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Business Taxes Law Guide—Revision 2024

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Motor Vehicle Fuel Tax Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 2. Motor Vehicle Fuel Tax Law

Chapter 2. Imposition of Tax.1

1Added by Stats. 2000, Ch. 1053 (AB 2114), operative January 1, 2002.

7360. Levy of tax. Repealed by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011.

7360. Levy of tax. (a) (1) A tax of eighteen cents ($0.18) is hereby imposed upon each gallon of fuel subject to the tax in Sections 7362, 7363, and 7364.

(2) If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by paragraph (1), on and after the date of the reduction, shall be recalculated by an amount so that the combined state rate under paragraph (1) and the federal tax rate per gallon equal twenty-seven cents ($0.27).

(3) If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.

(b) (1) On and after July 1, 2010, in addition to the tax imposed by subdivision (a), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364 in an amount equal to seventeen and three-tenths cents ($0.173) per gallon.

(2) For the 2011-12 fiscal year and each fiscal year thereafter, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board, and that rate shall be effective during the state's next fiscal year.

(3) In order to maintain revenue neutrality for each year, beginning with the rate adjustment on or before March 1, 2012, the adjustment under paragraph (2) shall also take into account the extent to which the actual amount of revenues derived pursuant to this subdivision and, as applicable, Section 7361.1, the revenue loss attributable to the exemption provided by Section 6357.7 resulted in a net revenue gain or loss for the fiscal year ending prior to the rate adjustment date on or before March 1.

(4) The intent of paragraphs (2) and (3) is to ensure that the act adding this subdivision and Section 6357.7 does not produce a net revenue gain in state taxes.

(5) Commencing July 1, 2019, the adjustments in paragraphs (2) and (3) shall cease, and the rate imposed by this subdivision shall be the rate in paragraph (1).

(c) On and after November 1, 2017, in addition to the taxes imposed by subdivisions (a) and (b), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364, in an amount equal to twelve cents ($0.12) per gallon.

(d) On July 1, 2020, and every July 1 thereafter, the board shall adjust the taxes imposed by subdivisions (a), (b), and (c), with the adjustment to apply to both to the base tax rates specified in those provisions and to any previous adjustment in rates made pursuant to this subdivision, by increasing the taxes by a percentage amount equal to the increase in the California Consumer Price Index, as calculated by the Department of Finance with the resulting taxes rounded to the nearest one-tenth of one cent ($0.01). The first adjustment pursuant to this subdivision shall be a percentage amount equal to the increase in the California Consumer Price Index from November 1, 2017, to November 1, 2019. Subsequent annual adjustments shall cover subsequent 12 month periods. The incremental change shall be added to the associated rate for that year.

(e) Any increases to the taxes imposed under subdivisions (a), (b), and (c) that are enacted by legislation subsequent to July 1, 2017, shall be deemed to be changes to the base tax rates for purposes of the California Consumer Price Index calculation and adjustment performed pursuant to subdivision (d).

History—Added by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011. Stats. 2017, Ch. 5 (SB 1), in effect April 28, 2017, added paragraph (5) to subdivision (b); and added subdivisions (c), (d), and (e).

7361. Floor stock tax. (a) For the privilege of storing, for the purpose of removal, sale, or use, every distributor owning motor vehicle fuel on January 1, 2002, shall pay a tax of eighteen cents ($0.18) for each gallon of motor vehicle fuel according to the volumetric measure thereof, on which a tax has not been imposed under Part 2 (commencing with Section 7301) as in effect on December 31, 2001, and tax would have been imposed on any prior removal, entry, or sale of motor vehicle fuel had Sections 7360 to 7363, inclusive, applied to motor vehicle fuel for the period before January 1, 2002.

(b) For purposes of subdivision (a):

(1) "Storing" includes the possession in a storage facility, except an approved terminal or refinery, of motor vehicle fuel as well as the motor vehicle fuel purchased from and invoiced by the seller prior to January 1, 2002, and in transit on that date.

(2) "Owning" means having title to the motor vehicle fuel.

(3) "Distributor" means any person who was required to be licensed as a distributor under Part 2 (commencing with Section 7301) as in effect on December 31, 2001.

7361.1. Storage tax. [Repealed by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011.]

7361.1. Storage tax. (a) For the privilege of storing, for the purpose of sale, each supplier, wholesaler, and retailer owning 1,000 or more gallons of tax-paid motor vehicle fuel, other than aviation gasoline, on July 1, 2010, shall pay a storage tax of seventeen and three-tenths cents ($0.173) per gallon of tax-paid motor vehicle fuel, other than aviation gasoline, in storage according to the volumetric measure thereof.

(b) For purposes of this section:

(1) "Owning" means having title to the motor vehicle fuel, other than aviation gasoline.

(2) "Retailer" means any person who sells motor vehicle fuel, other than aviation gasoline, in this state to a person who subsequently uses the motor vehicle fuel, other than aviation gasoline.

(3) "Storing" includes the ownership or possession of tax-paid motor vehicle fuel, other than aviation gasoline, outside of the bulk transfer or terminal system, including the holding of tax-paid motor vehicle fuel, other than aviation gasoline, 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 motor vehicle fuel, other than aviation gasoline, purchased from and invoiced by the seller, and tax-paid motor vehicle fuel, other than aviation gasoline removed from a terminal or entered into by a supplier, prior to the date specified in subdivision (a) and in transit on that date.

(4) "Wholesaler" means any person who sells motor vehicle fuel, other than aviation gasoline, in this state for resale to a retailer or to a person who is not a retailer and subsequently uses the motor vehicle fuel, other than aviation gasoline.

History—Added by Stats. 2011, Ch. 6 (AB 105), in effect March 24, 2011.

7361.2. Storage tax. (a) For the privilege of storing, for the purpose of sale, each supplier, wholesaler, and retailer owning 1,000 or more gallons of tax-paid motor vehicle fuel on November 1, 2017, shall pay a storage tax, the rate of which shall be determined by the board pursuant to the difference in the rate of the tax on motor vehicle fuel in effect on October 31, 2017, and the rate in effect on November 1, 2017, on tax-paid motor vehicle fuel in storage according to the volumetric measure thereof.

(b) For purposes of this section:

(1) "Owning" means having title to the motor vehicle fuel.

(2) "Retailer" means any person who sells motor vehicle fuel in this state to a person who subsequently uses the motor vehicle fuel.

(3) "Storing" includes the ownership or possession of tax-paid motor vehicle fuel outside of the bulk transfer/terminal system, including the holding of tax-paid motor vehicle 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 motor vehicle fuel purchased from and invoiced by the seller, and tax-paid motor vehicle fuel removed from a terminal or entered into by a supplier, prior to the date specified in subdivision (a) and in transit on that date.

(4) "Wholesaler" means any person who sells diesel fuel in this state for resale to a retailer or to a person who is not a retailer and subsequently uses the motor vehicle fuel.

History—Added by Stats. 2017, Ch. 5 (AB 105), in effect April 28, 2017.

7362. Levy of tax; rack removal. The tax specified in Section 7360 is imposed on the removal of motor vehicle fuel in this state from a terminal if the motor vehicle fuel is removed at the rack.

Legal incidence of Kansas motor fuel excise tax on distributor.—U.S. Supreme Court held that Kansas motor fuel tax imposed on the receipt of fuel by distributors was a nondiscriminatory tax imposed on an off-reservation transaction between non-Indians and did not violate the Indian nation's sovereignty. The Kansas statute was dispositive that the legal incidence of the tax was on the distributor, and, even if the Kansas statute did not explicitly state the legal incidence was on the distributor, the Court would look to who was liable for the tax to decide who bears the legal incidence of the tax. Wagnon v. Prairie Band Potawatomi Nation, (2005) 546 U.S. 95.

7363. Levy of tax; other. The tax specified in Section 7360 is also imposed on all of the following:

(a) The removal of motor vehicle fuel in this state from any refinery if either of the following applies:

(1) The removal is by bulk transfer and the refiner or the owner of the motor vehicle fuel immediately before the removal is not a licensed supplier.

(2) The removal is at the refinery rack.

(b) The entry of motor vehicle fuel into this state for sale, consumption, use, or warehousing if either of the following applies:

(1) The entry is by bulk transfer and the enterer is not a licensed supplier.

(2) The entry is not by bulk transfer.

(c) The removal or sale of motor vehicle fuel in this state to an unlicensed person unless there was a prior taxable removal, entry, or sale of the motor vehicle fuel.

(d) The removal or sale of blended motor vehicle fuel in this state by the blender thereof. The number of gallons of blended motor vehicle fuel subject to tax is the difference between the total number of gallons of blended motor vehicle fuel removed or sold and the number of gallons of previously taxed motor vehicle fuel used to produce the blended motor vehicle fuel.

7364. Levy of tax; backup tax. The tax specified in Section 7360 is imposed as a backup tax as follows:

(a) On the delivery into the fuel tank of a motor vehicle fuel-powered highway vehicle of:

(1) Any motor vehicle fuel on which a claim for refund has been allowed; or

(2) Any liquid on which tax has not been imposed by this part, Part 3 (commencing with Section 8601), or Part 31 (commencing with Section 60001).

(b) On the sale of any motor vehicle fuel on which a claim for refund has been allowed.

(c) On the sale and delivery into the fuel tank of a motor vehicle fuel-powered highway vehicle of any liquid on which tax has not been imposed by this part, Part 3 (commencing with Section 8601), or Part 31 (commencing with Section 60001).

History— Stats. 2001, Ch. 429 (AB 309), operative January 1, 2002, added "as follows:" after "as a backup tax" in the first paragraph; added subdivision letter designation (a) before "On the delivery into"; substituted "On" for "on" before "the delivery into", deleted "or sale" after "highway vehicle", deleted "any of the following" after "highway vehicle of" in subdivision (a); relettered former subdivisions (a) and (b) as subdivision (a) paragraphs (1) and (2); added ", or" after "has been allowed" in subdivision (a) paragraph (1); and added subdivision (c).

7365. Blender liability. Any person that produces blended motor vehicle fuel outside the bulk transfer/terminal system (the blender) shall pay tax as provided in subdivision (d) of Section 7363.

7366. Enterer liability. Every enterer shall pay tax on motor vehicle fuel imported into this state as provided in subdivision (b) of Section 7363.

7367. Highway vehicle operator/fueler liability. Every highway vehicle operator/fueler is liable for the backup tax imposed under Section 7364.

7368. Position holder liability. Every position holder shall pay the tax on the removal of motor vehicle fuel from a terminal as provided in Section 7362.

7369. Refiner liability. Every refiner shall pay tax on the removal of motor vehicle fuel from a refinery as provided in subdivision (a) of Section 7363.

7370. Terminal operator liability. The terminal operator is jointly and severally liable for the tax imposed under Section 7362 if both of the following apply:

(a) The position holder with respect to the motor vehicle fuel is a person other than the terminal operator and is not a licensed supplier.

(b) The terminal operator has not met the conditions of Section 7371.

7371. Terminal operator exclusion. A terminal operator is not liable for tax under Section 7370, if at the time of the removal, all of the following apply:

(a) The terminal operator is a licensed supplier.

(b) The terminal operator has an unexpired notification certificate from the position holder as required by the Internal Revenue Service.

(c) The terminal operator has no reason to believe that any information in the certificate is false.

7372. Two-party exchange. (a) The board may accept from the person who receives motor vehicle fuel removed at a refinery or terminal rack an amount equal to the tax due and required to be paid by the refiner or positionholder upon the removal of the motor vehicle fuel from a refinery or terminal rack, as if the amount were payment of the tax by the refiner or positionholder under Section 7362 or 7363, as the case may be, if the Internal Revenue Service authorizes payment of federal fuel taxes by the receiving party under a two-party exchange agreement or similar arrangement.

(b) The refiner or positionholder shall remain primarily liable for payment of the tax imposed by Section 7362 or 7363 for motor vehicle fuel removed at the refinery or terminal rack, as the case may be, plus any penalty or interest, until the amount is finally paid and credited to the account of the responsible refiner or positionholder; provided, however, that the board, at its discretion, may relieve the refiner or positionholder from primary liability for payment of tax imposed by Section 7362 or 7363 and hold another person primarily liable for the tax if (1) the Internal Revenue Service authorizes payment of fuel taxes by the receiving party under a two-party exchange agreement, and (2) under the Internal Revenue Service approach to two-party exchange agreements, another person is primarily liable for payment of the tax, and (3) the board elects to follow the Internal Revenue Service approach.

(c) The board may adopt those regulations as it deems appropriate to carry out this section.

History—Added by Stats. 2001, Ch. 429 (AB 309), operative January 1, 2002.

7373. Presumption of removal. (a) For the purpose of the proper administration of this part and to prevent evasion of the tax, unless the contrary is established, it shall be presumed that all motor vehicle fuel received at a terminal in this state, imported into this state, or refined and placed into storage for removal at a refinery in this state or blended motor vehicle fuel blended or converted in this state and no longer in the possession of the supplier has been removed or sold by the supplier.

(b) The presumption shall not apply if the supplier proves to the satisfaction of the board that both:

(1) The supplier has exercised ordinary care in entrusting control or possession of the motor vehicle fuel to another person.

(2) The person to whom the supplier has entrusted the control or possession of the motor vehicle fuel as bailee, consignee, employee, or agent, caused a removal or sale by the act of converting to that person's own use the motor vehicle fuel so entrusted to that person by the supplier.

(c) If the supplier proves to the satisfaction of the board, the existence of both of the circumstances in paragraphs (1) and (2) of subdivision (b), then the person who converted the motor vehicle fuel to his or her own use, as well as any other person receiving that motor vehicle fuel with the knowledge that it was so converted, shall be liable for payment of the tax imposed upon that removal or sale, and all of those persons shall be considered as suppliers for the purpose of Chapter 5 (commencing with Section 7651) or Chapter 6 (commencing with Section 7851) of this part.

History—Added by Stats. 2001, Ch. 429 (AB 309), operative January 1, 2002.