New York governor signs bill capping sales tax on fuel

| 5/23/2006

In hopes of appeasing fed-up constituents who are paying $3 per gallon for fuel in many areas of New York, Gov. George Pataki has signed a bill into law putting a “cap” on the sales tax on diesel and gasoline. The new rule takes effect June 1.

“I am signing this legislation in hopes that these tax cuts will provide some modest relief, especially as we enter the busy summer travel and tourism season,” Pataki said in a written statement.

The sales tax cap allows the state to add sales tax to only the first $2 worth of a gallon of diesel or gasoline. It will cap the tax at 8 cents per gallon – saving consumers about 4 cents per gallon at current prices. For counties and local governments, the cap is optional.

The tax, which doesn’t affect the status of the International Fuel Tax Agreement, is set at a percentage of the price of fuel, and rises and falls based on the sales price. At $3 per gallon, the state collects 12 cents per gallon in sales tax. Counties and other localities add an additional levy between 12 and 15 cents.

It will cost the state about $225 million annually in uncollected taxes. The losses will double if local governments go along with the cap.

The new law, previously A11331, fines fuel station owners who do not lower prices to coincide with the tax. Violators could face up to a $5,000 per occurrence.

Pataki also has directed the New York State Thruway Authority to make alternative fuels, like biodiesel and ethanol, available at stations along the roadway by the end of 2007.

New York lawmakers aren’t alone in their pursuit of fuel cost relief. Other states where relief actions are being sought include:

An Alabama House Democrat has requested that Republican Gov. Bob Riley open a special session so lawmakers can discuss a possible repeal of the state’s fuel tax. Nothing is in writing yet and there is no word on whether diesel would be included in any tax breaks.

Connecticut Gov. M. Jodi Rell said she would consider a legislative effort to suspend the state’s per-gallon tax on diesel and gasoline for the summer. A special session would need to be called for lawmakers to address it.

Georgia Democrats are calling for a 60-day moratorium on the state’s per-gallon taxes on fuel. Republican Gov. Sonny Perdue suspended the collection on fuel for one month last fall.

A Republican candidate for the Nevada governor’s seat is calling for the state’s portion of the gas tax to be repealed. The proposal doesn’t include diesel.

A Minnesota House lawmaker has introduced a bill that would suspend the state’s 20-cent-per-gallon tax on gasoline-based fuels for six months. The same tax on diesel would remain intact.

In New Hampshire, a Republican gubernatorial hopeful is calling for a suspension of the state’s per-gallon tax on diesel and gasoline for the summer.

Some Republican lawmakers in New Mexico have plans to push Democratic Gov. Bill Richardson to round up the Legislature for a special session to discuss suspending the state’s tax on diesel and gasoline.

North Carolina Gov. Mike Easley, a Democrat, has asked state lawmakers to cap the state’s per gallon tax on diesel and gasoline so that the rate will not increase from the current level. The state’s fuel tax can change every six months because a portion is set on recent average wholesale prices. The next change could take place in July. House Democrats also have plans to keep the fuel tax from increasing this year.

Democrats in the Texas House are calling for a 90-day suspension of the state’s 20-cent-per-gallon tax on motor fuels.

– By Keith Goble, state legislative editor