Federal Gas Tax Holiday Wouldn’t Apply to Nevada, California, Oklahoma and Tennessee

May 6, 2008

Even if the federal gas tax holiday was implemented, it would not apply (fully) to gasoline sold in four states. That’s because California, Nevada, Oklahoma, and Tennessee each has a provision in the state’s tax law which states that if the federal gas tax is lowered, that state’s own gas tax will increase by some amount. This is theoretically designed to maintain transportation spending in the state.

Here is a link to a Taxadmin.org page citing the provisions of the four states. Here’s California’s:

If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by this section, on and after the date of the reduction, shall be increased by an amount so that the combined state and federal tax rate per gallon equals the following:

(1) Twenty-three cents ($0.23) during 1990, on and after August 1.
(2) Twenty-four cents ($0.24) during 1991.
(3) Twenty-five cents ($0.25) during 1992.
(4) Twenty-six cents ($0.26) during 1993.
(5) Twenty-seven cents ($0.27) on and after January 1, 1994.
(c) If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.

The Taxing Tennessee blog has more.

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