wa-law.org > bill > 2025-26 > HB 2404 > Original Bill

HB 2404 - Special fuels taxes

Source

Section 1

The legislature finds that increased tax rates on diesel result in increased prices on food and goods. Vehicles that use special fuels, such as diesel, are a mainstay in food production and Washington's economy. Freight is moved by vehicles that rely on special fuels. The legislature recognizes that fuel prices in neighboring states tend to trend lower than Washington, sometimes more than a $1 difference per gallon. This difference encourages people to buy fuel out of state. The legislature finds reducing the special fuels tax may encourage more people to buy fuel in Washington, reduce the cost of Washington grown products, and improve the economy. Therefore, this act removes the special fuels tax increase that went into effect July 1, 2025, and planned future increases.

Section 2

  1. There is levied and imposed upon fuel licensees a tax at the rate of 23 cents per gallon of fuel.

  2. Beginning July 1, 2003, an additional and cumulative tax rate of five cents per gallon of fuel is imposed on fuel licensees. This subsection (2) expires when the bonds issued for transportation 2003 projects are retired.

  3. Beginning July 1, 2005, an additional and cumulative tax rate of three cents per gallon of fuel is imposed on fuel licensees.

  4. Beginning July 1, 2006, an additional and cumulative tax rate of three cents per gallon of fuel is imposed on fuel licensees.

  5. Beginning July 1, 2007, an additional and cumulative tax rate of two cents per gallon of fuel is imposed on fuel licensees.

  6. Beginning July 1, 2008, an additional and cumulative tax rate of one and one-half cents per gallon of fuel is imposed on fuel licensees.

  7. Beginning August 1, 2015, an additional and cumulative tax rate of seven cents per gallon of fuel is imposed on fuel licensees.

  8. Beginning July 1, 2016, an additional and cumulative tax rate of four and nine-tenths cents per gallon of fuel is imposed on fuel licensees.

  9. Beginning July 1, 2025, an additional and cumulative tax rate of six cents per gallon of fuel is imposed on fuel licensees.

  10. Beginning July 1, 2025, an additional and cumulative tax rate of three cents per gallon of special fuel is imposed on fuel licensees.

  11. Beginning the effective date of this section, the cumulative tax rate per gallon of special fuel must be reduced so that it is the same as it was on July 1, 2016.

  12. Beginning July 1, 2026, the fuel tax rates imposed under subsections (1) through (9) of this section must be increased annually by two percent and the resulting fuel tax rate must be rounded to the nearest one-thousandth of $1.

  13. Taxes are imposed when:

    1. Fuel is removed in this state from a terminal if the fuel is removed at the rack unless the removal is by a licensed supplier or distributor for direct delivery to a destination outside of the state, or the removal is by a fuel supplier for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;

    2. Fuel is removed in this state from a refinery if either of the following applies:

      1. The removal is by bulk transfer and the refiner or the owner of the fuel immediately before the removal is not a licensed supplier; or

      2. The removal is at the refinery rack unless the removal is to a licensed supplier or distributor for direct delivery to a destination outside of the state, or the removal is to a licensed supplier for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;

    3. Fuel enters into this state for sale, consumption, use, or storage, unless the fuel enters this state for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320, if either of the following applies:

      1. The entry is by bulk transfer and the importer is not a licensed supplier; or

      2. The entry is not by bulk transfer;

    4. Fuel enters this state by means outside the bulk transfer-terminal system and is delivered directly to a licensed terminal unless the owner is a licensed distributor or supplier;

    5. Fuel is sold or removed in this state to an unlicensed entity unless there was a prior taxable removal, entry, or sale of the fuel;

    6. Blended fuel is removed or sold in this state by the blender of the fuel. The number of gallons of blended fuel subject to tax is the difference between the total number of gallons of blended fuel removed or sold and the number of gallons of previously taxed fuel used to produce the blended fuel;

    7. Dyed special fuel is used on a highway, as authorized by the internal revenue code, unless the use is exempt from the fuel tax;

    8. Dyed special fuel is held for sale, sold, used, or is intended to be used in violation of this chapter;

      1. Special fuel purchased by an international fuel tax agreement licensee under RCW 82.38.320 is used on a highway; and

    9. Fuel is sold by a licensed fuel supplier to a fuel distributor or fuel blender and the fuel is not removed from the bulk transfer-terminal system.

Section 3

  1. To encourage the use of nonpolluting fuels, an annual license fee in lieu of the tax imposed by RCW 82.38.030 is imposed upon the use of liquefied natural gas, compressed natural gas, or propane used in any motor vehicle. The annual license fee must be based upon the following schedule and formula:

VEHICLE TONNAGE (GVW)

FEE

0

6,000

$ 45

6,001

10,000

$ 45

10,001

18,000

$ 80

18,001

28,000

$110

28,001

36,000

$150

36,001

and above

$250

  1. To determine the annual license fee for a registration year, the appropriate dollar amount in the schedule is multiplied by the cumulative fuel tax rate per gallon of special fuel effective on July 1st of the preceding calendar year and the product is divided by 12 cents, except for 2026, when the cumulative fuel tax rate must be calculated using the 2024 amount. The annual license fee must be rounded to the nearest five cents.

  2. The department, in addition to the resulting fee, must charge an additional fee of $5 as a handling charge for each license issued.

  3. The vehicle tonnage fee must be prorated so the annual license will correspond with the staggered vehicle licensing system.

  4. A decal or other identifying device issued upon payment of the annual fee must be displayed as prescribed by the department as authority to purchase this fuel.

  5. Persons selling or dispensing natural gas or propane may not sell or dispense this fuel for their own use or the use of others into tanks of vehicles powered by this fuel which do not display a valid decal or other identifying device.

  6. Commercial motor vehicles registered in a foreign jurisdiction under the provisions of the international registration plan are subject to the annual fee.

  7. Motor vehicles registered in a foreign jurisdiction, except those registered under the international registration plan under chapter 46.87 RCW, are exempt from this section.

  8. Vehicles registered in jurisdictions outside the state of Washington are exempt from this section.

  9. Any person selling or dispensing liquefied natural gas, compressed natural gas, or propane into the tank of a motor vehicle powered by this fuel, except as prescribed in this chapter, is subject to the penalty provisions of this chapter.

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