Governor Brown is objecting to a new ad that the Proposition 30 tax increase would apply to gasoline. The governor says that because sales tax doesn’t apply to gasoline, the tax on gas will not increase.
The No on Prop 30 campaign, of which I am a part, doesn’t read the law that way.
Tom Hiltachk, attorney of the No on 30 campaign, sets out why gasoline prices, indeed, will go up if Proposition 30 passes.
First, Proposition 30 amends the State’s Constitution. The existing sales and use tax is imposed by statute. Proposition 30 adds Section 36(f) to Article XIII of the Constitution and states in part:
In addition to the taxes imposed by Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code [i.e. the statutory sales and use tax], for the privilege of selling tangible personal property at retail, a tax is hereby imposed upon all retailers at the rate of 1/4 percent of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in the State on or after January 1, 2013 and before January 1, 2017. (Emphasis added.)
Thus, Proposition 30 imposes a new sales and use tax, “in addition” to the existing sales and use tax and places that tax in the State Constitution. The Yes on 30 campaign is correct that in 2010 the State Legislature exempted gasoline from the statutorily imposed sales and use tax, and the citation to Revenue and Taxation Code section 6357.7 is correct. However, that section states:
On and after July 1, 2010, there are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, motor vehicle fuel, as defined in Section 7326. (Emphasis added.)
Thus, the gasoline exemption applies only to the taxes “imposed by” the statutory sales and use tax law, not the constitutionally imposed tax proposed by Proposition 30. (See People v. Navarro (1972)7 Cal.3d 248, 260 [Wherever statutes conflict with constitutional provisions, the latter must prevail”]; and Delaney v. Superior Court (1990) 50 Cal.3d 785, 800–801, fn. 11 [Constitutions trump statutes that are in conflict.])
Second, even if the statutory exemption enacted in 2010 applied to the new tax imposed by Proposition 30, the effect on consumers would be the same. As counsel for the Yes on 30 campaign concedes: “an independent excise tax is now levied on gasoline.” What he fails to tell you is that the calculation of that excise tax is completely dependent on the current rate of sales tax. Thus, if the sales tax rate increases or decreases, the amount of excise tax is likewise increased or decreased by the State Board of Equalization. This scheme was called the “gas tax swap.” The statute that implements the “gas tax swap” and sets the gas tax rate is Revenue and Taxation Code section 7360, which provides in part:
(b)(2) For the 2011-12 fiscal year and each fiscal year thereafter the board [State Board of Equalization] shall on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) [the rate of gas tax] in that matter as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided in Section 6357.7, based on estimates made by the board, and that rate shall be effective during the state’s next fiscal year.
If Proposition 30 passes, the State Board of Equalization will be required to adjust the current excise tax on gasoline to increase it to reflect the increase in sales tax that would have otherwise applied to gas sales, but for the gas tax swap.