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 increase motor vehicle fuel (MVF) and diesel fuel excise tax rates, creates a fuel storage tax reporting requirement, and increases the sales and use tax rate on retail sales of diesel fuel.Open All Close All
Effective November 1, 2017, SB 1 increases the excise tax rates for MVF, (excluding aviation gasoline), and diesel fuel, and also increases the additional statewide sales and use tax rate imposed on retail sales and purchases of diesel fuel. 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 Special Tax and Fee rate page. 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 requires 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.
For purposes of SB 1, "storing" includes the ownership or possession of tax-paid MVF or diesel fuel outside of the bulk transfer/terminal system, including the holding of tax-paid MVF or diesel fuel for sale at wholesale or retail locations stored in a container of any kind, including railroad tank cars and trucks or trailer cargo tanks. "Storing" also includes tax-paid MVF or diesel fuel purchased from and invoiced by the seller, and tax-paid MVF or diesel fuel removed from a terminal or entered into by a supplier, prior to November 1, 2017, and in transit on that date.
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 –
- SB 1 states that the Board of Equalization (Board) is required to determine the revenue neutrality adjustment calculation one more time for the fiscal year beginning July 1, 2018. Assembly Bill 102 (Statues 2017, Ch. 16), The Taxpayer Transparency and Fairness Act of 2017: California Department of Tax and Fee Administration: Office of Tax Appeals: State Board of Equalization, specifically states that the Board retains this responsibility.
- 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.
- SB 1 did not impact the Fuel Tax Swap partial sales and use tax exemption for retail sales and purchases of MVF. For further information regarding the Fuel Tax Swap, please see the Fuel Tax Swap FAQs.
For further information regarding the Fuel Tax Swap, please see the Fuel Tax Swap FAQs.
Storage Tax – MVF and Diesel Fuel
The storage tax represents the increase in the excise tax rate on MVF or diesel fuel inventory stored for sale at the tax-paid rate that was in effect on October 31, 2017.
- The storage tax rate for MVF is 12 cents ($0.12) per gallon (excluding aviation gasoline).
- The storage tax rate for diesel fuel is 20 cents ($0.20) per gallon.
Suppliers, wholesalers and retailers owning 1,000 or more gallons of tax-paid MVF (excluding aviation gasoline) or 1,000 or more gallons of diesel fuel stored in inventory for sale, or in-transit below the terminal rack as of 12:01 a.m. on November 1, 2017, must report and pay the storage tax. This brings their tax-paid inventory stored for sale to the current rate as of November 1, 2017.
Suppliers and wholesalers that remove tax-paid MVF and/or diesel fuel from the rack before 12:01 a.m. on November 1, 2017, but haven't delivered it as of 12:01 a.m. on November 1, 2017, must report their in-transit inventory on their storage tax returns. In general, retailers don't take title of the fuel until the fuel is received at the retailer's location, therefore, the issue raised by in-transit MVF and diesel fuel will not affect fuel retailers.
The storage tax does not apply to tax-paid inventory that suppliers hold in the bulk transfer/terminal system (above the rack inventory).
MVF and diesel fuel storage tax returns and payment are due on or before January 1, 2018.
If you are a fuel seller reporting both MVF and diesel fuel on Schedule G filed with your sales and use tax return, you were issued two storage tax accounts, one for MVF and one for diesel fuel. If your sales and use tax account is coded as a fuel seller but you did not file a Schedule G, you were issued two storage tax accounts for potential MVF and diesel fuel inventory. Please see answer to question 12 if you should only have received one storage tax return.
The excise tax increase affects 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 is exempt from the diesel fuel tax and is not subject to the excise tax increase and should not be reported on your storage tax return.
You should call our Customer Service Center at 1-800-400-7115 (TTY:711) Monday through Friday, 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays, and select the option for Special Taxes and Fees from the main menu.
12. What do I do if I received a storage tax return for a product (MVF or diesel fuel) I don't sell?
You should check the box where it says "I do not sell MVF/diesel fuel" on your storage tax return(s) and return it to the CDTFA.
13. If I own 1,500 gallons of MVF or 1,500 gallons of diesel fuel for sale on November 1, 2017, do I have to pay the storage tax on the full 1,500 gallons, or just the number of gallons over 1,000?
If you own 1,000 gallons or more of tax-paid MVF or 1,000 gallons or more of tax-paid diesel fuel for sale as of 12:01 a.m. on November 1, 2017, you are required to report and pay the storage tax on the total gallons stored for sale (1,500 gallons in this example).
14. I have multiple MVF and diesel fuel storage locations. Some of the locations have less than 1,000 gallons of MVF or diesel fuel stored for sale. Do I owe the storage tax on my total inventory, or just for locations with more than 1,000 gallons of MVF or 1,000 gallons of diesel fuel?
If the total inventory for sale for all your locations is 1,000 gallons or more of tax-paid MVF or 1,000 gallons or more of tax-paid diesel fuel, you must report your total inventory for all locations , even though some locations may have less than 1,000 gallons of MVF or diesel fuel. The storage tax is applicable to the total tax-paid MVF or tax-paid diesel fuel inventory stored in inventory for sale. For example, if you have 500 gallons of tax-paid MVF stored for sale at location A and 1,200 gallons of tax-paid MVF stored for sale at location B, you owe the storage tax on the total 1,700 gallons of MVF.
15. If I own 800 gallons of MVF and 2,000 gallons diesel fuel inventory stored for sale at a single location, how does the 1,000 gallon threshold apply to the two types of fuel inventory? How should I report the storage tax?
The 1,000 gallon threshold applies to each fuel type separately. In this case, you would check the box, "I owned less than 1,000 gallons of MVF as of 12:01 a.m. on November 1, 2017" on the CDTFA-501-PFT storage tax return and report the 2,000 gallons of diesel fuel on the CDTFA-501-DFT storage tax return.
No. The storage tax rate is different for MVF and diesel fuel. If you report both on the same return, you would either over pay or under pay the storage taxes due.