Bill seeks to make tax exemption permanent

New bill is aimed at avoiding problems related to the expiry of a partial sales tax exemption on the purchase of bunker fuel.

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Updated on 27 Feb 2012 14:37 GMT

Senator Alan S. Lowenthal [pictured], a Democratic member of the California State Senate, introduced a bill on Thursday - SB 1243 - which seeks to make permanent a partial sales tax exemption on the purchase of marine fuel. Like most products sold in California, marine fuel is subject to the state's sales tax - a tax that adds to the cost of marine fuel and encourages its purchase outside the state by ocean-going vessels. To make California marine sales competitive, the state currently offers a partial sales tax exemption on maritime fuel sales. Under the exemption, the state does not tax fuel purchased in, but consumed outside of, California waters. SB 1243 would make the tax exemption permanent by eliminating the current expiration date of January 1, 2014. The exemption, which has required renewals every five years, has expired on two previous occasions, once in 1992 and once in 2002. According to the state Legislative Analyst, the previous temporary expirations of the exemption caused marine fuel sales statewide to plummet nearly 50 percent. The past expirations also resulted in the loss of hundreds of high-paying blue-collar jobs related to the port industry. “We've seen on two occasions that removing this sales tax exemption will cost our region jobs,” a statement released by Senator Lowenthal said. "The tax also impacts the competitiveness of California ports. Fuel accounts for about 30 percent to 45 percent of the cost of operating a vessel in international commerce. The addition of the full sales tax on marine fuel can virtually eliminate a vessel’s operating profits and de-incentivize the purchase of marine fuel in California," the statement added. “No other maritime port in the U.S. currently charges sales tax on marine fuel. This is about protecting California jobs and keeping California ports competitive,” said Senator Lowenthal. In reviewing the bill, the Legislative Analyst’s Office also emphasized that SB 1243 is consistent with current state tax policy. SB 1243 must be in print for 31 days before it can be acted on by the Legislature.