The California State Board of Equalization (BOE) will consider lowering the excise tax rate for gasoline by 2.2 cents for Fiscal Year (FY) 2016-17 during its 23 February 2016 meeting in Culver City. If adopted, the excise tax rate on gas will be 27.8 cents per gallon from 1 July 2016 through 30 June 2017. The current excise tax rate of 30 cents per gallon remains in effect until 30 June 2016.
California drivers pay two types of state taxes on gas: sales tax, which is a percentage of the price, and a per-gallon excise tax.
Before AB 6 and SB 70—collectively referred to as the “fuel tax swap”—took effect in 2010, drivers paid the full sales tax rate (then 8.25%), and an excise tax rate of 18 cents per gallon.
The fuel tax swap lowered the sales tax rate on gasoline to 2.25% and requires the BOE to set a per-gallon excise tax rate annually before 1 March. This excise tax rate is calculated such that drivers still pay the same amount in overall taxes at the pump that they would have paid before the swap.
In FY 2014-15, the BOE collected nearly $5.4 billion in excise tax for the state’s Motor Vehicle Fuel Account, which helps pay for highways, roads and other public transportation projects. The sales tax on gasoline also helps fund a variety of state and local road programs.
How the rate is determined. The excise tax rate takes into account a number of factors including: forecasted gas price; forecasted amount of gallons sold; sales tax revenue that would have been collected prior to the fuel tax swap; and tax revenue over- or under-collected in the prior fiscal year. The rate ensures that over a three-year period, motorists do not pay more or less in overall gas taxes than they would have prior to the swap.
The five-member California State Board of Equalization (BOE) is a publicly elected tax board. The BOE collects $60 billion annually in taxes and fees supporting state and local government services. It hears business tax appeals, acts as the appellate body for franchise and personal income tax appeals, and serves a significant role in the assessment and administration of property taxes.