Seven states change fuel tax rates

By Keith Goble, Land Line state legislative editor

States across the country made changes to their fuel tax collection effective July 1.

North Carolina’s fuel tax rate is down. The action follows a 2015 state law that overhauled how the state collects tax on fuel purchases.

The state’s per-gallon fuel tax rate was 37.5 cents. The fuel tax was composed of a flat rate and a wholesale component. It was adjusted twice annually based on wholesale prices, which plunged in the months leading up to the 2015 rule change.

In order to prevent an anticipated tax dip below 30 cents, state lawmakers abandoned the wholesale component and instead cut the state’s fuel tax rate by 1.5 cents to 36 cents per gallon on April 1, 2015. An additional cut of a penny took place on Jan. 1, 2016, and the final cut was made on July 1 when the tax rate was set at 34 cents.

Starting Jan. 1, 2017, a new formula will be used to calculate the tax rate. Specifically, the formula will ultimately be based on increases in state population and a consumer energy price index.

Continued low fuel prices have set in motion a price drop in Nebraska. Six months after the state’s fuel tax rate was increased by 1.5 cents to 26.8 cents, the state turned around and chopped off a penny.

The state tax is made up of three components: the variable tax, fixed tax and wholesale tax. The variable and wholesale rates are adjusted twice annually.

A separate petroleum release remedial action fee is not included in the state tax rates and remains unchanged at 0.9 cents per gallon on gas and at 0.3 cents on diesel.

The penny dip in the state’s tax rate is a result of continued low fuel prices and a six-month adjustment in the wholesale tax rate.

The state rate adjustment to 25.8 cents comes six months after legislators enacted the first in a series of four 1.5-cent yearly increases in the state’s fixed rate.

A dip in the gas tax also occurred across the state line in Iowa. The state’s diesel tax rate, however, is unchanged.

The 30.8-cent gas tax rate now is set at 30.7 cents while the diesel rate remains at 32.5 cents. The rates are based on a fuel distribution percentage formula.

A similar setup affects truckers and other drivers traveling in California. The state fuel tax rates are made up of an excise rate and a sales tax rate.

California’s Board of Equalization voted to decrease the excise rate on gas by 2.2 cents through June 30, 2017. As a result, the gas rate for the coming year falls from

30 cents to 27.8 cents. At the same time, the 13-cent diesel rate is raised 3 cents to 16 cents per gallon.

Sales tax collection on diesel fuel and gasoline is 17 cents and 5 cents, respectively. The diesel rate is down 5.5 cents from 22.5 cents while the gas rate is unchanged.

After the math is worked out on both tax components truckers now pay 33 cents per gallon and motorists pay 32.8 cents.

Across the country in Connecticut a significant savings is available to professional drivers. The previous 50.3-cent diesel rate was dropped by 8.6 cents to 41.7 cents.

The change is due to a law that links the state’s tax rate to wholesale fuel prices.

The new tax rate will remain in effect for one year.

Down the coast in Maryland an increase of 0.9 cents now is applied to gas and diesel purchases.

The boost is required by a 2013 law that raised the sales tax rate from 2 to 3 percent, along with an annual percent change in the consumer price index.

The two-part diesel rate is set at 34.25 cents per gallon, and the gas rate is set at 33.5 cents.

In Washington state, the fuel tax rates are up by one nickel.

The state was collecting 44.5 cents per gallon on diesel and gas purchases.

The rate was set in August 2015 following Gov. Jay Inslee’s signature on a $16.1 billion transportation revenue bill that increased the then-37.5-cent tax rate by 11.9 cents over two years.

On July 1 a second, 4.9-cent rate hike to 49.4 cents gives Washington the second-highest diesel tax rate in the nation – behind only Pennsylvania.