Regan Brown
California imposes excise taxes on gasoline and diesel fuel, which are collected from suppliers before they deliver the fuel to retail stations. The tax is imposed on the removal of motor vehicle fuel from a terminal or refinery rack, entry into the state, or sale to an unlicensed person. The diesel fuel tax revenue is deposited into the Motor Vehicle Fuel Account in the Transportation Tax Fund to pay for refunds, highway construction and maintenance, and mass transit systems. The California Department of Tax and Fee Administration (CDTFA) establishes the prepayment sales tax rate for motor vehicle fuel and diesel fuel annually, which may be adjusted as necessary. This prepayment is collected by suppliers from the purchaser and is included in the retail price of the fuel.
| Characteristics | Values |
|---|---|
| Taxing body | California Department of Tax and Fee Administration (CDTFA) |
| Type of tax | Excise tax |
| Tax rate | Not specified; varies depending on the type of fuel |
| Who pays the tax | Fuel vendors |
| Who the tax is passed on to | End consumers in the fuel's retail price |
| Tax payment deadline | Last day of each month for the previous month |
| Tax revenue allocation | Motor Vehicle Fuel Account in the Transportation Tax Fund |
| Tax exemptions | Aviation Gasoline, Biodiesel, waste vegetable oil (wvo), straight vegetable oil (svo) |
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What You'll Learn
Excise taxes on diesel fuel
California imposes excise taxes on diesel fuel and gasoline when the following events occur: removal at the refinery or terminal rack, entry into the state, sale to an unlicensed person, or the removal or sale of blended motor vehicle fuel or diesel fuel in the state by the blender. The Motor Vehicle Fuel Tax Law (MVFTL) and the Diesel Fuel Tax Law govern these excise taxes. The state collects these taxes from gasoline and diesel suppliers before they deliver the fuel to retail stations.
Excise taxes are levied directly on certain goods by state or federal governments. In California, fuel vendors and producers are responsible for paying excise taxes, and these costs are passed on to consumers in the retail price of the fuel. The California Department of Tax and Fee Administration (CDTFA) establishes the prepayment sales tax rate for motor vehicle fuel, diesel fuel, and aircraft jet fuel by March 1 of each year. These rates generally remain in effect from July 1 of the subsequent year to June 30 of the following year and may be adjusted annually or more frequently if necessary.
The diesel fuel tax revenue is deposited into the Motor Vehicle Fuel Account in the Transportation Tax Fund. The balance of the revenue is transferred to the Highway Users Tax Account and then to the State Highway Account. Local shares are also transferred to city and county road funds to construct and maintain public roads and mass transit systems.
Federal excise tax rates on various motor fuel products are included in the gasoline, diesel/kerosene, and compressed natural gas rates. There is a 0.1 ¢ per gallon charge for the Leaking Underground Storage Tank Trust Fund (LUST). In most areas, state and federal excise taxes amount to about 13% of the cost of a gallon of gas.
Dyed Diesel, when used off-road, is taxed at the combined statewide sales tax rate plus applicable district taxes. A partial exemption certificate should be provided for this rate to apply. Dyed Diesel is not subject to excise taxes unless it is used on a highway.
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Prepayment sales tax rate
The prepayment sales tax rate for motor vehicle fuel, diesel fuel, and aircraft jet fuel in California is established by the California Department of Tax and Fee Administration (CDTFA) by March 1st of each year. The rates are generally in effect from July 1 of the subsequent year to June 30 of the following year. The rate varies depending on the type of fuel and may be adjusted annually or more frequently if necessary.
Suppliers are required to collect prepayment of the retail sales tax from the purchaser at the time the motor vehicle fuel tax or diesel fuel tax is imposed. If no sale occurs at the time the tax is imposed, the supplier must prepay the retail sales tax.
The Motor Vehicle Fuel Tax Law (MVFTL) and the Diesel Fuel Tax Law impose excise taxes on gasoline and diesel fuel in specific scenarios, including removal at the refinery or terminal rack, entry into the state, and sale to an unlicensed person. The diesel fuel backup tax is imposed on the delivery of taxed diesel fuel into the fuel tank of a diesel-powered highway vehicle.
In California, the state collects excise taxes from gasoline and diesel suppliers before they deliver the fuel to retail stations. These excise taxes are included in the price of motor fuel and are ultimately paid by the end consumer. The primary excise taxes on fuel in California are on gasoline, though most states also tax other types of fuel.
For example, in California, alternative fuel is subject to a state excise tax of $0.18 per gallon. Compressed natural gas, liquefied natural gas, and liquefied petroleum gas used as vehicle fuels can be taxed through an annual flat-fee rate sticker tax based on the gross vehicle weight rating. Aviation fuel is taxed at $0.18 per gallon, while aircraft jet fuel is taxed at $0.02 per gallon.
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Federal excise tax rates
In California, the state collects excise taxes from gasoline and diesel suppliers before they deliver fuel to retail stations. An excise tax is a tax directly levied on certain goods by a state or federal government. The federal excise tax rates on various motor fuel products are as follows: Included in the Gasoline, Diesel/Kerosene, and Compressed Natural Gas rates is a 0.1 ¢ per gallon charge for the Leaking Underground Storage Tank Trust Fund (LUST). These tax rates are based on energy content relative to gasoline. In most areas, state and federal excise taxes amount to about 13% of the cost of a gallon of gas.
The Motor Vehicle Fuel Tax Law (MVFTL) and the Diesel Fuel Tax Law impose excise taxes on gasoline and diesel fuel when any of the following events occur: Removal at the refinery or terminal rack, entry into the state, sale to an unlicensed person, or the removal or sale of blended motor vehicle fuel or diesel fuel in this state by the blender. The Diesel Fuel backup tax is imposed on the delivery into the fuel tank of a diesel-powered highway vehicle of any diesel fuel that contains dye, any diesel fuel on which a claim for refund has been allowed, or any liquid on which tax has not been imposed by the Diesel Fuel Tax Law, MVF tax law, or Use Fuel Tax Law.
The price of all motor fuel sold in California also includes Federal motor fuel excise taxes, which are collected from the manufacturer by the IRS and are used to support the Federal Highway Administration. Payments of fuel excise taxes are made by fuel vendors, not by end consumers, though the taxes will be passed on in the fuel's retail price. Fuel tax is due on the last day of each month for the previous month. Payment on the annual flat rate tax is due only once a year. Fuel producers and vendors in California have to pay fuel excise taxes and are responsible for filing various fuel tax reports to the California government.
The California Department of Tax and Fee Administration (CDTFA) is required to establish the prepayment sales tax rate for motor vehicle fuel, diesel fuel, and aircraft jet fuel by March 1st of each year. The rates generally remain in effect from July 1 of the subsequent year to June 30 of the following year. The rate varies depending on the type of fuel involved and may be adjusted annually or more frequently if necessary. Suppliers are required to collect prepayment of retail sales tax from the person to whom the fuel is sold at any time the motor vehicle fuel tax or diesel fuel tax is imposed, or would be imposed but for certain exemptions, on the removal, entry, or sale in this state of motor vehicle fuel, diesel fuel, and aircraft jet fuel.
In California, Jet Fuel is subject to a state excise tax of $0.02 per gallon. Aircraft Jet Fuel, Diesel Fuel Tax, International Fuel Tax Agreement (IFTA) including CA Interstate User Diesel Fuel Tax (DI) Program, and Motor Vehicle Fuel Tax (Operative on or after January 1, 2002) are all included in the retail price of a gallon of motor fuel. When used off-road, Dyed Diesel is taxed at the combined statewide sales tax rate, plus applicable district taxes. A partial exemption certificate should be provided for this rate to apply. For the period October 1, 2022, through September 30, 2023, the partial exemption for diesel fuel also applies to sales of Dyed Diesel. Biodiesel, waste vegetable oil (wvo), and straight vegetable oil (svo) are taxed at the same rate as diesel fuel.
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Diesel fuel tax revenue
In California, the state collects excise taxes from gasoline and diesel suppliers before they deliver fuel to retail stations. An excise tax is a tax directly levied on certain goods by a state or federal government. The tax is imposed on the removal of motor vehicle fuel in California from a terminal or refinery rack if the motor vehicle fuel is removed from the rack. The Motor Vehicle Fuel Tax Law (MVFTL) and the Diesel Fuel Tax Law impose excise taxes on gasoline and diesel fuel when any of the following events occur: removal at the refinery or terminal rack, entry into the state, sale to an unlicensed person, or the removal or sale of blended motor vehicle fuel or diesel fuel in this state by the blender.
The diesel fuel tax revenue is deposited into the Motor Vehicle Fuel Account in the Transportation Tax Fund to pay the refunds authorized by the Diesel Fuel Tax Law. The balance of the revenue is transferred by the Controller to the Highway Users Tax Account, which is then transferred to the State Highway Account, and local shares are transferred to the city and county road funds to construct and maintain public roads and mass transit systems.
The price of all motor fuel sold in California also includes Federal motor fuel excise taxes, which are collected from the manufacturer by the IRS and are used to support the Federal Highway Administration. Federal excise tax rates on various motor fuel products are included in the Gasoline, Diesel/Kerosene, and Compressed Natural Gas rates. There is a 0.1 ¢ per gallon charge for the Leaking Underground Storage Tank Trust Fund (LUST). In most areas, state and federal excise taxes amount to about 13% of the cost of a gallon of gas.
Fuel tax is due on the last day of each month for the previous month, and payment on the annual flat rate tax is due only once a year. Fuel producers and vendors in California have to pay fuel excise taxes and are responsible for filing various fuel tax reports to the California government.
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Diesel fuel tax exemptions
In California, the state collects excise taxes from gasoline and diesel suppliers before they deliver the fuel to retail stations. The sales tax rate for diesel fuel from October 1, 2022, through September 30, 2023, is 9.0625% plus applicable district taxes. This rate includes the additional 4% sales tax rate on retail sales of diesel fuel and a temporary partial sales and use tax exemption of 3.9375%. The federal excise tax on diesel is $0.244 per gallon, while the state diesel fuel excise tax from July 1, 2023, through June 30, 2024, is $0.441 per gallon.
There are certain exemptions to these fuel taxes. For instance, the provision requiring the payment of fuel taxes does not apply when the fuel is removed by railroad cars from approved refineries and received at approved terminals, and the refinery and terminal are operated by the same licensed supplier. Sales or removals of dyed diesel fuel are also exempt from taxes. Dyed diesel fuel is only allowed to be used on California highways by registered qualified highway vehicle operators, exempt bus operators, or government entities.
There is also a partial tax exemption for diesel fuel used in farming activities or food processing. Farmers, ranchers, and haulers may qualify for a partial sales and use tax exemption when they use fuel to transport harvested agricultural or horticultural products from the field or ranch to the buyers. To claim the exemption, the diesel must be used for farming purposes by the owner, tenant, or operator of the farm. An exemption certificate must be obtained from the purchasers, and records of these transactions must be maintained prior to tax filing.
Additionally, diesel fuel sold to exempt bus operators with a Certificate of Exempt Bus Operation is exempt from taxes. Diesel fuel sold by a supplier to the United States, its agencies, and instrumentalities is also exempt, as well as diesel fuel sold to the United States armed forces for use in ships, aircraft, or outside California.
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Frequently asked questions
The sales tax on diesel fuel in California is imposed when the fuel is removed from the rack at a refinery or terminal, when it enters the state, or when it is sold to an unlicensed person. The rate varies depending on the type of fuel involved and is adjusted annually or more frequently if necessary.
Fuel vendors pay the excise tax, but they pass the cost on in the retail price of the fuel.
The Motor Vehicle Fuel Tax Law (MVFTL) imposes excise taxes on gasoline and diesel fuel. The revenue from the diesel fuel tax is deposited into the Motor Vehicle Fuel Account in the Transportation Tax Fund.
Dyed diesel is taxed at the combined statewide sales tax rate when used off-road. It is also subject to excise taxes when used on the highway.
