Bill Summary – FastDemocracy

The Florida Senate
                    BILL ANALYSIS AND FISCAL IMPACT STATEMENT
                (This document is based on the provisions contained in the legislation as of the latest date listed below.)
                        Prepared By: The Professional Staff of the Committee on Finance and Tax
BILL:             SB 322
INTRODUCER:       Senator Gruters
SUBJECT:          Natural Gas Fuel Taxes
DATE:             March 17, 2023                  REVISED:
           ANALYST                      STAFF DIRECTOR                 REFERENCE                                 ACTION
1. Price                              Vickers                                TR             Favorable
2. Gross                              Babin                                  FT             Favorable
3.                                                                           AP
    I.    Summary:
          SB 322 delays the imposition of Florida’s natural gas fuel tax from January 1, 2024, to January
          1, 2026, and conforms related statutory provisions.
          The Revenue Estimating Conference determined that the bill would, in Fiscal Year 2023-2024,
          reduce General Revenue Fund receipts by an insignificant amount, reduce state trust fund
          receipts by $200,000, and reduce local government revenue by $100,000.
          The bill takes effect July 1, 2023.
    II.   Present Situation:
          In 2013, the Legislature established a fuel tax for natural gas when sold as a fuel for a motor
          vehicle. The decal fee imposed on “alternative fuel” vehicles was simultaneously repealed.1 The
          bill repealed related provisions, including s. 206.877, F.S. (motor vehicles fueled by liquefied
          petroleum gas or compressed natural gas), and s. 206.89, F.S. (licensure of retailers of alternative
          fuel); and it amended and relocated various provisions to the new part V.
          The bill delayed the imposition of the newly established tax until December 31, 2018, and
          exempted from the sales and use tax natural gas and natural gas fuel when placed into the fuel
          system of a motor vehicle.2 Thereafter, a person operating as a natural gas fuel retailer was
          required to pay a tax on all natural gas fuel purchases3 and report monthly to the Department of
          Revenue.4
1
  Ch.2013-198, L.O.F. Codified in Part V of ch. 206, F.S.
2
  Section 212.08(4)(a)2., F.S. (2022).
3
  Section 206.9952(8), F.S. (2013).
4
  The method for determining the tax rate imposed was originally created in s. 206.996(1), F.S., with an effective date of
February 2019.
BILL:   SB 322                                                                                                           Page 2
         Beginning January 1, 2019, the following taxes were to be imposed on natural gas fuel:
          An excise tax of 4 cents upon each motor fuel equivalent gallon of natural gas fuel.
          An additional tax of 1 cent upon each motor fuel equivalent gallon5 of natural gas fuel, which
            is designated as the “ninth-cent fuel tax.”
          An additional tax of 1 cent on each motor fuel equivalent gallon of natural gas fuel by each
            county, which is designated as the “local option fuel tax.”
          An additional tax on each motor fuel equivalent gallon of natural gas fuel, which is
            designated as the “State Comprehensive Enhanced Transportation System (SCETS) Tax,” at
            a rate determined by statute.6
          An additional tax on each motor fuel equivalent gallon of natural gas fuel “for the privilege
            of selling natural gas fuel” at a rate determined by statute.7
         The Legislature also established the following penalties:
          A penalty, set to expire on December 31, 2018, for any person who acts as a natural gas
            retailer without holding a valid natural gas fuel retailer license in the amount of $200 for each
            month of operation without a license.8
          Effective January 1, 2019, a penalty of 25 percent of the tax assessed on the total purchases
            made during the unlicensed period for any person who acts as a natural gas fuel retailer
            without a valid natural gas fuel retailer license.9
         In 2018, the Legislature:
          Delayed until January 1, 2024, imposition of the natural gas fuel taxes described above, as
             well as a natural gas fuel retailer’s obligation to report monthly to the DOR.
          Made a correction to the formulas used by the DOR to determine the annual tax rates for
             SCETS and the additional fuel tax, which was necessary to properly perform the
             calculations.10
          Extended the expiration date of the $200 penalty against a person acting as a natural gas
             retailer without a license from December 31, 2018, to December 31, 2023.
          Extended the effective date of the 25 percent penalty to January 1, 2019, to
             January 1, 2024.11
5
  “Motor fuel equivalent gallon” is defined in s. 206.9951(1), F.S., to mean the volume of natural gas fuel it takes to equal the
energy content of one gallon of motor fuel. Section 206.9955, F.S., currently defines the motor fuel equivalent gallon for
compressed natural gas, liquefied natural gas, and liquefied petroleum gas.
6
  Each calendar year, the department shall determine the tax rate applicable to the sale of natural gas fuel for the following
12-month period beginning January 1, rounded to the nearest tenth of a cent, by adjusting the initially established tax rate of
5.8 cents per gallon by the percentage change in the average of the Consumer Price Index issued by the United States
Department of Labor for the most recent 12-month period ending September 30. Section 206.9955(2)(d), F.S. (2013).
7
  Each calendar year, the department shall determine the tax rate applicable to the sale of natural gas fuel, rounded to the
nearest tenth of a cent, for the following 12- month period beginning January 1. The tax rate is calculated by adjusting the
initially established tax rate of 9.2 cents per gallon by the percentage change in the average of the Consumer Price Index
issued by the United States Department of Labor for the most recent 12-month period ending September 30. Section
206.9955(2)(e)1., F.S. (2013).
8
  Section 206.9952(3)(a), F.S. (2013).
9
  Section 206.9952(3)(b), F.S. (2013).
10
   Supra notes 6 and 7.
11
   Ch. 2018-118, L.O.F.
BILL:   SB 322                                                                                                         Page 3
III.     Effect of Proposed Changes:
         The bill delays from January 1, 2024, to January 1, 2026, the imposition of natural gas fuel taxes,
         calculations required to be made by the DOR to set the annual tax rate for SCETS and the
         additional tax, and a retailer’s obligation to report monthly. Monthly reporting must begin
         February 2026, rather than February 2024.
         The bill extends the current expiration date from December 31, 2023, to December 31, 2025, for
         the penalty imposed on a person who acts as a natural gas retailer but does not hold proper
         licensure. The bill also makes the 25 percent penalty against a retailer who acts without a retailer
         license effective January 1, 2026, rather than January 1, 2024.
         The bill takes effect July 1, 2023.
IV.      Constitutional Issues:
         A.       Municipality/County Mandates Restrictions:
                  Article VII, s. 18 of the Florida Constitution governs laws that require counties and
                  municipalities to spend funds, limit the ability of counties and municipalities to raise
                  revenue, or reduce the percentage of state tax shared with counties and municipalities.
                  Subsection (b) of Art. VII, s. 18 of the Florida Constitution provides that except upon
                  approval of each house of the Legislature by two-thirds vote of the membership, the
                  legislature may not enact, amend, or repeal any general law if the anticipated effect of
                  doing so would be to reduce the authority that municipalities or counties have to raise
                  revenue in the aggregate, as such authority existed on February 1, 1989. However, the
                  mandates requirements do not apply to laws having an insignificant impact,12,13 which is
                  $2.3 million or less for Fiscal Year 2023-2024.14 The Revenue Estimating Conference
                  determined that the bill will reduce local revenues by $100,000. Thus, the bill is likely
                  not a mandate.
                  Furthermore, while the bill reduces the authority of local governments to raise revenue by
                  delaying the imposition of county and municipal taxes on natural gas fuel, the authority
                  to raise revenue through taxes on natural gas fuel did not exist on February 1, 1989.15
12
   FLA. CONST. art. VII, s. 18(d).
13
   An insignificant fiscal impact is the amount not greater than the average statewide population for the applicable fiscal year
multiplied by $0.10. See Florida Senate Committee on Community Affairs, Interim Report 2012-115: Insignificant Impact,
(September 2011), available at http://www.flsenate.gov/PublishedContent/Session/2012/InterimReports/2012-115ca.pdf (last
visited Mar. 8, 2023).
14
   Based on the Demographic Estimating Conference’s estimated population adopted on July 18, 2022. The conference
packet is available at http://edr.state.fl.us/Content/conferences/population/archives/220718demographic.pdf (last visited Mar.
8, 2023).
15
   See s. 206.877, F.S. (1989). Motor vehicles fueled by compressed natural gas were subject to payment of an annual decal
fee in lieu of tax.
BILL:   SB 322                                                                                                    Page 4
         B.      Public Records/Open Meetings Issues:
                 None.
         C.      Trust Funds Restrictions:
                 None.
         D.      State Tax or Fee Increases:
                 The bill does not create or raise a state tax or fee. Therefore, the requirements of
                 Article VII, section 19 of the Florida Constitution do not apply.
         E.      Other Constitutional Issues:
                 None identified.
V.       Fiscal Impact Statement:
         A.      Tax/Fee Issues:
                 The Revenue Estimating Conference determined that the bill would, in Fiscal Year 2023-
                 2024, reduce General Revenue Fund receipts by an insignificant amount, reduce state
                 trust fund receipts by $200,000, and reduce local government revenue by $100,000.
         B.      Private Sector Impact:
                 Those who purchase or sell natural gas fuel will not pay taxes on such fuel until January
                 1, 2026. Retailers will not report nor be subject to the specified penalties until such date.
         C.      Government Sector Impact:
                 The Department of Revenue estimates nonrecurring and recurring costs to implement the
                 provisions in the bill. Nonrecurring costs for Fiscal Year 2024-2025 equal $53,000.
                 Nonrecurring costs for Fiscal Year 2025-2026 equal $191,256. Beginning in Fiscal Year
                 2025-2026, recurring costs equal $18,000.16
                 The estimated costs will be used to update and maintain the states System for Unified
                 Tax (SUNTAX). The cost to inform retailers of the delayed imposition of the natural gas
                 tax will be absorbed by the DOR.
VI.      Technical Deficiencies:
         None.
16
  Department of Revenue, 2023 Agency Legislative Bill Analysis (Feb. 1, 2023) (on file with the Senate Committee on
Finance and Tax).
 BILL:   SB 322                                                                                                                         Page 5
VII.      Related Issues:
          None.
VIII.     Statutes Affected:
          This bill substantially amends the following sections of the Florida Statutes: 206.9955,
          206.9952, and 206.996.
 IX.      Additional Information:
          A.       Committee Substitute – Statement of Changes:
                   (Summarizing differences between the Committee Substitute and the prior version of the bill.)
                   None.
          B.       Amendments:
                   None.
           This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.
Statutes affected: 
S 322 Filed: 206.9955, 206.996