Updates on States Suspending Motor Fuels Tax

In recent months, a number of states have enacted legislation to temporarily suspend the motor fuels tax. Weaver will monitor these actions and update this post regularly.

Updated December 12, 2022

Connecticut Extends Motor Fuel Tax Suspension Through November 2022

Connecticut has extended its gas tax suspension through the end of 2022. The $0.25 per gallon gas tax will be gradually reinstated $0.05 per gallon per month beginning in January.

Earlier in the year, Connecticut suspended its $0.25 per gallon excise tax on gasoline for three months beginning April 1, 2022 through July 1, 2022. The Connecticut Department of Revenue Services has issued guidance on the reporting requirements for motor fuel distributors during the 3-month period of the gasoline tax suspension. During this period, motor fuel distributors should report sales of gasoline and gasohol on line 13a of Form O-MF for electronic filers and on line 13 of Form O-MF for paper filers. Lines 16, 17 and 18, which are typically used to report gasoline and gasohol sales, should not be used during the suspension period. The first tax return to be impacted by the suspension is the April 2022 return, due May 25, 2022.

The Connecticut law instructs retailer dealers of gasoline to reduce the per-gallon price of fuel in an amount equal to the amount of the tax reduction. However, it does not include any direction on how the Department of Revenue should implement this fuel tax suspension with respect to tax paid gasoline currently in circulation and whether a retail dealer can obtain a refund of the tax that it is not passing on to consumers.

New York Suspends Motor Fuel Taxes Through January 2023

New York enacted a seven-month suspension of the state excise tax, prepaid sales tax on fuel and the New York City metropolitan commuter transportation district sales tax imposed on gasoline and highway diesel. The suspension takes effect from June 1, 2022 through the end of the year. Petroleum business tax and inspection fees will remain in effect. Illinois has frozen its motor fuel tax on gasoline for the rest of 2022 at the current rate of $0.392 per gallon. Illinois adjusts its fuel tax rates annually on July 1; however, legislation passed over the weekend delays any increase until January 2023.

Maryland Suspends Motor Fuel Taxes for 30-Days

Maryland’s legislature has approved a 30-day suspension of the excise taxes imposed on gasoline, diesel and aviation fuel. Governor Hogan signed the legislation on March 18, 2021, and the suspension is effective immediately. The legislation provides that retailers of motor fuel holding previously tax-paid fuel may apply for a refund of the tax on that fuel. Retailers can apply for this refund by filing Form 779-R with the Comptroller. At the end of the 30-day suspension period (April 16, 2022), retailers with untaxed inventory must remit to the Comptroller of Taxes the applicable unpaid taxes on the inventory. The inventory schedule used to determine the tax due on April 16, 2022 is Schedule 779-RM.

With respect to Maryland motor fuel licensees conducting tax-free transactions during the period, the tax is suspended, the Comptroller has issued the following reporting guidance:

• Tax-free sales are to be reported on Disbursement Schedule 10 of Form 769. A separate form for each product code detailing the applicable tax-free sales transactions is to be prepared. All tax-free sales are to be clearly labeled “Gas Tax Holiday Sales” above the schedule type and product code box. Disbursement Schedule 10 must list all transactions by customer and enter a subtotal of all sales for each. The sum of all Disbursement Schedule 10s should be detailed on Line 14 of Form 776-2.
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• Tax-free purchases are to be reported on Receipt Schedule 2 of Form 768. A separate form for each product code detailing the applicable tax-free sales transactions is to be prepared. Receipt Schedule 2 must list all transactions by customer and enter a subtotal of all receipts for each. The sum of all Receipt Schedule 2s should be detailed on Line 3 of Form 776-2.

Georgia Extends Motor Fuel Tax Suspension Through January 11, 2023

Georgia’s Governor issued an Executive Order previously extended the suspension of the state motor fuel excise tax through August 13. The Georgia legislature had previously passed a bill suspending the state motor fuel excise tax through May 31. Citing an ongoing supply chain emergency, Governor Kemp has extended the suspension until August 13.

In March 2022, Georgia’s legislature passed a bill suspending the state motor fuel excise tax through May 31. At the time, the legislation did not include any direction on how the Department of Revenue should implement this fuel tax suspension. In Georgia, sales between licensed distributors are exempt from the excise tax. Absent additional guidance from the State, any tax-paid fuel currently in circulation in Georgia would remain tax paid with the fuel tax suspension applying to fuel that has not yet been distributed in a taxable manner.

Kentucky Freezes Motor Fuel Tax Rate

Kentucky’s motor fuel tax increase set to take effect on July 1, 2022 has been suspended. Governor Beshear filed an emergency regulation to stop the $0.02 per gallon tax increase. The tax on gasoline will remain $0.26 per gallon and the tax on diesel will remain $0.23 per gallon. Kentucky Distributors will receive notice of this from the Department of Revenue no later than 20 days before
July 1.

California Partial Diesel Fuel Sales Tax Exemption

Effective October 1, 2022, California will have a partial reduction in the sales tax rates on diesel fuel. The prepaid sales tax rate for the period October 1, 2022 – June 30, 2023 will be reduced from $0.47 per gallon to $0.33 per gallon and the retail sales tax rate will be reduced from 13% to 9.0625%. The sales tax rates for gasoline and jet fuel will remain unchanged.

For information or assistance in complying with these requirements, contact us. We are here to help.

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