Lower Excise Tax Rate on Gasoline Starts July 1

With the Fourth of July holiday on its way and summertime road trips on the minds of many California drivers, the California State Board of Equalization says motorists starting July 1, will pay a lower excise tax rate on gasoline, down to $0.36 per gallon. That’s down 3 and half cents from the old rate.

The new rate of $0.36 – down from $0.395 – as reached after the Board voted unanimously at its February 2014 meeting to lower the rate for the 2014-2015 fiscal year, which ends June 30, 2015.

While Californians will be paying less in state excise tax at the pump starting July 1, that doesn’t necessarily mean it will translate into lower gasoline prices. Other factors, such as world crude oil prices, also affect California’s gasoline prices.

The adjustment of the excise tax on gasoline stems from laws enacted in 2010 known as the ‘fuel tax swap.’ The swap requires revenue neutrality, meaning motorists pay no more or less state tax on gasoline purchases than they would have paid prior to the swap. The new laws lowered the sales tax on gasoline to 2.25 percent and raised the excise tax by an amount projected to equal the sales tax that otherwise would have been collected under the old tax structure. The graphic picture with this story is an example.

You can also watch this video www.boe.ca.gov/taxprograms/excise_gas_tax.htm

The excise tax rate – set by March 1 of each year for the coming fiscal year – is based on estimates of projected price and gallons to be purchased provided by the Department of Finance and IHS Global Insight, an internationally-recognized firm that provides economic and financial data.