Tax Rate on Gasoline
The excise tax rate is adjusted every year to ensure the overall state taxes consumers pay at the pump remain the same as they would have been under the prior tax structure. The graphic above illustrates how these tax laws work.
In March 2010, Governor Arnold Schwarzenegger signed two fuel tax measures (AB x8 6 and SB 70), commonly referred to as the fuel tax swap, which adjusted the rates of the sales and excise tax on gasoline, effective July 1, 2010. The fuel tax swap legislation was designed to be revenue neutral, ensuring overall state taxes paid by consumers at the pump are the same as they would have paid under the prior tax structure. Thus, the fuel tax swap legislation does not produce a net revenue gain in state taxes. The legislation mandated the BOE to adjust the excise tax rate every year by March 1. The new rate is effective July 1 of each year.
Beginning July 1, 2013, the excise tax on gasoline will be $0.395 per gallon, an increase of 3.5 cents.
BOE's Role:
- BOE has no independent authority to increase taxes.
- State law currently imposes a sales tax and an excise tax on motor vehicle fuel.
- The legislation mandates the BOE adjust the excise tax rate annually by March 1.
About the New Rate Structure:
- Sales tax rate on gasoline decreased in 2010 from 8.25% (this includes a temporary 1% sales tax increase that is no longer in effect) to 2.25%
- Excise tax rate increased from 18 cents to 35.3 cents per gallon in 2010.
| Revenue Neutrality Maintains Total State Taxes Paid by Drivers | ||
|---|---|---|
| Gasoline Price Breakdown per Gallon | Tax Structure Before 2010 Law | Tax Structure After 2010 Law |
| Gasoline Price (example) | $3.96 | $3.96 |
| State Excise Tax Rate | $0.18 | $0.395 ↑ |
| Statewide Sales Tax Rate (effective January 1, 2013) | 7.50% | 2.25% ↓ |
| Total Sales Tax | $0.31 | $0.10 |
| Total Price per Gallon | $4.45 | $4.45 |
Where your money is going
The 2.25 percent sales tax on gasoline primarily funds local government. The excise tax is dedicated to public roads and mass transit.
How The 2.25 percent sales tax on gasoline is broken down:
- 1.0% Bradley-Burns local tax
- 0.25% Fiscal Recovery Fund to pay for Economic Recovery Bonds (RTC section 6051.5)
- 0.50% Local Public Safety Fund (Sec. 35, Article XIII)
- 0.50% Local Revenue Fund (RTC section 6051.2)
*The Proposition 30 quarter percent sales tax increase does not apply to gasoline sales, and is not factored into the adjustment of the excise tax rate for gasoline.