PA 07-199—sSB 1392

Finance, Revenue and Bonding Committee

AN ACT CONCERNING THE DIESEL FUEL TAX

SUMMARY: This act establishes a three-step increase in the motor fuel tax on diesel fuel used in any type of motor vehicle from 26 cents per gallon to 36 cents as of July 1, 2007; 36. 8 cents as of July 1, 2008; and 38 cents as of July 1, 2013. (PA 07-1, June Special Session, revises these increases. )

The act also exempts from the petroleum products gross earnings tax petroleum refiners' or distributors' gross earnings from first sales of diesel fuel in Connecticut, but only if the fuel is exclusively for use by motor carriers. (PA 07-1 expands the exemption. ) The exemption applies to first sales of qualifying fuel occurring on or after July 1, 2007.

Finally, to reflect its changes in these two taxes, the act reduces scheduled petroleum products gross earnings tax revenue transfers from the General Fund to the Special Transportation Fund (STF). (PA 07-1 further reduces transfer amounts for FYs 08-10. ) Petroleum products gross earnings tax revenue goes to the General Fund and is transferred to the STF, while motor fuel tax revenue goes directly to the STF.

EFFECTIVE DATE: July 1, 2007

PETROLEUM PRODUCTS GROSS EARNINGS TAX EXEMPTION FOR DIESEL FUEL

The petroleum products gross earnings tax exemption covers diesel fuel used to operate (1) two-axle trucks or combinations with gross vehicle weights or registered gross vehicle weights above 26,000 pounds and (2) three-or-more-axle trucks regardless of weight. It does not cover fuel for recreational vehicles used by individuals exclusively for pleasure and not in connection with a trade or business.

REVENUE TRANSFERS TO THE STF

Starting in FY 08, the act reduces scheduled petroleum products gross earnings tax revenue transfers from the General Fund to the STF for each fiscal year as shown in Table 1.

TABLE 1: SCHEDULED PETROLEUM PRODUCTS GROSS EARNINGS TAX REVENUE TRANSFERS FROM GENERAL FUND TO THE STF

BACKGROUND

Related Act

PA 07-1 June Special Session, substantially revises this act. It increases the diesel tax rate for FY 08 to 37 cents per gallon, eliminates the other two increases required by this act, and requires the revenue services commissioner instead to set annual diesel tax rates for FY 09 and subsequent years based on average wholesale diesel prices for the previous 12 months. PA 07-1 June Special Session, also expands this act's diesel fuel exemption from the petroleum products gross earnings tax to cover all diesel fuel except that used in electric generating plants to generate electricity. Finally, PA 07-1 June Special Session, reduces petroleum products gross earnings tax revenue transfers for FYs 08-10 below the levels specified in this act.

OLR TRACKING: JSL: JR: PF: DW