AB 1032: Diesel Fuel Tax Law: reimbursements.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2015-10-04
The Diesel Fuel Tax Law imposes a tax upon the removal, entry, sale, delivery, or specified use of diesel fuel, at a specified rate per gallon. That law provides for a reimbursement of the amount of that tax to persons who have used that tax-paid fuel in specified nontaxable uses, which is allowed through a claim for refund.
This bill would allow a claim for refund for amounts of tax paid on the biodiesel fuel portion of dyed blended biodiesel fuel removed from an approved terminal at the terminal rack, as provided, to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
The Diesel Fuel Tax Law imposes a tax upon the removal, entry, sale, delivery, or specified use of diesel fuel, at a specified rate per gallon. That law provides for a reimbursement of the amount of that tax to persons who have used that tax-paid fuel in specified nontaxable uses, which is allowed through a claim for refund.
This bill would allow a claim for refund for amounts of tax paid on the biodiesel fuel portion of dyed blended biodiesel fuel removed from an approved terminal at the terminal rack, as provided, to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
The Diesel Fuel Tax Law imposes a tax upon the removal, entry, sale, delivery, or specified use of diesel fuel, at a specified rate per gallon. That law provides for a reimbursement of the amount of that tax to persons who have used that tax-paid fuel in specified nontaxable uses, which is allowed through a claim for refund.
This bill would allow a claim for refund for amounts of tax paid on the biodiesel fuel portion of dyed blended biodiesel fuel removed from an approved terminal at the terminal rack, as provided, to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
Persons who have paid a tax for diesel fuel lost, sold, or removed as provided in paragraph (4) of subdivision (a), or used in a nontaxable use, other than on a farm for farming purposes or in an exempt bus operation, shall, except as otherwise provided in this part, be reimbursed and repaid the amount of the tax.
(a)Except as otherwise provided in subdivision (b), a claim for refund with respect to diesel fuel is allowed under this section only if all of the following apply:
(1)Tax was imposed on the diesel fuel to which the claim relates.
(2)The claimant bought or produced the diesel fuel and did not sell or resell it in this state except as provided in paragraph (4).
(3)The claimant has filed a timely claim for refund that contains the information required under subdivision (b) and the claim is supported by the original invoice or original invoice facsimile retained in an alternative storage media showing the purchase. If no original invoice was created, electronic invoicing shall be accepted as reflected by a computerized facsimile when accompanied by an original copy of the bill of lading or fuel manifest that can be directly tied to the electronic invoice.
(4)The diesel fuel was any of the following:
(A)Used for purposes other than operating motor vehicles upon the public highways of the state.
(B)Exported for use outside of this state. Diesel fuel carried from this state in the fuel tank of a motor vehicle is not deemed to be exported from this state unless the diesel fuel becomes subject to tax as an import under the laws of the destination state.
(C)Used in any construction equipment that is exempt from vehicle registration pursuant to the Vehicle Code, while operated within the confines and limits of a construction project.
(D)Used in the operation of a motor vehicle on any highway that is under the jurisdiction of the United States Department of Agriculture and with respect to the use of the highway the claimant pays, or contributes to, the cost of construction or maintenance thereof pursuant to an agreement with, or permission of, the United States Department of Agriculture.
(E)Used in any motor vehicle owned by any county, city and county, city, district, or other political subdivision or public agency when operated by it over any highway constructed and maintained by the United States or any department or agency thereof within a military reservation in this state. If the motor vehicle is operated both over the highway and over a public highway outside the military reservation in a continuous trip the tax shall not be refunded as to that portion of the diesel fuel used to operate the vehicle over the public highway outside the military reservation.
Nothing contained in this section shall be construed as a refund of the tax for the use of diesel fuel in any motor vehicle operated upon a public highway within a military reservation, which highway is constructed or maintained by this state or any political subdivision thereof.
As used in this section, military reservation includes any establishment of the United States Government or any agency thereof used by the Armed Forces of the United States for military, air, or naval operations, including research projects.
(F)Sold by a supplier and which was sold to any consulate officer or consulate employee under circumstances which would have entitled the supplier to an exemption under paragraph (6) of subdivision (a) of Section 60100 if the supplier had sold the diesel fuel directly to the consulate officer or consulate employee.
(G)Lost in the ordinary course of handling, transportation, or storage.
(H)(i)Sold by a person to the United States and its agencies and instrumentalities under circumstances that would have entitled that person to an exemption from the payment of diesel fuel tax under Section 60100 had that person been the supplier of this diesel fuel.
(ii)Sold by a supplier and which was sold by credit card to the United States and its agencies and instrumentalities under circumstances which would have entitled the supplier to an exemption under Section 60100 if the supplier had sold the diesel fuel directly to the United States and its agencies and instrumentalities.
(I)Sold by a person to a train operator for use in a diesel-powered train or for other off-highway use under circumstances that would have entitled that person to an exemption from the payment of diesel fuel tax under Section 60100 had that person been the supplier of this diesel fuel.
(J)Removed from an approved terminal at the terminal rack, but only to the extent that the supplier can show that the tax on the same amount of diesel fuel has been paid more than one time by the same supplier.
(b)Where tax is not imposed on dyed blended biodiesel fuel upon removal from an approved terminal at the terminal rack, if tax was previously imposed on the biodiesel fuel portion of the dyed blended biodiesel fuel, then, pursuant to paragraph (1) of subdivision (a), a claim for refund is allowed for the tax that was paid on that biodiesel fuel, but only to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
(c)Each claim for refund under this section shall contain the following information with respect to all of the diesel fuel covered by the claim:
(1)The name, address, telephone number, and permit number of the person that sold the diesel fuel to the claimant and the date of the purchase.
(2)A statement by the claimant that the diesel fuel covered by the claim did not contain visible evidence of dye.
(3)A statement, which may appear on the invoice, original invoice facsimile, or similar document, by the person that sold the diesel fuel to the claimant that the diesel fuel sold did not contain visible evidence of dye.
(4)The total amount of diesel fuel covered by the claim.
(5)The use made of the diesel fuel covered by the claim described by reference to specific categories listed in paragraph (4) of subdivision (a).
(6)If the diesel fuel covered by the claim was exported, a statement that the claimant has the proof of exportation.
(d)Each claim for refund under this section shall be made on a form prescribed by the board and shall be filed for a calendar year. If, at the close of any of the first three quarters of the calendar year, more than seven hundred fifty dollars ($750) is refundable under this section with respect to diesel fuel used or exported during that quarter or any prior quarter during the calendar year, and for which no other claim has been filed, a claim may be filed for the quarterly period. To facilitate the administration of this section, the board may require the filing of claims for refund for other than yearly periods.
SEC. 2.Section 60505.5 of the Revenue and Taxation Code is amended to read:60505.5.The claim for refund forms prescribed in subdivision (d) of Section 60501 and subdivision (d) of Section 60502 may include, but not be limited to, electronic media. The claim for refund forms shall be authenticated in a form or pursuant to methods as may be prescribed by the board.
Persons who have paid a tax for diesel fuel lost, sold, or removed as provided in paragraph (4) of subdivision (a), or used in a nontaxable use, other than on a farm for farming purposes or in an exempt bus operation, shall, except as otherwise provided in this part, be reimbursed and repaid the amount of the tax.
(a)Except as otherwise provided in subdivision (b), a claim for refund with respect to diesel fuel is allowed under this section only if all of the following apply:
(1)Tax was imposed on the diesel fuel to which the claim relates.
(2)The claimant bought or produced the diesel fuel and did not sell or resell it in this state except as provided in paragraph (4).
(3)The claimant has filed a timely claim for refund that contains the information required under subdivision (b) and the claim is supported by the original invoice or original invoice facsimile retained in an alternative storage media showing the purchase. If no original invoice was created, electronic invoicing shall be accepted as reflected by a computerized facsimile when accompanied by an original copy of the bill of lading or fuel manifest that can be directly tied to the electronic invoice.
(4)The diesel fuel was any of the following:
(A)Used for purposes other than operating motor vehicles upon the public highways of the state.
(B)Exported for use outside of this state. Diesel fuel carried from this state in the fuel tank of a motor vehicle is not deemed to be exported from this state unless the diesel fuel becomes subject to tax as an import under the laws of the destination state.
(C)Used in any construction equipment that is exempt from vehicle registration pursuant to the Vehicle Code, while operated within the confines and limits of a construction project.
(D)Used in the operation of a motor vehicle on any highway that is under the jurisdiction of the United States Department of Agriculture and with respect to the use of the highway the claimant pays, or contributes to, the cost of construction or maintenance thereof pursuant to an agreement with, or permission of, the United States Department of Agriculture.
(E)Used in any motor vehicle owned by any county, city and county, city, district, or other political subdivision or public agency when operated by it over any highway constructed and maintained by the United States or any department or agency thereof within a military reservation in this state. If the motor vehicle is operated both over the highway and over a public highway outside the military reservation in a continuous trip the tax shall not be refunded as to that portion of the diesel fuel used to operate the vehicle over the public highway outside the military reservation.
Nothing contained in this section shall be construed as a refund of the tax for the use of diesel fuel in any motor vehicle operated upon a public highway within a military reservation, which highway is constructed or maintained by this state or any political subdivision thereof.
As used in this section, military reservation includes any establishment of the United States Government or any agency thereof used by the Armed Forces of the United States for military, air, or naval operations, including research projects.
(F)Sold by a supplier and which was sold to any consulate officer or consulate employee under circumstances which would have entitled the supplier to an exemption under paragraph (6) of subdivision (a) of Section 60100 if the supplier had sold the diesel fuel directly to the consulate officer or consulate employee.
(G)Lost in the ordinary course of handling, transportation, or storage.
(H)(i)Sold by a person to the United States and its agencies and instrumentalities under circumstances that would have entitled that person to an exemption from the payment of diesel fuel tax under Section 60100 had that person been the supplier of this diesel fuel.
(ii)Sold by a supplier and which was sold by credit card to the United States and its agencies and instrumentalities under circumstances which would have entitled the supplier to an exemption under Section 60100 if the supplier had sold the diesel fuel directly to the United States and its agencies and instrumentalities.
(I)Sold by a person to a train operator for use in a diesel-powered train or for other off-highway use under circumstances that would have entitled that person to an exemption from the payment of diesel fuel tax under Section 60100 had that person been the supplier of this diesel fuel.
(J)Removed from an approved terminal at the terminal rack, but only to the extent that the supplier can show that the tax on the same amount of diesel fuel has been paid more than one time by the same supplier.
(b)Where tax is not imposed on dyed blended biodiesel fuel upon removal from an approved terminal at the terminal rack, if tax was previously imposed on the biodiesel fuel portion of the dyed blended biodiesel fuel, then, pursuant to paragraph (1) of subdivision (a), a claim for refund is allowed for the tax that was paid on that biodiesel fuel, but only to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
(c)Each claim for refund under this section shall contain the following information with respect to all of the diesel fuel covered by the claim:
(1)The name, address, telephone number, and permit number of the person that sold the diesel fuel to the claimant and the date of the purchase.
(2)A statement by the claimant that the diesel fuel covered by the claim did not contain visible evidence of dye.
(3)A statement, which may appear on the invoice, original invoice facsimile, or similar document, by the person that sold the diesel fuel to the claimant that the diesel fuel sold did not contain visible evidence of dye.
(4)The total amount of diesel fuel covered by the claim.
(5)The use made of the diesel fuel covered by the claim described by reference to specific categories listed in paragraph (4) of subdivision (a).
(6)If the diesel fuel covered by the claim was exported, a statement that the claimant has the proof of exportation.
(d)Each claim for refund under this section shall be made on a form prescribed by the board and shall be filed for a calendar year. If, at the close of any of the first three quarters of the calendar year, more than seven hundred fifty dollars ($750) is refundable under this section with respect to diesel fuel used or exported during that quarter or any prior quarter during the calendar year, and for which no other claim has been filed, a claim may be filed for the quarterly period. To facilitate the administration of this section, the board may require the filing of claims for refund for other than yearly periods.
SEC. 2.Section 60505.5 of the Revenue and Taxation Code is amended to read:60505.5.The claim for refund forms prescribed in subdivision (d) of Section 60501 and subdivision (d) of Section 60502 may include, but not be limited to, electronic media. The claim for refund forms shall be authenticated in a form or pursuant to methods as may be prescribed by the board.
Persons who have paid a tax for diesel fuel lost, sold, or removed as provided in paragraph (4) of subdivision (a), or used in a nontaxable use, other than on a farm for farming purposes or in an exempt bus operation, shall, except as otherwise provided in this part, be reimbursed and repaid the amount of the tax.
(a)A Except as otherwise provided in subdivision (b), a claim for refund with respect to diesel fuel is allowed under this section only if all of the following apply:
(1)Tax was imposed on the diesel fuel to which the claim relates.
(2)The claimant bought or produced the diesel fuel and did not sell or resell it in this state except as provided in paragraph (4).
(3)The claimant has filed a timely claim for refund that contains the information required under subdivision (b) and the claim is supported by the original invoice or original invoice facsimile retained in an alternative storage media showing the purchase. If no original invoice was created, electronic invoicing shall be accepted as reflected by a computerized facsimile when accompanied by an original copy of the bill of lading or fuel manifest that can be directly tied to the electronic invoice.
(4)The diesel fuel was any of the following:
(A)Used for purposes other than operating motor vehicles upon the public highways of the state.
(B)Exported for use outside of this state. Diesel fuel carried from this state in the fuel tank of a motor vehicle is not deemed to be exported from this state unless the diesel fuel becomes subject to tax as an import under the laws of the destination state.
(C)Used in any construction equipment that is exempt from vehicle registration pursuant to the Vehicle Code, while operated within the confines and limits of a construction project.
(D)Used in the operation of a motor vehicle on any highway that is under the jurisdiction of the United States Department of Agriculture and with respect to the use of the highway the claimant pays, or contributes to, the cost of construction or maintenance thereof pursuant to an agreement with, or permission of, the United States Department of Agriculture.
(E)Used in any motor vehicle owned by any county, city and county, city, district, or other political subdivision or public agency when operated by it over any highway constructed and maintained by the United States or any department or agency thereof within a military reservation in this state. If the motor vehicle is operated both over the highway and over a public highway outside the military reservation in a continuous trip the tax shall not be refunded as to that portion of the diesel fuel used to operate the vehicle over the public highway outside the military reservation.
Nothing contained in this section shall be construed as a refund of the tax for the use of diesel fuel in any motor vehicle operated upon a public highway within a military reservation, which highway is constructed or maintained by this state or any political subdivision thereof.
As used in this section, military reservation includes any establishment of the United States Government or any agency thereof used by the Armed Forces of the United States for military, air, or naval operations, including research projects.
(F)Sold by a supplier and which was sold to any consulate officer or consulate employee under circumstances which would have entitled the supplier to an exemption under paragraph (6) of subdivision (a) of Section 60100 if the supplier had sold the diesel fuel directly to the consulate officer or consulate employee.
(G)Lost in the ordinary course of handling, transportation, or storage.
(H)(i)Sold by a person to the United States and its agencies and instrumentalities under circumstances that would have entitled that person to an exemption from the payment of diesel fuel tax under Section 60100 had that person been the supplier of this diesel fuel.
(ii)Sold by a supplier and which was sold by credit card to the United States and its agencies and instrumentalities under circumstances which would have entitled the supplier to an exemption under Section 60100 if the supplier had sold the diesel fuel directly to the United States and its agencies and instrumentalities.
(I)Sold by a person to a train operator for use in a diesel-powered train or for other off-highway use under circumstances that would have entitled that person to an exemption from the payment of diesel fuel tax under Section 60100 had that person been the supplier of this diesel fuel.
(J)Removed from an approved terminal at the terminal rack, but only to the extent that the supplier can show that the tax on the same amount of diesel fuel has been paid more than one time by the same supplier.
(b)Where tax is not imposed on dyed blended biodiesel fuel upon removal from an approved terminal at the terminal rack, if tax was previously imposed on the biodiesel fuel portion of the dyed blended biodiesel fuel, then, pursuant to paragraph (1) of subdivision (a), a claim for refund is allowed for the tax that was paid on that biodiesel fuel, but only to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
(b)
(c)Each claim for refund under this section shall contain the following information with respect to all of the diesel fuel covered by the claim:
(1)The name, address, telephone number, and permit number of the person that sold the diesel fuel to the claimant and the date of the purchase.
(2)A statement by the claimant that the diesel fuel covered by the claim did not contain visible evidence of dye.
(3)A statement, which may appear on the invoice, original invoice facsimile, or similar document, by the person that sold the diesel fuel to the claimant that the diesel fuel sold did not contain visible evidence of dye.
(4)The total amount of diesel fuel covered by the claim.
(5)The use made of the diesel fuel covered by the claim described by reference to specific categories listed in paragraph (4) of subdivision (a).
(6)If the diesel fuel covered by the claim was exported, a statement that the claimant has the proof of exportation.
(c)
(d)Each claim for refund under this section shall be made on a form prescribed by the board and shall be filed for a calendar year. If, at the close of any of the first three quarters of the calendar year, more than seven hundred fifty dollars ($750) is refundable under this section with respect to diesel fuel used or exported during that quarter or any prior quarter during the calendar year, and for which no other claim has been filed, a claim may be filed for the quarterly period. To facilitate the administration of this section, the board may require the filing of claims for refund for other than yearly periods.
SEC. 2.Section 60505.5 of the Revenue and Taxation Code is amended to read:60505.5.The claim for refund forms prescribed in subdivision (c) (d) of Section 60501 and subdivision (d) of Section 60502 may include, but not be limited to, electronic media. The claim for refund forms shall be authenticated in a form or pursuant to methods as may be prescribed by the board.
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Date
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Status
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|---|---|
| Jun 11, 2015 | Referred to Coms. on T. & H. and GOV. & F. |
| Oct 4, 2015 | Chaptered by Secretary of State - Chapter 481, Statutes of 2015. |
| Oct 4, 2015 | Approved by the Governor. |
| Sep 16, 2015 | Enrolled and presented to the Governor at 4 p.m. |
| Sep 2, 2015 | Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0. Page 2413.). |
| Sep 2, 2015 | Read third time. Passed. Ordered to the Assembly. |
| Sep 2, 2015 | In Assembly. Ordered to Engrossing and Enrolling. |
| Sep 1, 2015 | Read second time. Ordered to third reading. |
| Aug 31, 2015 | From committee: Do pass. (Ayes 7. Noes 0.) (August 27). |
| Aug 17, 2015 | In committee: Referred to APPR. suspense file. |
| Jul 8, 2015 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 7. Noes 0.) (July 8). Re-referred to Com. on APPR. |
| Jun 24, 2015 | From committee: Do pass and re-refer to Com. on GOV. & F. with recommendation: To Consent Calendar. (Ayes 11. Noes 0.) (June 23). Re-referred to Com. on GOV. & F. |
| Feb 26, 2015 | Read first time. To print. |
| Jun 1, 2015 | Read third time. Passed. Ordered to the Senate. (Ayes 80. Noes 0. Page 1722.) |
| Jun 1, 2015 | Read third time. Passed. Ordered to the Senate. |
| Jun 1, 2015 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 28, 2015 | Read second time. Ordered to third reading. |
| May 28, 2015 | From committee: Do pass. (Ayes 17. Noes 0.) (May 28). |
| May 6, 2015 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Apr 28, 2015 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 9. Noes 0.) (April 27). Re-referred to Com. on APPR. |
| Apr 13, 2015 | In committee: Set, first hearing. Referred to REV. & TAX. suspense file. |
| Mar 19, 2015 | Referred to Com. on REV. & TAX. |
| Feb 27, 2015 | From printer. May be heard in committee March 29. |
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Date
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Description
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Location
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Votes
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|---|---|---|---|---|
| Sep 2, 2015 | Assembly 3rd Reading AB1032 Salas By Leyva | Senate Floor |
Passed |
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| Aug 27, 2015 | Do pass | Senate Standing Committee on Appropriations |
Passed |
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| Aug 17, 2015 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
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| Jul 8, 2015 | Do pass, but first be re-referred to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Governance and Finance |
Passed |
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| Jun 23, 2015 | Do pass, but first be re-referred to the Committee on [Governance and Finance] with the recommendation: To Consent Calendar | Senate Standing Committee on Transportation and Housing |
Passed |
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| Jun 1, 2015 | AB 1032 SALAS Assembly Third Reading | Assembly Floor |
Passed |
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| May 28, 2015 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
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| Apr 27, 2015 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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|---|---|---|
| California Biodiesel Alliance | ** Support | Sep 2, 2015 |
| California Independent Oil Marketers Association | ** Support | Sep 2, 2015 |
AB 1032
Page 4
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Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: AB 1032
Introduced: 2/26/15
SENATE TRANS. & HOUSING COMMITTEE: 11-0, 6/23/15
AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/8/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
ASSEMBLY FLOOR: 80-0, 6/1/15 - See last page for vote
SUBJECT: Diesel Fuel Tax Law: reimbursements
SOURCE: California Biodiesel Alliance
DIGEST: This bill provides for a refund of the excise tax paid on biodiesel that is blended with tax-exempt diesel fuel.
Existing law:
Defines biodiesel as an alternative vehicle fuel that contains no petroleum and is produced from renewable resources, such as palm oil or used vegetable oil. If biodiesel is combined with petroleum diesel, the resulting fuel is referred to as Bxx where xx equals the percentage of biodiesel in the fuel. Thus, B5 refers to fuel that is 5% renewable diesel and 95% petroleum diesel.
Considers biodiesel to be a diesel fuel and subject to the excise tax on diesel fuel. Currently, the total excise tax paid on a gallon of diesel is 13 cents per gallon. Typically, the state collects the diesel excise tax when a tanker truck picks up the diesel from a refinery or distribution terminal (known as “the rack”) or when it enters the state via truck or rail.
Exempts diesel from the state excise tax if it is used for purposes other than operating motor vehicles upon the public streets and highways and a very few limited on-highway uses. When diesel fuel is not taxed at the rack, then it is dyed to make its illegal use on-road easier for law enforcement to discover. Untaxed diesel is often referred to as dyed diesel. Those who buy taxed diesel, but do not use it for a taxable purpose, are eligible for a refund of the amount of tax paid. To receive the refund, a taxpayer applies to the Board of Equalization (BOE), which processes and issues the refunds, typically as part of the taxpayer’s annual return with the board.
This bill makes a supplier of dyed biodiesel eligible for a refund of the diesel excise tax that the supplier paid prior to the biodiesel being blended with dyed diesel and removed from the rack as tax-exempt.
Background
Most domestically produced biodiesel comes from the Midwest. Typically, the excise tax applies upon the fuel’s entry into California. As such, the “enterer” is responsible for the diesel fuel tax when the fuel enters the state. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent purchase of this tax-paid biodiesel to create a blended diesel fuel — B5 for example — the tax-paid biodiesel fuel is blended with diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the state allows the supplier to claim a credit on their return.
If, however, it is blended with tax-exempt (i.e., dyed) diesel fuel, then it leaves the rack without paying the excise tax. In this case, suppliers have been unable to obtain a credit or refund for taxes paid on that biodiesel. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is taxed coming into the terminal, but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement of the tax from the BOE.
Comments
Purpose. According to the author, this bill provides a necessary and widely agreed upon solution to a tax policy oversight in existing law.
According to the source, this bill helps level the playing field for biodiesel in the state. The biodiesel industry estimates that the current problem in existing law may be effectively preventing biodiesel from being blended into 15-30% of the diesel volume in the state. This bill will remove the tax hurdle and presumably increase the amount of biodiesel used in California.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, the BOE estimates that the overpayment of diesel fuel tax was $779,000 in 2012-13, and $2.8 million in 2013-14 (special fund); projections for future years when the bill would be in effect are not available. BOE indicates that administrative costs are absorbable.
California Biodiesel Alliance (source)
California Independent Oil Marketers Association
OPPOSITION: (Verified 8/28/15)
None received
ASSEMBLY FLOOR: 80-0, 6/1/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
Prepared by: Eric Thronson / T. & H. / (916) 651-4121
8/31/15 16:36:41
**** END ****
AB 1032 (Salas) Page 2 of 2
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1032 (Salas) - Diesel Fuel Tax Law: reimbursements.
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Version: February 26, 2015 |
Policy Vote: T. & H. 11 - 0, GOV. & F. 7 - 0 |
Urgency: No |
Mandate: No |
Hearing Date: August 17, 2015 |
Consultant: Robert Ingenito |
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1032 would provide for a diesel tax refund to a supplier for the portion of biodiesel fuel removed from the terminal rack that is used for nontaxable purposes.
Fiscal Impact: The Board of Equalization (BOE) estimates that the overpayment of diesel fuel tax was $779,000 in 2012-13, and $2.8 million in 2013-14 (special fund); projections for future years when the bill would be in effect are not available. BOE indicates that administrative costs are absorbable.
Background: Under current law, a per-gallon excise tax is imposed on the removal of diesel fuel (1) at the refinery or terminal rack, (2) upon entry into California, or (3) upon sale to an unlicensed person. Current law defines a "terminal" as a distribution facility supplied by pipeline or vessel, from which the diesel fuel may be removed at the rack. The term also includes a diesel fuel production facility (i.e., a refinery) with storage facilities not supplied by pipeline or vessel. These diesel fuel production facilities have the same licensing and reporting requirements as those terminals supplied by pipeline or vessel.
Generally, a "supplier" of diesel fuel owes the excise tax at the time the fuel is removed from the terminal rack. However, if the diesel fuel enters California outside of the bulk transfer/terminal system (i.e., "below the rack" by train or truck), the excise tax is due upon entry into California.
Under current law, biodiesel is considered to be a diesel fuel and is subject to its excise tax. The fuel industry generally describes biodiesel according to the applicable percentage of biodiesel blended with petroleum diesel. For example, "B5" would represent a blend comprised of 95 percent petroleum diesel and 5 percent biodiesel.
Most domestically produced biodiesel comes from the Midwest. Because distribution of this biodiesel occurs outside of the normal bulk transfer/terminal system, the excise tax applies upon the fuel's entry into California. As such, the "enterer" is responsible for the diesel fuel tax when the fuel enters the State. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent purchase of this tax-paid biodiesel to create a blended diesel fuel, the tax-paid biodiesel fuel is blended with "ex-tax" diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the State allows the supplier to claim a credit on their tax return.
Some suppliers, however, have been unable to obtain a credit or refund for taxes paid on biodiesel that enters the State, or is produced in-state, and is delivered into their terminals as tax-paid, but is subsequently removed at the terminal rack for a nontaxable purpose. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, it does not account for tax-paid diesel fuel that is taxed coming into the terminal but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from BOE. Since the tax-paid biodiesel portion is blended with ex-tax dyed diesel fuel, it is not subject to taxation when removed from the terminal rack. Because there is no subsequent taxable event with which to claim the credit, current law does not provide for a reimbursement of the tax-paid portion of the biodiesel portion.
Proposed Law: This bill would provide for a diesel tax refund to a supplier for that portion of biodiesel fuel removed from the terminal rack as a dyed biodiesel fuel.
Staff Comments: By eliminating the double tax related to biodiesel fuel, this bill would encourage its use relative to traditional diesel fuel. BOE’s revenue estimate utilizes actual data from 2012-13 and 2013-14. The bill would take effect on January 1, 2016; given projected growth of the biodiesel fuel industry, actual future refund amounts are likely to be higher.
-- END --
AB 1032 (Salas) Page 3 of 3
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No: |
AB 1032 |
Hearing Date: |
7/8/15 |
Author: |
Salas |
Tax Levy: |
No |
Version: |
2/26/15 |
Fiscal: |
Yes |
Consultant: |
Bouaziz |
||
DIESEL FUEL TAX LAW: REIMBURSEMENTS
Provides for a refund of the excise tax paid on biodiesel that is blended with tax-exempt diesel fuel.
Background and Existing Law
Under the Diesel Fuel Tax Law, state law imposes a $0.11 per gallon tax upon the removal, entry, sale, delivery, or specified use of diesel fuel. The state collects the diesel excise tax when a tanker truck picks up the diesel from a refinery, when it is distributed at the terminal rack, or when it enters the state via truck or rail.
Existing state law exempts diesel from the state excise tax if it is used for purposes other than operating motor vehicles upon the public streets and highways, and a very few limited on-highway uses. When diesel fuel is not taxed, it is dyed to make its illegal use on the road easier for law enforcement to discover. Untaxed diesel is often referred to as dyed diesel.
Those who buy taxed diesel, but do not use it for a taxable purpose, are eligible for a refund of the amount of tax paid. To receive the refund, a taxpayer applies to the Board of Equalization (BOE), which processes and issues the refunds, typically as part of the taxpayer’s annual return with the board.
Proposed Law
Assembly Bill 1032 allows a diesel fuel tax refund to a supplier for the portion of tax paid on biodiesel fuel removed from the terminal rack as a dyed biodiesel blend. AB 1032 requires a supplier to show that the tax on that biodiesel fuel has been paid by the same supplier.
State Revenue Impact
BOE estimates fuel tax overpayments of $779,000 in fiscal year 2012-13, and $2.829 million in 2013-14.
Comments
1. Purpose of the bill. According to the author, “While current law allows reimbursement for tax paid on diesel fuel intended for off-highway uses that has been taxed more than once, it does not account for tax-paid biodiesel blends. In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the Board of Equalization.
AB 1032 seeks to remedy this by creating a refund mechanism for amounts of tax paid on the biodiesel fuel portion, of dyed blended biodiesel fuel removed from an approved refinery or distribution facility.”
2. Issue at hand. Under California law, biodiesel is considered to be a diesel fuel, and is subject to the excise tax on diesel fuel. The fuel industry generally describes biodiesel according to the applicable percentage of biodiesel blended with petroleum diesel. For example, "B5" would represent a blend comprised of 95% petroleum diesel and 5% biodiesel. Most domestically produced biodiesel comes from the Midwest. Because distribution of this biodiesel occurs outside of the normal bulk transfer/terminal system, the excise tax applies upon the fuel's entry into California. As such, the enterer is responsible for the diesel fuel tax when the fuel enters the state. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility. In either case, when another supplier makes a subsequent purchase of tax paid biodiesel to create a blended diesel fuel, the tax paid biodiesel fuel is blended with untaxed diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the state allows the supplier to claim a credit on their return.
However, some suppliers have been unable to obtain a credit or refund for taxes paid on biodiesel that enters the state, or is produced in-state, and is delivered into their terminals as tax-paid, but is subsequently removed at the terminal rack for a nontaxable purpose. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is taxed coming into the terminal but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer, and is also unable to seek reimbursement for the tax from the BOE. AB 1032 allows a diesel fuel tax refund to a supplier for that portion of tax-paid biodiesel fuel removed from the terminal rack as a dyed biodiesel blend.
3. Related legislation. During the 2013-14 Legislative Session, the Assembly Committee on Revenue and Taxation introduced AB 2757, which contained provisions nearly identical to the present bill. AB 2757 passed the Assembly Floor by a vote of 76 to 0. However, in the Senate, AB 2757 was substantially amended and the tax related provisions were removed from the bill. The diesel fuel provisions were then added to AB 2756 (Assembly Committee on Revenue and Taxation, 2014), which the Governor vetoed for unrelated provisions, dealing with the administration of property taxes.
4. Incoming! The Senate Transportation and Housing Committee approved AB 1032 by a vote of 11-0 on June 23, 2015.
Assembly Actions
Assembly Revenue and Taxation 9-0
Assembly Appropriations 17-0
Assembly Floor 80-0
Senate Transportation and Housing 11-0
Support and Opposition
(7/2/15)
Support: California Biodiesel Alliance; California Independent Oil Marketers Association.
Opposition: Unknown.
-- END --
AB 1032 (Salas) Page 3 of 3
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: AB 1032 Hearing Date: 6/23/2015
Author: |
Salas |
||
Version: |
2/26/2015 |
||
Urgency: |
No |
Fiscal: |
Yes |
Consultant: |
Eric Thronson |
||
SUBJECT: Diesel Fuel Tax Law: reimbursements
DIGEST: This bill provides for a refund of the excise tax paid on biodiesel that is blended with tax-exempt diesel fuel.
ANALYSIS:
Biodiesel is an alternative vehicle fuel that contains no petroleum and is produced from renewable resources, such as palm oil or used vegetable oil. If biodiesel is combined with petroleum diesel, the resulting fuel is referred to as Bxx where xx equals the percentage of biodiesel in the fuel. Thus, B5 refers to fuel that is 5% renewable diesel and 95% petroleum diesel.
Under California law, biodiesel is considered to be a diesel fuel and is subject to the excise tax on diesel fuel. Currently, the total excise tax paid on a gallon of diesel is 11 cents per gallon and on July 1 of this year will be 13 cents. State law, known as the “gas tax swap,” requires the State Board of Equalization (BOE) to adjust annually the excise tax on diesel.
Typically, the state collects the diesel excise tax when a tanker truck picks up the diesel from a refinery or distribution terminal (known as “the rack”) or when it enters the state via truck or rail.
Existing law exempts diesel from the state excise tax if it is used for purposes other than operating motor vehicles upon the public streets and highways and a very few limited on-highway uses. When diesel fuel is not taxed at the rack, then it is dyed to make its illegal use on road easier for law enforcement to discover. Untaxed diesel is often referred to as dyed diesel.
Those who buy taxed diesel, but do not use it for a taxable purpose, are eligible for a refund of the amount of tax paid. To receive the refund, a taxpayer applies to the BOE, which processes and issues the refunds, typically as part of the taxpayer’s annual return with the board.
This bill makes a supplier of dyed biodiesel eligible for a refund of the diesel excise tax that the supplier paid prior to the biodiesel being blended with dyed diesel and removed from the rack as tax-exempt.
COMMENTS:
Purpose. According to the author, this bill provides a necessary and widely agreed upon solution to a tax policy oversight in existing law.
Background. Most domestically produced biodiesel comes from the Midwest. Typically, the excise tax applies upon the fuel’s entry into California. As such, the “enterer” is responsible for the diesel fuel tax when the fuel enters the state. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent purchase of this tax-paid biodiesel to create a blended diesel fuel — B5 for example — the tax-paid biodiesel fuel is blended with diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the state allows the supplier to claim a credit on their return.
If, however, it is blended with tax-exempt (i.e., dyed) diesel fuel, then it leaves the rack without paying the excise tax. In this case, suppliers have been unable to obtain a credit or refund for taxes paid on that biodiesel. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is taxed coming into the terminal, but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the BOE.
According to the sponsor, this bill helps level the playing field for biodiesel in the state. The biodiesel industry estimates that the current problem in existing law may be effectively preventing biodiesel from being blended into 15-30% of the diesel volume in the state. This bill will remove the tax hurdle and presumably increase the amount of biodiesel used in California.
Double-referral. The Rules Committee has referred this bill to both this committee and the Governance and Finance Committee. Therefore, if the bill passes this committee, it will be referred to the Committee on Governance and Finance.
Related Legislation:
AB 2757 (Bocanegra, Statutes of 2014) — identical to this bill, provided for a refund of the excise tax paid on biodiesel that is blended with tax-exempt diesel fuel. AB 2757 was unanimously approved by this committee on June 16, 2014, before it was gut-and-amended to address an unrelated issue.
AB 2756 (Assembly Committee on Revenue and Taxation, Statutes of 2014) — initially involved certification of county assessors, but was amended to include the language in this bill late in the session. AB 2756 was vetoed by the governor; the veto message, however, related only to the assessor language and not to content of this bill.
Assembly Votes:
Floor: 80-0
Appr: 17-0
R&T: 9-0
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
POSITIONS: (Communicated to the committee before noon on Wednesday,
June 17, 2015.)
SUPPORT:
California Biodiesel Alliance
California Independent Oil Marketers Association
OPPOSITION:
None received
-- END --
AB 1032
Page 3
ASSEMBLY THIRD READING
AB 1032
(Salas)
As Introduced February 26, 2015
Majority vote
Committee |
Votes |
Ayes |
Noes |
Revenue & Taxation |
9-0 |
Ting, Brough, Dababneh, Gipson, Roger Hernández, Mullin, Patterson, Quirk, Wagner |
|
Appropriations |
17-0 |
Gomez, Bigelow, Bonta, Calderon, Chang, Daly, Eggman, Gallagher, Eduardo Garcia, Gordon, Holden, Jones, Quirk, Rendon, Wagner, Weber, Wood |
|
SUMMARY: Provides that, where tax is not imposed on dyed blended biodiesel fuel upon removal from the terminal rack, if tax was previously imposed on the biodiesel fuel portion, then a claim for refund is allowed for the tax paid on that biodiesel fuel. Specifically, this bill:
Provides that the claim for refund shall only be allowed to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
Makes other technical and conforming changes to the Diesel Fuel Tax Law.
EXISTING LAW:
Imposes a tax, under the Diesel Fuel Tax Law, upon the removal, entry, sale, delivery, or specified use of diesel fuel, at a specified rate per gallon.
Provides for a reimbursement of the amount of the tax to persons who have used tax-paid fuel for specified nontaxable uses, which is allowed through a claim for refund.
FISCAL EFFECT: According to the Assembly Appropriations Committee:
1) Minor and absorbable administrative costs to the Board of Equalization (BOE).
2) Had this bill been in effect the previous two fiscal years, estimated General Fund refunds for overpayment of diesel tax fuel would have been $779,000 and $2,829,000 for Fiscal Year (FY) 2012-13 and FY 2013-14, respectively.
COMMENTS:
The author has provided the following statement in support of this bill:
The Diesel Fuel Tax Law imposes a per gallon tax upon the removal, entry, sale, or delivery of diesel fuel. The law allows for an exemption (via tax refund) when diesel is dyed and intended for off-highway use such as for machinery and equipment used for farming, mining, logging, and construction.
Biodiesel, often sold when blended with traditional petroleum diesel, is considered to be a diesel fuel and subject to the same taxes. Therefore, biodiesel is taxed upon its entry into California or its removal from a refinery or distribution facility. However, when the tax-paid biodiesel is blended with tax-exempt diesel fuel, the biodiesel portion is not provided the same tax exempt status for off-highway uses...
While current law allows reimbursement for tax paid on diesel fuel intended for off-highway uses that has been taxed more than once, it does not account for tax-paid biodiesel blends. In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the Board of Equalization.
AB 1032 seeks to remedy this by creating a refund mechanism for amounts of tax paid on the biodiesel fuel portion of dyed blended biodiesel fuel removed from an approved refinery or distribution facility if a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
Committee Comments:
The Diesel Fuel Tax Law: Under the Diesel Fuel Tax Law, a per-gallon excise tax is imposed on the removal of diesel fuel at the refinery or terminal rack, upon entry into California, or upon sale to an unlicensed person.
Existing law defines a "terminal" as a distribution facility supplied by pipeline or vessel, from which the diesel fuel may be removed at the rack. The term also includes a diesel fuel production facility (i.e., a refinery) with storage facilities not supplied by pipeline or vessel. These diesel fuel production facilities have the same licensing and reporting requirements as those terminals supplied by pipeline or vessel.
Generally, a "supplier" of diesel fuel owes the excise tax at the time the fuel is removed from the terminal rack. However, if the diesel fuel enters California outside of the bulk transfer/terminal system (i.e., "below the rack" by train or truck), the excise tax is due upon entry into California.
The term "supplier" includes, among others, a person owning fuel in a terminal (i.e., a "position holder"), a refiner, an importer, a blender, and a terminal operator. The BOE requires suppliers to be licensed and to file monthly returns or information reports detailing the amount of fuel entered, received, removed, and stored.
Exemptions and refunds: Certain sales by diesel fuel suppliers are exempt from the excise tax, including sales for use outside California, and sales of dyed diesel fuel. Thus, certain parties may claim a credit or refund for tax paid on fuel that is subsequently used in a nontaxable manner.
Biodiesel: Under California law, biodiesel is considered to be a diesel fuel and is subject to the excise tax on diesel fuel. The fuel industry generally describes biodiesel according to the applicable percentage of biodiesel blended with petroleum diesel. For example, "B5" would represent a blend comprised of 95% petroleum diesel and 5% biodiesel.
Most domestically produced biodiesel comes from the Midwest. Because distribution of this biodiesel occurs outside of the normal bulk transfer/terminal system, the excise tax applies upon the fuel's entry into California. As such, the "enterer" is responsible for the diesel fuel tax when the fuel enters California. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent purchase of this tax-paid biodiesel to create a blended diesel fuel, the tax-paid biodiesel fuel is blended with "ex-tax" diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the state allows the supplier to claim a credit on their return.
Some suppliers, however, have been unable to obtain a credit or refund for taxes paid on biodiesel that enters California, or is produced in-state, and is delivered into their terminals as tax-paid, but is subsequently removed at the terminal rack for a nontaxable purpose. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is taxed coming into the terminal but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the BOE. Since the tax-paid biodiesel portion is blended with ex-tax dyed diesel fuel, it is not subject to taxation when removed from the terminal rack. Because there is no subsequent taxable event with which to claim the credit, the current statute does not provide for a reimbursement of the tax-paid portion of the biodiesel.
What would this bill do? This bill allows a diesel fuel tax refund to a supplier for that portion of tax-paid biodiesel fuel removed from the terminal rack as a dyed biodiesel blend.
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0000662
AB 1032
Page 2
Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB 1032
(Salas) – As Introduced February 26, 2015
Policy Committee: |
Revenue and Taxation |
Vote: |
9 - 0 |
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill allows a diesel fuel tax refund to a supplier for that portion of tax-paid biodiesel fuel removed from a terminal or production facility as a dyed biodiesel blend (i.e., nontaxable fuel).
FISCAL EFFECT:
1) Minor and absorbable administrative costs to the Board of Equalization (BOE).
2) Had this bill been in effect the previous two fiscal years, estimated GF refunds for overpayment of diesel tax fuel would have been $779,000 and $2,829,000 for FY 2012-13 and FY 2013-14, respectively.
COMMENTS:
1) Purpose. According to the author, while current law permits reimbursement of tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is removed from a terminal or production facility for nontaxable purposes. In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the BOE. AB 1032 creates a refund mechanism for amounts of tax paid on the biodiesel portion of dyed fuel when a supplier can show the tax on that biodiesel fuel has been paid.
2) Dyed Fuels. Fuels that are not taxed or taxed at a lower rate are often dyed colors in order to distinguish them from fully-taxable fuels. Untaxed fuels are often simply referred to as "dyed." Examples of dyed biodiesel fuels are those allowed for use in equipment that will not be used on public roads, including tractors, generators, boats, home heating, lawn mowers, and other farm equipment.
3) Biodiesel Fuel Supply. Generally, suppliers of diesel fuel owe excise tax at the moment the fuel: (i) is delivered from a terminal, in the case of fuel that enters California through a pipeline or vessel; or (ii) enters California on a train or truck (such fuel is known as "below the rack"). Most domestic biodiesel comes from the Midwest and is distributed via train or truck, attracting tax at the moment of entry into California. Biodiesel that is produced in California, however, is generally taxed upon removal from the fuel production facility.
4) Double-Taxed Blended Fuel. Certain producers may blend biodiesel produced outside California with biodiesel produced in California. Such blending usually occurs at a fuel production facility, and thereby attracts tax upon removal from that facility. The blended portion of this fuel was already taxed, however, upon entry into California, and as a result a portion of the end product was subject to taxation twice. In such cases, the state allows the supplier to claim a credit or refund for that double tax.
5) Recovering Tax on Dyed Biodiesel. If blended fuel is removed from a facility for a non-taxable purpose (i.e., a dyed biodiesel blend), there is no tax event at the point of removal, since the use of the fuel is not subject to tax. As a result, some suppliers have been unable to obtain a credit or refund for taxes paid on biodiesel that enters the state, or has otherwise arrived at the facility as tax paid fuel. This bill provides the statutory mechanism needed to allow suppliers to claim a refund on the tax paid portion of the biodiesel blend.
6) Prior Legislation. This bill contains the same provision as initially proposed in AB 2757 (Committee on Revenue and Taxation) of 2014, and later added to AB 2756 (Committee on Revenue and Taxation) of 2014 in combination with a property tax assessors measure. AB 2756 was vetoed by the Governor because of the property tax assessors measure, and this legislation has been reintroduced as a stand-alone item.
Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081
AB 1032
Page 4
Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 1032
(Salas) – As Introduced February 26, 2015
SUSPENSE
Majority vote. Fiscal committee.
SUBJECT: Diesel Fuel Tax Law: reimbursements
SUMMARY: Provides that, where tax is not imposed on dyed blended biodiesel fuel upon removal from the terminal rack, if tax was previously imposed on the biodiesel fuel portion, then a claim for refund is allowed for the tax paid on that biodiesel fuel. Specifically, this bill:
Provides that the claim for refund shall only be allowed to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
Makes other technical and conforming changes to the Diesel Fuel Tax Law.
EXISTING LAW:
Imposes a tax, under the Diesel Fuel Tax Law, upon the removal, entry, sale, delivery, or specified use of diesel fuel, at a specified rate per gallon.
Provides for a reimbursement of the amount of the tax to persons who have used tax-paid fuel for specified nontaxable uses, which is allowed through a claim for refund.
FISCAL EFFECT: The State Board of Equalization (BOE) estimates that this bill would have resulted in roughly $779,000 in refunds in fiscal year (FY) 2012-13, and roughly $2.83 million in FY 2013-14.
COMMENTS:
The author has provided the following statement in support of this bill:
The Diesel Fuel Tax Law imposes a per gallon tax upon the removal, entry, sale, or delivery of diesel fuel. The law allows for an exemption (via tax refund) when diesel is dyed and intended for off-highway use such as for machinery and equipment used for farming, mining, logging, and construction.
Biodiesel, often sold when blended with traditional petroleum diesel, is considered to be a diesel fuel and subject to the same taxes. Therefore, biodiesel is taxed upon its entry into California or its removal from a refinery or distribution facility. However, when the tax-paid biodiesel is blended with tax-exempt diesel fuel, the biodiesel portion is not provided the same tax exempt status for off-highway uses. [. . .]
While current law allows reimbursement for tax paid on diesel fuel intended for off-highway uses that has been taxed more than once, it does not account for tax-paid biodiesel blends. In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the Board of Equalization.
AB 1032 seeks to remedy this by creating a refund mechanism for
amounts of tax paid on the biodiesel fuel portion of dyed blended
biodiesel fuel removed from an approved refinery or distribution
facility if a supplier can show that the tax on that biodiesel fuel
has been paid by the same supplier.
Proponents of this bill note the following:
AB 1032 would help level the playing field for biodiesel in
California. The Diesel Fuel Tax Law, which imposes a tax on diesel
fuel, currently provides for a reimbursement for the amount of that
tax to entities who have used that tax-paid fuel in certain
nontaxable uses. However, because clear biodiesel is currently
transported to terminals for blending by truck rather than pipeline,
biodiesel producers, who have paid the Diesel Fuel excise or "road
tax," must charge the refiner/blenders for the tax, and the
refiner/blender is not currently able to recoup the funds for the tax
paid on the biodiesel fuel portion of dyed blended diesel fuel
removed from the terminal. We believe that allowing for a
reimbursement (through a claim for refund), when the supplier can
show that they have paid the tax on that biodiesel removed from an
approved terminal, is a necessary and widely agreed upon solution to
this problem.
The BOE notes the following in its staff analysis of this bill:
The BOE would not have any administrative issues with the refund provisions. The BOE administers all provisions of the [Diesel Fuel Tax Law], including the exemption and refund provisions. BOE staff works closely with the fuel industry to remain aware of industry trends and practices, and provides information and assistance in the form of special notices, publications and reports, answers to frequently asked questions, and newsletters. The BOE has previously provided guidance to suppliers that refunds are not allowed for tax-paid biodiesel fuel converted to dyed biodiesel fuel.
Committee Staff Comments:
The Diesel Fuel Tax Law: Under the Diesel Fuel Tax Law, a per-gallon excise tax is imposed on the removal of diesel fuel at the refinery or terminal rack, upon entry into California, or upon sale to an unlicensed person.
Existing law defines a "terminal" as a distribution facility supplied by pipeline or vessel, from which the diesel fuel may be removed at the rack. The term also includes a diesel fuel production facility (i.e., a refinery) with storage facilities not supplied by pipeline or vessel. These diesel fuel production facilities have the same licensing and reporting requirements as those terminals supplied by pipeline or vessel.
Generally, a "supplier" of diesel fuel owes the excise tax at the time the fuel is removed from the terminal rack. However, if the diesel fuel enters California outside of the bulk transfer/terminal system (i.e., "below the rack" by train or truck), the excise tax is due upon entry into California.
The term "supplier" includes, among others, a person owning fuel in a terminal (i.e., a "position holder"), a refiner, an importer, a blender, and a terminal operator. The BOE requires suppliers to be licensed and to file monthly returns or information reports detailing the amount of fuel entered, received, removed, and stored.
Exemptions and refunds: Certain sales by diesel fuel suppliers are exempt from the excise tax, including sales for use outside California, and sales of dyed diesel fuel. Thus, certain parties may claim a credit or refund for tax paid on fuel that is subsequently used in a nontaxable manner.
Biodiesel: Under California law, biodiesel is considered to be a diesel fuel and is subject to the excise tax on diesel fuel. The fuel industry generally describes biodiesel according to the applicable percentage of biodiesel blended with petroleum diesel. For example, "B5" would represent a blend comprised of 95% petroleum diesel and 5% biodiesel.
Most domestically produced biodiesel comes from the Midwest. Because distribution of this biodiesel occurs outside of the normal bulk transfer/terminal system, the excise tax applies upon the fuel's entry into California. As such, the "enterer" is responsible for the diesel fuel tax when the fuel enters California. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent purchase of this tax-paid biodiesel to create a blended diesel fuel, the tax-paid biodiesel fuel is blended with "ex-tax" diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the state allows the supplier to claim a credit on their return.
Some suppliers, however, have been unable to obtain a credit or refund for taxes paid on biodiesel that enters California, or is produced in-state, and is delivered into their terminals as tax-paid, but is subsequently removed at the terminal rack for a nontaxable purpose. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is taxed coming into the terminal but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the BOE. Since the tax-paid biodiesel portion is blended with ex-tax dyed diesel fuel, it is not subject to taxation when removed from the terminal rack. Because there is no subsequent taxable event with which to claim the credit, the current statute does not provide for a reimbursement of the tax-paid portion of the biodiesel.
What would this bill do? This bill allows a diesel fuel tax refund to a supplier for that portion of tax-paid biodiesel fuel removed from the terminal rack as a dyed biodiesel blend.
Why does this all seem so familiar? During the 2013-14 Legislative Session, this Committee introduced AB 2757 (Committee on Revenue and Taxation), which contained provisions substantially identical to the present bill. AB 2757 passed the Assembly Floor by a vote of 76 to 0. In the Senate, however, AB 2757 was substantially amended and the tax-related provisions were removed from the bill. The diesel fuel provisions were then added to AB 2756 (Committee on Revenue and Taxation), which the Governor vetoed for unrelated provisions dealing with the administration of property taxes.
REGISTERED SUPPORT / OPPOSITION:
Support
California Biodiesel Alliance
California Independent Oil Marketers Association
Opposition
None on file
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098
AB 1032
Page 4
Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 1032
(Salas) – As Introduced February 26, 2015
Majority vote. Fiscal committee.
SUBJECT: Diesel Fuel Tax Law: reimbursements
SUMMARY: Provides that, where tax is not imposed on dyed blended biodiesel fuel upon removal from the terminal rack, if tax was previously imposed on the biodiesel fuel portion, then a claim for refund is allowed for the tax paid on that biodiesel fuel. Specifically, this bill:
Provides that the claim for refund shall only be allowed to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier.
Makes other technical and conforming changes to the Diesel Fuel Tax Law.
EXISTING LAW:
Imposes a tax, under the Diesel Fuel Tax Law, upon the removal, entry, sale, delivery, or specified use of diesel fuel, at a specified rate per gallon.
Provides for a reimbursement of the amount of the tax to persons who have used tax-paid fuel for specified nontaxable uses, which is allowed through a claim for refund.
FISCAL EFFECT: The State Board of Equalization (BOE) estimates that this bill would have resulted in roughly $779,000 in refunds in fiscal year (FY) 2012-13, and roughly $2.83 million in FY 2013-14.
COMMENTS:
The author has provided the following statement in support of this bill:
The Diesel Fuel Tax Law imposes a per gallon tax upon the removal, entry, sale, or delivery of diesel fuel. The law allows for an exemption (via tax refund) when diesel is dyed and intended for off-highway use such as for machinery and equipment used for farming, mining, logging, and construction.
Biodiesel, often sold when blended with traditional petroleum diesel, is considered to be a diesel fuel and subject to the same taxes. Therefore, biodiesel is taxed upon its entry into California or its removal from a refinery or distribution facility. However, when the tax-paid biodiesel is blended with tax-exempt diesel fuel, the biodiesel portion is not provided the same tax exempt status for off-highway uses. [. . .]
While current law allows reimbursement for tax paid on diesel fuel intended for off-highway uses that has been taxed more than once, it does not account for tax-paid biodiesel blends. In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the Board of Equalization.
AB 1032 seeks to remedy this by creating a refund mechanism for
amounts of tax paid on the biodiesel fuel portion of dyed blended
biodiesel fuel removed from an approved refinery or distribution
facility if a supplier can show that the tax on that biodiesel fuel
has been paid by the same supplier.
Proponents of this bill note the following:
AB 1032 would help level the playing field for biodiesel in
California. The Diesel Fuel Tax Law, which imposes a tax on diesel
fuel, currently provides for a reimbursement for the amount of that
tax to entities who have used that tax-paid fuel in certain
nontaxable uses. However, because clear biodiesel is currently
transported to terminals for blending by truck rather than pipeline,
biodiesel producers, who have paid the Diesel Fuel excise or "road
tax," must charge the refiner/blenders for the tax, and the
refiner/blender is not currently able to recoup the funds for the tax
paid on the biodiesel fuel portion of dyed blended diesel fuel
removed from the terminal. We believe that allowing for a
reimbursement (through a claim for refund), when the supplier can
show that they have paid the tax on that biodiesel removed from an
approved terminal, is a necessary and widely agreed upon solution to
this problem.
The BOE notes the following in its staff analysis of this bill:
The BOE would not have any administrative issues with the refund provisions. The BOE administers all provisions of the [Diesel Fuel Tax Law], including the exemption and refund provisions. BOE staff works closely with the fuel industry to remain aware of industry trends and practices, and provides information and assistance in the form of special notices, publications and reports, answers to frequently asked questions, and newsletters. The BOE has previously provided guidance to suppliers that refunds are not allowed for tax-paid biodiesel fuel converted to dyed biodiesel fuel.
Committee Staff Comments:
The Diesel Fuel Tax Law: Under the Diesel Fuel Tax Law, a per-gallon excise tax is imposed on the removal of diesel fuel at the refinery or terminal rack, upon entry into California, or upon sale to an unlicensed person.
Existing law defines a "terminal" as a distribution facility supplied by pipeline or vessel, from which the diesel fuel may be removed at the rack. The term also includes a diesel fuel production facility (i.e., a refinery) with storage facilities not supplied by pipeline or vessel. These diesel fuel production facilities have the same licensing and reporting requirements as those terminals supplied by pipeline or vessel.
Generally, a "supplier" of diesel fuel owes the excise tax at the time the fuel is removed from the terminal rack. However, if the diesel fuel enters California outside of the bulk transfer/terminal system (i.e., "below the rack" by train or truck), the excise tax is due upon entry into California.
The term "supplier" includes, among others, a person owning fuel in a terminal (i.e., a "position holder"), a refiner, an importer, a blender, and a terminal operator. The BOE requires suppliers to be licensed and to file monthly returns or information reports detailing the amount of fuel entered, received, removed, and stored.
Exemptions and refunds: Certain sales by diesel fuel suppliers are exempt from the excise tax, including sales for use outside California, and sales of dyed diesel fuel. Thus, certain parties may claim a credit or refund for tax paid on fuel that is subsequently used in a nontaxable manner.
Biodiesel: Under California law, biodiesel is considered to be a diesel fuel and is subject to the excise tax on diesel fuel. The fuel industry generally describes biodiesel according to the applicable percentage of biodiesel blended with petroleum diesel. For example, "B5" would represent a blend comprised of 95% petroleum diesel and 5% biodiesel.
Most domestically produced biodiesel comes from the Midwest. Because distribution of this biodiesel occurs outside of the normal bulk transfer/terminal system, the excise tax applies upon the fuel's entry into California. As such, the "enterer" is responsible for the diesel fuel tax when the fuel enters California. Biodiesel that is produced in California, on the other hand, is generally taxed upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent purchase of this tax-paid biodiesel to create a blended diesel fuel, the tax-paid biodiesel fuel is blended with "ex-tax" diesel fuel. When this blended fuel is subsequently removed from the terminal rack, it results in tax being assessed twice on the biodiesel portion. In such cases, the state allows the supplier to claim a credit on their return.
Some suppliers, however, have been unable to obtain a credit or refund for taxes paid on biodiesel that enters California, or is produced in-state, and is delivered into their terminals as tax-paid, but is subsequently removed at the terminal rack for a nontaxable purpose. In other words, while current law allows reimbursement for tax paid on diesel fuel that has been taxed more than once, the current statutory regime does not account for tax-paid diesel fuel that is taxed coming into the terminal but removed for nontaxable purposes (i.e., dyed biodiesel blends). In such cases, the supplier is unable to recover the tax from the customer and is also unable to seek reimbursement for the tax from the BOE. Since the tax-paid biodiesel portion is blended with ex-tax dyed diesel fuel, it is not subject to taxation when removed from the terminal rack. Because there is no subsequent taxable event with which to claim the credit, the current statute does not provide for a reimbursement of the tax-paid portion of the biodiesel.
What would this bill do? This bill allows a diesel fuel tax refund to a supplier for that portion of tax-paid biodiesel fuel removed from the terminal rack as a dyed biodiesel blend.
Why does this all seem so familiar? During the 2013-14 Legislative Session, this Committee introduced AB 2757 (Committee on Revenue and Taxation), which contained provisions substantially identical to the present bill. AB 2757 passed the Assembly Floor by a vote of 76 to 0. In the Senate, however, AB 2757 was substantially amended and the tax-related provisions were removed from the bill. The diesel fuel provisions were then added to AB 2756 (Committee on Revenue and Taxation), which the Governor vetoed for unrelated provisions dealing with the administration of property taxes.
REGISTERED SUPPORT / OPPOSITION:
Support
California Biodiesel Alliance
California Independent Oil Marketers Association
Opposition
None on file
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098
Discussed in Hearing
2MIN
Senate Floor
13SEC
Senate Standing Committee on Appropriations
35SEC
Assembly Floor
Bill Author
Bill Co-Author(s):