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F I S C A L I M P A C T R E P O R T

SPONSOR Gonzales

ORIGINAL DATE

LAST UPDATED

1/29/06

HB 455

SHORT TITLE SCHOOL BUS GAS TAX DEDUCTION

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(16.0)

(13.7) Recurring State Road Fund

(2.2)

(1.9) Recurring Municipalities

and Counties

(1.2)

(1.2) Recurring

County Gov-

ernment Road

Fund

(1.2)

(1.2) Recurring Municipal Road

Fund

(0.3)

(0.3) Recurring Municipal Arte-

rial Fund

(0.05)

(0.05) Recurring State Aviation

fund

(0.03)

(0.02) Recurring Motor Boat Fuel

Fund

11.6

10.0 Recurring

Compensating

Tax: General

fund

1.5

1.2 Recurring

Compensating

Tax: Small Cit-

ies Assistance

1.5

1.2 Recurring

Compensating

Tax: Small

County Assis-

tance

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

House Bill 455 – Page

2

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 455 amends the Gasoline Tax Act to allow school buses contracted with the Public

Education Department (PED) or a public school district to deduct the amount of gasoline excise

tax they currently pay. The claim by a school bus operator can be filed quarterly and for no less

than one hundred gallons.

The effective date is July 1, 2006

FISCAL IMPLICATIONS

Based on information PED provided TRD, total gasoline tax payments for school bus operators

are estimated to be $21,000 in FY07 and $18,000 in FY07. With the deduction, the gasoline tax

revenues will decline by those amounts. Table one shows how the reduction in revenues will im-

pact the funds that receive distributions.

Table 1: Distribution of Gasoline Tax Deduction

(000s)

Distribution Share

(21,000)

(18,000)

State Aviation Fund

0.26%

(0.05)

$

(0.05)

$

Motorboat Fuel Tax Fund

0.13%

(0.03)

(0.02)

Counties and Municipalities

10.38%

(2.18)

(1.87)

County government road fund

5.76%

(1.21)

(1.04)

Road funds of Municipalities

5.76%

(1.21)

(1.04)

Municipal arterial program

1.44%

(0.30)

(0.26)

State Road Fund

76.27%

(16.02)

(13.73)

Since the amount of the deduction is no longer part of the gasoline tax, it becomes taxable under

the compensating tax. At 17 cents per gallon, the current excise rate, the amount of gallons used

123,500 in FY07 and 105,880 used in FY08. The compensating tax revenues would increase by

$14.5 million in FY07 and $12.4 million in FY08.

Table 2: Net Impact on School Bus Operators

FY07

FY08

Gasoline Tax Revenues

(21,000)

$

(18,000)

$

Compensating Tax Revenues

14,515

12,441

Net Impact

(6,485)

$

(5,559)

$

OTHER SUBSTANTIVE ISSUES

TRD:

It is important the proposal includes both a deduction and a refund claim mechanism because

House Bill 455 – Page

3

of the way the Gasoline Tax is collected (see discussion below). However, the sponsors of the

proposal may not be aware that gross receipts or compensating tax would be due on any fuel

for which the users claim the gasoline tax deduction or refund. The exemption from gross re-

ceipts and compensating tax for gasoline sales is limited to sales on which the gasoline tax has

been paid (Section 7-9-26).

Gasoline tax background:

Gasoline tax is collected from persons “receiving” fuel in the state (generally large-volume

middlemen between the terminal and retailers). In order for the person receiving the fuel to

take a deduction, he/she needs to be able to show that they sold fuel to someone who was eli-

gible for the deduction. Large volume school bus users, who purchase directly from the per-

sons receiving the fuel, would be able to certify that they are using the fuel for a validly de-

ductible purpose, thus enabling the gasoline taxpayer to take the deduction.

This mechanism will not work for small volume users who purchase their fuel at retail. When

most retailers purchase their fuel the gasoline tax has already been paid. Since the retailer is

not the entity eligible for the deduction, there is no realistic mechanism that would enable the

school bus user to prove to the original taxpayer that they are eligible for the deduction. The

proper mechanism to provide tax relief in this circumstance is a refund for the small volume

school bus users. Such a mechanism already exists in the Special Fuel Tax statutes for school

bus users (Section 7-16A-13.1). The user would provide evidence to the Department that their

use of the fuel is eligible for deduction and the Department would refund the tax paid on the

fuel to the user. At the same time, however, the Department will collect compensating tax on

the fuel at the rate of 5% of the purchase price

NF/nt