FINAL BILL REPORT

EHB 1407

C 270 L 01

Synopsis as Enacted

Brief Description:  Modifying the taxation of fuel.

Sponsors:  By Representatives Fisher and Mitchell; by request of Department of Licensing.

House Committee on Transportation

Senate Committee on Transportation

Background:

Prior to 1999 taxes on motor fuel were collected by the Department of Licensing from fuel distributors.  At that time, there were approximately 740 licensed fuel distributors in Washington.  In addition, approximately 27,000 individuals held licenses that allowed them to purchase fuel without paying taxes up front.  These users held the fuel in bulk storage tanks, using some of the fuel for non-highway purposes (usually agriculture).  They only had to remit taxes for portions of fuel used for highway purposes.

In 1994 the Federal Highway Administration estimated that fuel tax was being evaded on 3 to 7 percent of gasoline gallons, and 15 to 25 percent of diesel gallons.  In 1996 the Legislative Transportation Committee concluded that significant fuel tax evasion was occurring in Washington, and made recommendations to address the issue.

In 1998 the Legislature enacted SHB 2659, which imposes fuel taxes at the time of removal of such fuel from the terminal rack in Washington.  This is referred to as ?tax-at-the-rack.@  Taxes are remitted to the Department of Licensing.

Summary:

Technical corrections are made to the motor vehicle fuel tax and special fuel tax statutes.  The definition of ?motor vehicle fuel supplier@ is amended to conform to federal regulations.  The term ?position holder@ is changed to ?licensed supplier.@  The statute is changed to clarify that special fuel sold by a licensed supplier to a distributor, importer, or blender is a taxable event.  Distributors may offer lines of credit, assets, or other financial security in lieu of a surety bond.

Votes on Final Passage:

House970

Senate460

Effective:  July 22, 2001