S2470

An Act increasing the petroleum products gross receipts tax, amending and supplementing P.L.1990, c.42 and amending P.L.1991, c.181 and P.L.1991, c.19.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1990, c.42 (C.54:15B-2) is amended to read as follows:

2. For the purposes of this act:

"Aviation fuel" means aviation gasoline or aviation grade kerosene or any other fuel that is used in aircraft.

"Aviation gasoline" means fuel specifically compounded for use in reciprocating aircraft engines.

"Aviation grade kerosene" means any kerosene type jet fuel covered by ASTM Specification D 1655 or meeting specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8).

"Blended fuel" means a mixture composed of gasoline, diesel fuel, kerosene or blended fuel and another liquid, including blend stock other than a de minimis amount of a product such as carburetor detergent or oxidation inhibitor, that can be used as a fuel in a highway vehicle. "Blended fuel" includes but is not limited to gasohol, biobased liquid fuel, biodiesel fuel, ethanol, methanol, fuel grade alcohol, diesel fuel enhancers and resulting blends.

"Company" includes a corporation, partnership, limited partnership, limited liability company, association, individual, or any fiduciary thereof.

"Diesel fuel" means a liquid that is commonly or commercially known or sold as a fuel that is suitable for use in a diesel-powered highway vehicle. A liquid meets this requirement if, without further processing or blending, the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle. "Diesel fuel" includes biobased liquid fuel, biodiesel fuel, and number 1 and number 2 diesel.

"Director" means the Director of the Division of Taxation in the Department of the Treasury.

"First sale of petroleum products within this State" means the initial sale of a petroleum product delivered to a location in this State. A "first sale of petroleum products within this State" does not include a book or exchange transfer of petroleum products if such products are intended to be sold in the ordinary course of business.

"Gasoline" means all products commonly or commercially known or sold as gasoline that are suitable for use as a motor fuel. “Gasoline” does not include products that have an ASTM octane number of less than 75 as determined by the "motor method," ASTM D2700-92. The term does not include racing gasoline or aviation gasoline, but for administrative purposes does include fuel grade alcohol.

"Gross receipts" means all consideration derived from the first sale of petroleum products within this State except sales of:

a. asphalt;

b. petroleum products sold pursuant to a written contract extending one year or longer to nonprofit entities qualifying under subsection (b) of section 9 of P.L.1966, c.30 (C.54:32B-9) as evidenced by an invoice in form prescribed by subsection b. of section 3 of P.L.1991, c.19 (C.54:15B-10);

c. petroleum products sold to governmental entities qualifying under subsection (a) of section 9 of P.L.1966, c.30 (C.54:32B-9) as evidenced by an invoice in form prescribed by subsection b. of section 3 of P.L.1991, c.19 (C.54:15B-10); and

d. polymer grade propylene used in the manufacture of polypropylene.

“Highway fuel” means gasoline, blended fuel that contains gasoline or is intended for use as gasoline, liquefied petroleum gas, and diesel fuel, blended fuel that contains diesel fuel or is intended for use as diesel fuel, and kerosene, other than aviation grade kerosene.

"Kerosene" means the petroleum fraction containing hydrocarbons that are slightly heavier than those found in gasoline and naphtha, with a boiling range of 149 to 300 degrees Celsius.

"Petroleum products" means refined products made from crude petroleum and its fractionation products, through straight distillation of crude oil or through redistillation of unfinished derivatives, but shall not mean the products commonly known as number 2 heating oil, number 4 heating oil, number 6 heating oil, kerosene and propane gas to be used exclusively for residential use.

"Quarterly period" means a period of three calendar months commencing on the first day of January, April, July or October and ending on the last day of March, June, September or December, respectively.

["Retail gasoline price survey" means a Statewide representative random sample of retail gasoline prices conducted by the Board of Public Utilities, Office of the Economist, or its successor, that shall be completed for the month of November and May of each year.]

"Retail price per gallon" means the price [posted by gasoline] charged by retailers in the State for [unleaded regular gasoline] a gallon of the petroleum product dispensed into the fuel tanks of motor vehicles without State or federal tax included.

"Unleaded regular gasoline" means gasoline of the octane rating equal to the lowest octane rated gasoline offered for sale at a majority of the gasoline retailers in the State.

(cf: P.L.1991, c.181, s.1)

2. Section 7 of P.L.1991, c.181 (C.54:15B-2.1) is amended to read as follows:

7. a. "Gross receipts," as otherwise defined by section 2 of P.L.1990, c.42 (C.54:15B-2), shall not include receipts from sales of petroleum products used by marine vessels engaged in interstate or foreign commerce and sales of aviation fuels used by common carriers in interstate or foreign commerce other than the "burnout" portion which shall be taxable pursuant to rules promulgated by the director.

b. Highway fuel used for the following purposes is exempt from the tax imposed by section 3 of P.L.1990, c.42 (C.54:15B-3), and a refund of the tax imposed by that section may be claimed by the consumer providing proof the tax has been paid and no refund has been previously issued:

(1) autobuses while being operated over the highways of this State in those municipalities to which the operator has paid a monthly franchise tax for the use of the streets therein under the provisions of R.S.48:16-25 and autobuses while being operated over the highways of this State in a regular route bus operation as defined in R.S.48:4-1 and under operating authority conferred pursuant to R.S.48:4-3, or while providing bus service under a contract with the New Jersey Transit Corporation or under a contract with a county for special or rural transportation bus service subject to the jurisdiction of the New Jersey Transit Corporation pursuant to P.L.1979, c.150 (C.27:25-1 et seq.), and autobuses providing commuter bus service which receive or discharge passengers in New Jersey. For the purpose of this paragraph "commuter bus service" means regularly scheduled passenger service provided by motor vehicles whether within or across the geographical boundaries of New Jersey and utilized by passengers using reduced fare, multiple ride, or commutation tickets and shall not include charter bus operations for the transportation of enrolled children and adults referred to in subsection c. of R.S.48:4-1 and "regular route service" does not mean a regular route in the nature of special bus operation or a casino bus operation;

(2) agricultural tractors not operated on a public highway;

(3) farm machinery;

(4) ambulances;

(5) rural free delivery carriers in the dispatch of their official business;

(6) vehicles that run only on rails or tracks, and such vehicles as run in substitution therefor;

(7) highway motor vehicles that are operated exclusively on private property;

(8) motor boats or motor vessels used exclusively for or in the propagation, planting, preservation and gathering of oysters and clams in the tidal waters of this State;

(9) motor boats or motor vessels used exclusively for commercial fishing;

(10) motor boats or motor vessels, while being used for hire for fishing parties or being used for sightseeing or excursion parties;

(11) fire engines and fire-fighting apparatus;

(12) stationary machinery and vehicles or implements not designed for the use of transporting persons or property on the public highways;

(13) heating and lighting devices;

(14) motor boats or motor vessels used exclusively for Sea Scout training by a duly chartered unit of the Boy Scouts of America; and

(15) emergency vehicles used exclusively by volunteer first-aid or rescue squads.

(cf: P.L.1991, c.181, s.7)

3. Section 3 of P.L.1990, c.42 (C.54:15B-3) is amended to read as follows:

3. a. (1) (a) There is imposed on each company which is engaged in the refining or distribution, or both, of petroleum products other than highway fuel and aviation fuel and which distributes such products in this State a tax at the rate of [two and three-quarters percent (2 3/4%)] seven percent of its gross receipts derived from the first sale of petroleum products within this State; there is imposed on each company which is engaged in the refining or distribution, or both, of highway fuel other than gasoline a tax at the rate of 12.5 percent of its gross receipts derived from the first sale of those products within this State; and there is imposed on each company which is engaged in the refining or distribution, or both, of gasoline a tax at the rate determined pursuant to subparagraph (b) of this paragraph. [; provided however, that the]

(b) the rate for gasoline, and blended fuel that contains gasoline or is intended for use as gasoline, shall be 10 cents per gallon first sold within this State on and after the first day of the second month following the enactment of P.L. , c. (pending before the Legislature as this bill) but before the first day of the thirteenth month following the enactment of P.L. , c. (pending before the Legislature as this bill), 20 cents per gallon first sold within this State on and after the first day of the thirteenth month following the enactment of P.L. , c. (pending before the Legislature as this bill) but before the first day of the twenty-fifth month following the enactment of P.L. , c. (pending before the Legislature as this bill); and 25 cents per gallon first sold within this State on and after the first day of the twenty fifth month following the enactment of P.L. , c. (pending before the Legislature as this bill).

(c) The applicable tax rate for [fuel oils, aviation fuels and motor fuels subject to tax under R.S.54:39-1 et seq.] liquefied petroleum gas, which is taxed as a highway fuel pursuant to subparagraph (a) of this paragraph, shall be converted to a cents-per-gallon rate, rounded to the nearest tenth of a cent, [that shall be calculated by the use of] and adjusted quarterly by the director, effective on July 1, October 1, January 1, and April 1, based on the average retail price per gallon of unleaded regular gasoline [in December 1990,] in the State, as determined in [a] the most recent survey of the retail price per gallon of gasoline [prices] that [included] includes a Statewide representative random sample conducted [in December 1990 for that month] by the Board of Public Utilities, Office of the Economist, [and shall be effective for the tax due for months ending after that date; and] or its successor.

(d) The cents-per-gallon rate determined pursuant to subparagraph (c) of this paragraph shall not be less than the rate determined for the quarter beginning October 1, 2016.

(e) The applicable tax rate for diesel fuel, blended fuel that contains diesel fuel or is intended for use as diesel fuel, and kerosene, other than aviation grade kerosene, which are taxed as a highway fuel pursuant to subparagraph (a) of this paragraph, shall be converted to a cents-per-gallon rate, rounded to the nearest tenth of a cent, and adjusted quarterly by the director, effective on July 1, October 1, January 1, and April 1, based on the average retail price per gallon of number 2 diesel in the State, as determined in the most recent survey of retail diesel fuel prices that includes a Statewide representative random sample conducted by the Board of Public Utilities, Office of the Economist, or its successor.

Notwithstanding the provisions of subparagraph (a) of this paragraph to the contrary, for the period from on and after the first day of the second month following the enactment of P.L. , c. (pending before the Legislature as this bill) through the last day of the sixth month following the enactment of P.L. , c. (pending before the Legislature as this bill), no rate of tax shall be applied to diesel fuel, blended fuel that contains diesel fuel or is intended for use as diesel fuel, or kerosene, other than aviation grade kerosene; for the period from the first day of the seventh month following the enactment of P.L. , c. (pending before the Legislature as this bill) but before the first day of the thirteenth month following the enactment of P.L. , c. (pending before the Legislature as this bill), the applicable rate for those fuels shall be 70 percent of the rate otherwise determined pursuant to subparagraph (a) of this paragraph, and for the first day of the thirteenth month following the enactment of P.L. , c. (pending before the Legislature as this bill) and thereafter the applicable rate for those fuels shall be determined pursuant to subparagraph (a) of this paragraph.

(f) The cents-per-gallon rate determined pursuant to subparagraph (e) of this paragraph shall not be less than the rate determined for the quarter beginning October 1, 2016.

(g) The applicable tax rate for fuel oil determined pursuant to subparagraph (a) of this paragraph shall be converted to a cents-per-gallon rate, rounded to the nearest tenth of a cent, and adjusted quarterly by the director, effective on July 1, October 1, January 1, and April 1, to reflect the average price per gallon, without State or federal tax included, of retail sales of number 2 fuel oil in the State, as determined in the most recent survey of retail diesel fuel prices that included a Statewide representative random sample conducted by the Board of Public Utilities, Office of the Economist, or its successor.

(h) The cents-per-gallon rate determined pursuant to subparagraph (g) of this paragraph shall not be less than the rate determined for the quarter beginning October 1, 2016.

(2) (a) In addition to the tax, if any, imposed by paragraph (1) of this subsection, a cents-per-gallon tax is imposed on each company’s gross receipts derived from the first sale of petroleum products within this State on gasoline, blended fuel that contains gasoline or that is intended for use as gasoline, liquefied petroleum gas and aviation fuel at the rate of four cents per gallon; and

(b) In addition to the tax, if any, imposed by paragraph (1) of this subsection, a cents-per-gallon tax is imposed on each company’s gross receipts derived from the first sale of petroleum products within this State on diesel fuel, blended fuel that contains diesel fuel or is intended for use as diesel fuel, and kerosene other than aviation grade kerosene at the rate of four cents per gallon before the first day of the seventh month following the enactment of P.L. , c. (pending before the Legislature as this bill) and at the rate of eight cents per gallon on the first day of the seventh month following enactment of P.L. , c. (pending before the Legislature as this bill) and thereafter.

b. There is imposed on each company that imports or causes to be imported, other than by a company subject to and having paid the tax on those imported petroleum products that have generated gross receipts taxable under subsection a. of this section, petroleum products for use or consumption by it within this State a tax at the rate [of two and three-quarters percent (2 3/4%)] or rates of the consideration given or contracted to be given and the gallonage, determined pursuant to subsection a. of this section, for such petroleum products if the consideration given or contracted to be given for all such deliveries made during a quarterly period exceeds $5,000[; provided however, that the applicable tax rate for fuel oils, aviation fuels and motor fuels subject to tax under R.S.54:39-1 et seq. shall be converted to a cents per gallon rate, rounded to the nearest cent, that shall be calculated by the use of the average retail price per gallon of unleaded regular gasoline in December 1990, as determined in a survey of retail gasoline prices that included a Statewide representative random sample conducted in December 1990 for that month by the Board of Public Utilities, Office of the Economist, and shall be effective for the tax due for months ending after that date].

(cf: P.L.2000, c.48, s.1)

4. Section 2 of P.L.1991, c.19 (C.54:15B-9) is amended to read as follows:

2. a. A person who shall purchase or otherwise acquire petroleum products, upon which the petroleum products gross receipts tax has not been paid and is not due pursuant to subsection b. of section 5 of P.L.1990, c.42 (C.54:15B-5) or upon which a reimbursement payment has been paid pursuant to section 3 of [this act] P.L.1991, c.19 (C.54:15B-10), from a federal government department, agency or instrumentality, or any agent or officer thereof, for use not specifically associated with any federal government function or operation, shall pay to the State a tax [equivalent to two and three-quarters percent (2 3/4%)] at the rate or rates of the consideration given or contracted to be given for the purchase or acquisition of the petroleum products and the gallonage, determined pursuant to subsection a. of section 3 of P.L.1990, c.42 (C.54:15B-3) in accordance with the procedures set forth in the "Petroleum Products Gross Receipts Tax Act," P.L.1990, c.42 (C.54:15B-1 et seq.).

b. A person who knowingly uses, or who conspires with an official, agent or employee of a federal government department, agency or instrumentality, for the use of, a requisition, purchase order, or a card or an authority to which the person is not specifically entitled by government regulations, with the intent to obtain petroleum products from a federal government department, agency or instrumentality for a use not specifically associated with a federal government function or operation, upon which the petroleum products gross receipts tax has not been paid, is guilty of a crime of the fourth degree.

(cf: P.L.1991, c.19, s.2)

5. Section 3 of P.L.1991, c.19 (C.54:15B-10) is amended to read as follows:

3. a. A federal government department, agency or instrumentality, that purchases petroleum products other than by the first sale of that product in this State for use in a federal government function or operation, upon which petroleum products the petroleum products gross receipts tax has been paid or is due and payable, shall be reimbursed and paid an amount [equivalent to two and three-quarters percent (2 3/4%)] at the rate or rates of the consideration given or contracted to be given [by the federal government department, agency or instrumentality for the purchase of the petroleum products] , and the gallonage, determined pursuant to subsection a. of section 3 of P.L.1990, c.42 (C.54:15B-3).

b. The reimbursement shall be claimed by presenting to the Director of the Division of Taxation in the Department of the Treasury an application for the reimbursement, on a form prescribed by the director, which application shall be verified by a declaration of the applicant that the statements contained therein are true. Such application for reimbursement shall be supported by an invoice, or invoices, showing the name and address of the person from whom the petroleum products were purchased, the name of the purchaser, the date of purchase, the quantity of the product purchased, the price paid for the purchase of the product, and an acknowledgment by the seller that payment of the cost of the product to the seller, including the petroleum gross receipts tax due thereon, has been made. Such invoice, or invoices, shall be legibly written and shall be void if any corrections or erasures shall appear on the face thereof.

c. If petroleum products are sold to a federal government department, agency or instrumentality that shall be entitled to a reimbursement under this act, the seller of the petroleum products shall supply the purchaser with an invoice that conforms with the requirements of subsection b. of this section.

(cf: P.L.1991, c.19, s.3)

6. (New section) a. There is levied a tax on persons, other than licensed companies pursuant to section 6 of P.L.1991, c.181 (C.54:15B-12), holding the fuels enumerated in subparagraph (a) of paragraph (2) of subsection a. of section 3 of P.L.1990, c.42 (C.54:15B-3) in storage for sale as of the close of the last business day of the first month following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill). The amount of tax shall be the difference between the tax per gallon specified by subsection a. of section 3 of P.L1990, c.42 (C.54:15B-3) for the type of fuel and the tax previously paid per gallon, multiplied by the gallons in storage of that type of fuel as of the close of the business day on that day.

b. Persons in possession of those fuels in storage as of the close of the last business day of the first month following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) shall:

(1) take an inventory at the close of the business day on that day;

(2) report the gallons listed in paragraph (1) of this subsection, on forms provided by the director, not later than the fifteenth day of the third month following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(3) Remit the tax levied under this section to the director no later than February 1, 2017.

c. Fuel not reflected in the inventory taken pursuant to subsection b. of this section is deemed to be previously untaxed, except to the extent that it is invoiced as delivered tax-paid on or after the first day of the second month following the enactment of P.L. , c. (pending before the Legislature as this bill).

d. There is levied a tax on persons, other than licensed companies pursuant to section 6 of P.L.1991, c.181 (C.54:15B-12), holding the fuels enumerated in subparagraph (b) of paragraph (2) of subsection a. of section 3 of P.L.1990, c.42 (C.54:15B-3) in storage for sale as of the close of the business day on the last day of the sixth month following the enactment of P.L. , c. (pending before the Legislature as this bill) on which tax has previously been paid. The amount of tax shall be the difference between the tax per gallon specified by subsection a. of section 3 of P.L1990, c.42 (C.54:15B-3) for the type of fuel and the tax previously paid per gallon, multiplied by the gallons in storage of that type of fuel as of the close of the business day on the last day of the sixth month following the enactment of P.L. , c. (pending before the Legislature as this bill).

e. Persons in possession of those fuels in storage as of the close of the business day on the last day of the sixth month following the enactment of P.L. , c. (pending before the Legislature as this bill) shall:

(1) take an inventory at the close of the business day on the last day of the sixth month following the enactment of P.L. , c. (pending before the Legislature as this bill);

(2) report the gallons listed in paragraph (1) of this subsection on forms provided by the director, not later than the last day of the seventh month following the enactment of P.L. , c. (pending before the Legislature as this bill); and

(3) Remit the tax levied under this section to the director no later than August 1, 2017.

f. Fuel not reflected in the inventory taken pursuant to subsection b. of this section is deemed to be previously untaxed, except to the extent that it is invoiced as delivered tax-paid after the last day of the sixth month following the enactment of P.L. , c. (pending before the Legislature as this bill).

g. In determining the amount of tax due under this section, a person may exclude the amount of fuel in dead storage in each storage tank

h. As used in this section:

"Close of the business day" means the time at which the last transaction has occurred for that day.

"Dead storage" means the amount of fuel that cannot be pumped out of a fuel storage tank because the motor fuel is below the mouth of the draw pipe. The amount of motor fuel in dead storage is 200 gallons for a tank with a capacity of less than 10,000 gallons and 400 gallons for a tank with a capacity of 10,000 gallons or more.

7. (New section) Notwithstanding any provision of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to the contrary, the director may adopt immediately upon filing with the Office of Administrative Law such regulations as the director deems necessary to implement the provisions of sections 1 through 6 of P.L. , c. (pending before the Legislature as this bill), which regulations shall be effective for a period not to exceed 360 days following the date of enactment of P.L. , c. (pending before the Legislature as this bill) and may thereafter be amended, adopted, or readopted by the director in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).

8. This act shall take effect immediately, and sections 1 through 6 shall apply to first sales of petroleum products within this State and to deliveries of petroleum products for use or consumption within this State made on or after the first day of the second month following the date of enactment.

STATEMENT

The bill provides for increases in the petroleum products gross receipts tax rates, which, either by statutory or constitutional dedication, will finance funding for the State’s transportation infrastructure.

Currently, the petroleum products tax is imposed at the rate of 2¾ percent on gross receipts from the first sale of petroleum products in New Jersey. In the case of motor fuels, aviation fuels, and heating fuels (home heating fuels are exempt) this rate is converted to $0.04 per gallon.

This bill increases the base rate on petroleum products, other than highway fuel and other than aviation fuel, to 7 percent of gross receipts, increases the base rate on highway fuel other than gasoline to 12.5 percent of gross receipts, and phases in over three years a cents-per-gallon tax on gasoline.

The increased tax on gasoline begins at 10 cents per gallon, in the first year, increases by 10 cents to 20 cents per gallon in the second year, and increases 5 cents to 25 cents per gallon in the third year and thereafter.

The 12.5 percent tax on liquefied petroleum gas is converted to a cents-per-gallon rate based on the retail price of gasoline before the imposition of State and federal tax. The 12.5 percent tax on diesel fuel, diesel fuel equivalents and kerosene (other than aviation grade kerosene), is converted to a cents-per-gallon rate based on the retail price of number 2 diesel before tax. The 7 percent tax on fuel oil is converted to a cents-per-gallon rate based on the pretax retail price of number 2 fuel oil. Initially, the diesel and kerosene rate will be zero; on and after January 1, 2017 it will be 70 percent of the 12.5 percent rate, and on and after July 1, 2017 it will be taxed at the 12.5 percent rate. The rates are converted to cents-per-gallon rates, and the cents-per-gallon rates can be adjusted quarterly, but cannot fall below the rates determined for the quarter beginning October 1, 2016.

The highway fuels will be subject to an additional cents-per-gallon rate. Initially, the rate will be four cents. On and after one year after enactment, the additional rate on diesel fuel and kerosene will be raised to eight cents per gallon.

Aviation fuel will be subject to a 4-cents-per-gallon tax, and taxation of common carriers in interstate and foreign commerce will be limited to the “burnout” portion, both of which are identical to practice under current law.