New Jersey-2016-A4383-Introduced

An Act decreasing the petroleum products gross receipts tax rate on certain petroleum products, revising various parts of the statutory law.

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

"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.

["2016 implementation date" means the later of November 1, 2016 or the 15th day after the date of enactment of P.L.2016, c.57.]

(cf: P.L.2016, c.57, s.12)

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 receipts from 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.] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)

(cf: P.L.2016, c.57, s.13)

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 [seven percent] two and three-quarters percent (2 3/4%) of its gross receipts derived from the first sale of petroleum products within this State [and there is imposed on each company which is engaged in the refining or distribution, or both, of highway fuel a tax at the rate of 12.85 percent, as adjusted pursuant to subsection c. of this section, of its gross receipts derived from the first sale of those products within this State.] ; provided however, that the

[(b) The] applicable tax rate for [gasoline, blended fuel that contains gasoline or is intended for use as gasoline, and liquefied petroleum gas, which are taxed as a highway fuel pursuant to subparagraph (a) of this paragraph,] 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 [tenth of a] cent, [and adjusted quarterly by the director, effective on July 1, October 1, January 1, and April 1, based on] that shall be calculated by the use of the average retail price per gallon of unleaded regular gasoline [in the State] in December 1990, as determined in [the most recent] a survey of the retail [price per gallon of] gasoline prices that [includes] included a Statewide representative random sample conducted in December 1990 for that month by the Board of Public Utilities, Office of the Economist, [or its successor.] and shall be effective for the tax due for months ending after that date; and

[(c) The cents-per-gallon rate determined pursuant to subparagraph (b) of this paragraph shall not be less than the rate determined for the average retail price per gallon of unleaded gasoline in the State on July 1, 2016.

(d) 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 the 2016 implementation date through December 31, 2016, 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 January 1, 2017 through June 30, 2017, the applicable rate for those fuels shall be 70 percent of the rate otherwise determined pursuant to subparagraph (a) of this paragraph, and for July 1, 2017 and thereafter the applicable rate for those fuels determined pursuant to subparagraph (a) of this paragraph.

(e) The cents-per-gallon rate determined pursuant to subparagraph (d) of this paragraph shall not be less than the rate determined for the average retail price per gallon of number 2 diesel in the State on July 1, 2016.

(f) 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.

(g) The cents-per-gallon rate determined pursuant to subparagraph (f) of this paragraph shall not be less than the rate determined for the average price per gallon, without State or federal tax included, of retail sales of number 2 fuel oil in the State on July 1, 2016.

(h) On and after the 10th day following a certification by the review council pursuant to subsection c. of section 19 of P.L.2016, c.57 (C.52:18A-257), no tax shall be imposed pursuant to this paragraph.

(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 July 1, 2017 and at the rate of eight cents per gallon on and after July 1, 2017.]

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 [or rates, determined pursuant to subsection a. of this section, on] of two and three-quarters percent (2 3/4%) of the consideration given or contracted to be given [and the gallonage] 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.

c. [(1) For State fiscal years 2018 through 2026, the rate of tax imposed on highway fuel pursuant to subsection a. of this section shall be adjusted annually so that the total revenue derived from highway fuel shall not exceed the highway fuel cap amount.

(2) The State Treasurer shall, on or before December 31, 2016, determine the highway fuel cap amount as the sum of:

(a) the taxes collected for State Fiscal Year 2016 pursuant to paragraphs (1) and (2) of subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103) on highway fuel,

(b) the amount derived from taxing the gallonage of highway fuel subject to motor fuel tax in State Fiscal Year 2016 at the rate of four cents per gallon, and

(c) the amount that would have been derived from taxing the gallonage of highway fuel subject to motor fuel tax in State Fiscal Year 2016 at the rate of 23 cents per gallon.

(3) On or before August 15 of each State Fiscal Year following State Fiscal Year 2017, the State Treasurer and the Legislative Budget and Finance Officer shall determine the total revenue derived from:

(a) the taxes collected for the prior State Fiscal Year pursuant to paragraphs (1) and (2) of subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103) on highway fuel,

(b) the revenue that would be derived from imposing the tax pursuant to paragraph (2) of subsection a. of this section on highway fuel at the rate of four cents per gallon, and

(4) Upon consideration of the result of the determination pursuant to paragraph (3) of this subsection, and consultation with the Legislative Budget and Finance Officer, the State Treasurer shall determine the rate of tax to be imposed on highway fuel pursuant to subsection a. of this section that will result in revenue from:

(a) the taxes collected on highway fuel for the current State Fiscal Year pursuant to paragraphs (1) and (2) of subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103),

(b) the revenue derived from the tax imposed pursuant to paragraph (2) of subsection a. of this section on highway fuel at the rate of four cents per gallon for the current State Fiscal Year, and

equaling the highway fuel cap amount determined pursuant to paragraph (2) of this subsection, as adjusted pursuant to paragraph (5) of this subsection;

and that rate shall take effect on October 1 of that year.

(5) If the actual revenue determined pursuant to paragraph (3) of this subsection exceeds the highway fuel cap amount determined pursuant to paragraph (2) of this subsection, then the highway fuel cap amount for the succeeding year shall be decreased by the amount of the excess in setting the rate pursuant to paragraph (4) of this subsection. If the actual revenue determined pursuant to paragraph (3) of this subsection is less than the highway fuel cap amount determined pursuant to paragraph (2) of this subsection, then the highway fuel cap amount for the succeeding year shall be increased by the amount of the shortfall in setting the rate pursuant
to paragraph (4) of this subsection.] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)

(cf: P.L.2016, c.57, s.14)

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 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 [at the rate or rates] equivalent to two and three-quarters percent (2 3/4%) 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.2016, c.57, s.15)

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 [at the rate or rates] equivalent to two and three-quarters percent (2 3/4%) of the consideration given or contracted to be given [, and the gallonage, determined pursuant to subsection a. of section 3 of P.L.1990, c.42 (C.54:15B-3)] by the federal government department, agency or instrumentality for the purchase of the petroleum products.

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.2016, c.57, s.16)

6. Section 19 of P.L.2016, c.57 (C.52:18A-257) is amended to read as follows:

19. a. The State Treasurer, and the Legislative Budget and Finance Officer, together with a third public member who shall be jointly selected thereby, shall constitute the review council.

b. The review council shall, on or before January 15, 2020, provide the Governor and the Legislature with an advisory report of their consensus estimate of the increase or decrease in State revenues pursuant to each section of P.L.2016, c.57 (C.54:15B-13 et al.), and pursuant to this act as a whole, during the preceding three State fiscal years, including a comparison of those estimates to the legislative fiscal estimate or fiscal note published contemporaneous with the enactment of this act prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).

c. [The review council shall conduct an ongoing review of the application of each section of P.L.2016, c.57 (C.54:15B-13 et al.).

The review council shall, not later than five days after any Legislative action that halts, delays, or reverses the implementation of those sections as scheduled on the date of enactment of P.L.2016, c.57 (C.54:15B-13 et al.), certify for the purposes of subparagraph (h) of paragraph (1) of subsection a. of section 3. of P.L.1990, c.42 (C.54:15B-3) to the Director of the Division of Taxation that the scheduled implementation of P.L.2016, c.57 (C.54:15B-13 et al.) had been impeded.] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)

(cf: P.L.2016, c.57, s.19)

7. Section 20 of P.L.2016, c.57 is amended to read as follows:

20. This act shall take effect immediately, provided, however, that section 8shall apply to taxable years beginning on or after January 1, 2017 [, and sections 12 through 16 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 2016 implementation date].

(cf: P.L.2016, c.57, s.20)

8. Section 17 of P.L.2016, c.57 (C.54:15B-13) and section 18 of P.L.2016, c.57 are repealed.

9. This act shall take effect immediately.

STATEMENT

This bill decreases the petroleum products gross receipts tax rate on certain petroleum products to alleviate the additional tax burden that will be imposed on individuals and businesses when the tax rate increases provided by P.L.2016, c.57 are implemented on November 1, 2016.

In addition to certain other tax law changes, P.L.2016, c.57 increased the base tax rate on petroleum products, other than highway fuel and other than aviation fuel, from 2.75 percent to 7 percent of gross receipts, and increased the base tax rate on highway fuel from 2.75 percent to 12.85 percent of gross receipts. The law provides for the base rates on these petroleum products to be converted to a cents-per-gallon rate based on the pre-tax retail price of the petroleum product, and allows for the cents-per-gallon rate to be adjusted quarterly but not to fall below the rates determined on July 1, 2016.

This bill eliminates those tax rate increases so that the rates of tax imposed on gross receipts from the first sale of petroleum products in this State are returned to their pre-November 1, 2016 levels. As a result of this change, the base tax rate imposed on petroleum products will be decreased from 7 percent to 2.75 percent of gross receipts, and the base tax rate imposed on highway fuel similarly will be decreased from 12.85 percent to 2.75 percent of gross receipts.

The bill eliminates added provisions of the petroleum products gross receipts tax that allow for the cents-per-gallon rate on gasoline, gasoline equivalents, liquefied petroleum gas, diesel fuel, diesel fuel equivalents, kerosene, and fuel oil to be adjusted quarterly. In doing so, the bill directs the percentage tax rate imposed on motor fuels, aviation fuels, and heating fuels to be converted to a cents-per-gallon rate of $0.04 per gallon in keeping with the method of taxation on those products prior to enactment of P.L.2016, c.57.

The bill also eliminates provisions that established a highway fuel cap under the petroleum products gross receipts tax, revises certain defined terms under the tax, modifies the duties and responsibilities of the three-member review council established by P.L.2016, c.57, and repeals the temporary "floor tax" and the authorization for the adoption of temporary rules and regulations to effectuate the purposes of the tax rate decrease provided by the bill.

The bill takes effect immediately upon enactment.