Effort to cap fuel sales tax dies in Indiana

| 5/10/2007

A bill has died in the Indiana Senate that called for changing how the state collects taxes on fuel. If it had been approved, state government would have lost as much as $45 million annually in revenue.

The Senate Tax and Fiscal Policy Committee failed to release the bill to the full chamber before a deadline to advance, effectively killing it for the year. The House previously approved it.

Sponsored by Rep. Dennie Oxley, D-Milltown, the bill would have suspended collection of the 6-percent sales tax on diesel and gas purchases at certain thresholds. Indiana is one of nine states to collect the tax at the pump.

The sales tax on fuel is separate from the 27-cent-per-gallon excise tax charged on diesel and 29-cent-per-gallon excise tax charged on gas. The sales tax is applied to the base price of fuel before the excise taxes are added.

The bill – HB1622 – would have applied the sales tax up to a total pump price for diesel of $2.40. If prices exceed that amount, truckers and others would not have had to pay sales tax on the difference between the higher price and $2.40.

The sales tax on gasoline only would have been applied to the first $2.25 of the pump price.

An analysis of the bill puts the cost to the state for capping the tax at between $37 million and $45 million. Those revenues are earmarked largely for the state’s general fund.

The effort can be brought back for consideration during the regular session that begins in January 2008.

– By Keith Goble, state legislative editor