Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013

Use Fuel Tax Law

Analysis of Use Fuel Tax Law

Nature and Rate of Tax. The use fuel tax is imposed upon the use of "fuel." The rate of tax is eighteen cents ($0.18) per gallon of diesel and similar fuels; six cents ($0.06) per gallon of liquefied petroleum gas and liquid natural gas, seven cents ($0.07) per 100 cubic feet of compressed natural gas, measured at standard pressure and temperature and nine cents ($0.09) per gallon of ethanol and methanol containing not more than 15 percent gasoline or diesel fuels. The owner or operator of a vehicle propelled by a system using liquefied petroleum gas, liquid natural gas, or compressed natural gas may pay an annual flat rate fuel tax based on the type or weight of the vehicle instead of the above tax per gallon. (Secs. 8651, 8651.5, 8651.6, 8651.7, and 8651.8.)

Beginning July 1, 1995, the excise tax on diesel fuel will be administered under the Diesel Fuel Tax Law in Part 31 (commencing with Section 60001) which moves the collection point to the terminal rack level. The tax rate will remain the same, but the liability for the tax will be shifted to conform with federal law.

Motor Vehicle. "Motor vehicle" includes every self-propelled vehicle operated or suitable for operation on the highway. (Sec. 8603.)

Highway. "Highway" includes any road of whatever nature publicly maintained and open to the use of the public for purposes of vehicular travel. (Sec. 8605.)

Interstate User. "Interstate user" includes any person who uses fuel in the propulsion of a motor vehicle in this state and who operates the motor vehicle within and without the state or United States.

Fuel. "Fuel" includes any combustible gas or liquid used in an internal combustion engine for the generation of power, except fuel subject to tax under the Motor Vehicle Fuel Tax Law (primarily gasoline). It includes diesel fuel, liquefied petroleum gas and natural gas. It does not include any combustible gas or liquid specifically manufactured and used for racing motor vehicles at a racetrack. (Sec. 8604.)

Use. "Use" in addition to the consumption of fuel to propel a motor vehicle includes placing the fuel into any receptacle on a motor vehicle from which fuel is supplied for the propulsion of the vehicle. "Use" does not include placing the fuel into storage tanks. (Sec. 8607.)

User. A "user" is a person who uses fuel within the meaning of the Use Fuel Tax Law. (Sec. 8608.)

Vendor. A "vendor" is any person who sells fuel in this state and places or causes the fuel to be placed into the fuel tank of a motor vehicle. (Sec. 8610.)

User Permits. Every person desiring to become a "user" must obtain a permit from the Board and deposit the required security. The permit is valid until canceled or revoked. (Secs. 8701–8707.) A California trip permit may be issued to interstate users for entry into this state. The permit is valid for four consecutive days. (Sec. 8708.)

Vendor Permits. Every person desiring to become a "vendor" must obtain a permit from the Board and deposit the required security. The permit is valid until canceled or revoked. (Secs. 8711–8715.) A person holding a vendor's permit and not actively engaged in business as a vendor is required to surrender the permit for cancellation. (Sec. 8716.)

Collection of Tax by Vendor. The vendor who sells and delivers fuel into the fuel tank of a motor vehicle must collect the tax from the user and give him a receipt therefor in the form prescribed by the Board. Fuel sold through a key lock or other unattended mechanism is presumed to be delivered into the fuel tank of a motor vehicle. The presumption is rebutted by a certificate from the user that all fuel delivered is into bulk containers. (Sec. 8732.)

The Board may authorize a political subdivision of this state holding a valid use fuel tax permit to furnish fuel as an accommodation to another political subdivision of this state under certain circumstances. (Sec. 8732.1.)

Tax as a Debt. The tax collected by the vendor is a debt owed by the vendor to the state. (Sec. 8733.)

Alcohol as a Fuel. Any alcohol produced for use in or as a fuel to propel a motor vehicle shall be taxed as fuel and not subject to taxes under the Alcoholic Beverage Tax Law.

Exemptions. The tax does not apply with respect to fuel used for a purpose other than the generation of power to propel a motor vehicle in this state nor to fuel used in a motor vehicle to propel:

1. Certain implements of husbandry which are exempt from registration under the Vehicle Code and are only incidentally operated upon the highway. (Sec. 8652.)

2. Certain construction equipment which is exempt from registration under the Vehicle Code and which is operated within the limits of a construction project and only incidentally operated upon the highway. (Sec. 8652.)

3. A motor vehicle off the highway. (Sec. 8653.)

4. A motor vehicle on certain U.S. Department of Agriculture highways when user pays or contributes to the cost of construction or maintenance of the highway pursuant to an agreement with or permission of the U.S. Department of Agriculture. (Sec. 8653.1.)

5. A motor vehicle operated by certain public agencies on military reservations. (Sec. 8654.)

6. A motor vehicle operated by certain public and private local bus transit operators (see Section 8655). Such operators pay a tax of one cent per gallon for fuel used in such local transit operations.

Purchases Without Payment of Tax. The Board may authorize the holder of a valid user's permit to buy fuel delivered into his vehicle fuel tank without payment of tax to the vendor when the user uses the vehicle partly out of state, or exclusively off highway, and thus would consistently over pay tax, or qualifies for the partial exemption in Section 8655. (Sec. 8732.)

Returns and Payment. Vendor and user returns are due on or before the 25th day of each month for the preceding month. Payment of the tax due must be made with the return. The Board may extend the time for making a return or payment of tax for one month. Interest accrues from the due date until paid. (Secs. 8751–8755.)

Failure to pay the tax or a determination within the time required will result in the imposition of a 10 percent penalty. If a return is not filed, a determination of the amount of tax due will be made and a 10 percent penalty added thereto. Interest accrues if the tax is not paid when due. The penalties imposed are limited to a maximum of 10 percent of the tax for which the return is required for any one return. (Sec. 8876.)

Lien for Tax. The tax, interest, and penalties are a lien on and have the effect of an execution duly levied against any vehicle in which the fuel is used and against any personal property of the user. The lien attaches at the time of the operation of the vehicle in this state. The lien for tax and interest is paramount to all private liens or encumbrances and to the rights of any conditional vendor or holder of legal title to any motor vehicle operated in this state through the use of fuel. (Secs. 8991, 8992, and 8994.)

Certificate of Clearance. No vehicle, except a passenger vehicle, using fuel subject to this tax may be transferred without a written tax clearance from the Board. The Board may release all or any portion of the property subject to lien if it determines that the tax, interest, and penalties are secured by a lien on other property or that the release will not jeopardize the collection of tax, interest, and penalties. (Secs. 8993, 8995, and 8997.)

Successor Withholding and Liability. A vendor liable for any tax, and selling the business, stock, or quitting the business, or his successor, must withhold from the purchase price enough to cover the liability until the former owner produces a receipt from the board showing that the liability was paid or that no tax is due. (9021–9024.)

Records. Every user and every person dealing in, transporting, or storing fuel must keep adequate records including receipts, invoices, and other pertinent papers. (Sec. 9253.)

Disposition of Proceeds. All money received under this law (except overpayments of certain fees) are deposited by the Board in the State Treasury to the credit of the Motor Vehicle Fuel account in the State Transportation Fund. (Sec. 9301.)

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