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California: Local Utility User Tax Exemption for Public Transit


 California User Tax Exemption Fuels Renewable Energy for Public Transit.

By the end of 2020, California utilities will be required to get one-third of their power from renewable sources. The state's "large, investor-owned utilities" are already required "to get 20 percent of their electricity from the sun, the wind, and other renewable energy sources…" -- a benchmark they achieved in 2012.

California Senate Bill No. 1257, is designed to help state utilities reach their 33% goal. The bill, which was filed in August 2012, amends existing Revenue and Taxation Code.

Pursuant to the Mills-Hayes Act (Section 8655 of the Revenue and Taxation Code), "…a tax shall not be imposed upon the use of fuel by public transit operations." SB 1257 clarifies "that, pursuant to the Mills-Hayes Act, the consumption of electricity as a motor vehicle fuel for use by an electric public transit bus shall be exempt from any taxes imposed upon the consumption of electricity."

New Revenue and Taxation Code Section 7284.3 reads:

"(b) There is exempt from any utility user tax, imposed by any local jurisdiction, a local agency's or public transit operator's consumption of compressed natural gas dispensed by a gas compressor, within a local jurisdiction, that is separately metered and is dedicated to providing compressed natural gas as a motor vehicle fuel for use by the local agency or public transit operator.

 (c) There is exempt from any utility user tax on the consumption of electricity, imposed by any local jurisdiction, a local agency's or public transit operator's consumption of electricity used to charge electric bus propulsion batteries, within a local jurisdiction, that is separately metered and is dedicated to providing electricity as a motor vehicle fuel for use by an electric public transit operator."

This is deemed to be "a matter of statewide concern" rather than a municipal affair. The Legislature recognizes "that public transit operators are moving towards the use of electricity as a primary fuel source to meet air quality objectives at the state and regional levels, as well as to provide vital public transportation services to transit-dependent citizens in California." (Section 1).

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.