-paid MVF (excluding aviation gasoline) or diesel fuel stored in inventory for sale, as of 12:01 a.m. on November 1, 2017, to report and pay a storage tax. The return and payment were due on or before January 1, 2018.
SB 1 increased the state diesel fuel excise tax rate by 20 cents ($0.20) per gallon, therefore, effective November 1, 2017, the interstate user rate increased by 20 cents ($0.20) per gallon. You may view, print, or download the fuel tax rates for all International Fuel Tax Agreement (IFTA) jurisdictions, including California, at the International Fuel Tax Association, Inc. website.
Revenue and Taxation Code section 60022 defines "diesel fuel" as any liquid that is commonly or commercially known or sold as a fuel that is suitable for use in a diesel-powered highway vehicle. A liquid meets this requirement if, without further processing or blending, the liquid has practical and commercial fitness for use in the engine of a diesel powered highway vehicle. This includes biofuels used as alternatives to petroleum-based diesel fuel. The most common are biodiesel, straight vegetable oil, waste vegetable oil, and renewable diesel.
"Diesel fuel" does not include kerosene, gasoline, liquefied petroleum gas, natural gas in liquid or gaseous form, or alcohol.
Revenue and Taxation Code section 7326 defines motor vehicle fuel to mean gasoline and aviation gasoline. The term motor vehicle fuel does not include jet fuel, diesel fuel, kerosene, liquefied petroleum gas, natural gas in liquid or gaseous form, alcohol, or racing fuel.
- Diesel Fuel –
- Immediately upon enactment on April 28, 2017, SB 1 eliminated the annual revenue neutrality adjustment calculation for diesel fuel and changed the base excise tax rate to 16 cents ($0.16) per gallon.
- SB 1 did not eliminate the additional sales and use tax rate on retail sales and purchases of diesel fuel; rather, it increased it by 4 percent (4.00%).
- SB 1 did not impact the partial exemptions of the sales and use tax rates on sales of diesel fuel for qualified farming activities and food processing or for off-highway uses.
- MVF –
- Effective July 1, 2019, the full FTS rate of 17.3 cents ($0.173) per gallon will be imposed, making the full MVF tax rate 47.3 cents ($0.473) per gallon (Base rate of $0.18 + FTS rate of $0.173 + SB 1 rate of $0.12) until July 1, 2020, when it will be adjusted for the first annual CPI adjustment.
- For more information regarding the Fuel Tax Swap, please see the Fuel Tax Swap FAQs.
SB 1 did not impact the Fuel Tax Swap partial sales and use tax exemption for retail sales and purchases of MVF.
The excise tax increase affected all types of taxable diesel fuel, including biodiesel, biofuel, 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, biofuel, and renewable diesel are included in this definition.
Dyed diesel fuel is intended for off-highway use only and was exempt from the diesel fuel tax and is not subject to the excise tax increase.