Indiana House OKs cap on fuel sales tax

| 3/9/2007

The Indiana House has approved a bill that would change how the state collects taxes on fuel. If approved, state government would lose as much as $45 million annually in revenue.

House Democrats, who control the chamber by a 51-49 margin, pledged during the fall elections to pursue legislation that would end the practice of collecting sales tax on fuel purchases. Indiana is one of nine states to collect the tax at the pump.

They later abandoned that plan because it would cost the state as much as $360 million in lost revenue each year, The Associated Press reported. Instead, House lawmakers voted 75-25 to approve a bill that would suspend collection of the 6 percent sales tax on diesel and gas purchases at certain thresholds. It now heads to the Senate for debate.

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.

Sponsored by Rep. Dennie Oxley, D-Milltown, the bill would apply 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 to pay sales tax on the difference between the higher price and $2.40.

The sales tax on gasoline only would be 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.

"While this legislation is not everything I wanted, it does begin to get the state of Indiana out of the business of making a profit from (fuel) price gouging," Oxley said in a written statement.

The bill - HB1622 - is in the Senate Tax and Fiscal Policy Committee.

- By Keith Goble, state legislative editor