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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
electric vehicles; gas tax equivalent
Purpose
Allows the Arizona Department of Transportation (ADOT) to establish a gas tax equivalent on electric vehicles and motor vehicles that use fuels other than motor vehicle fuel, use fuel or aviation fuel. Prescribes conversion standards to be used to determine the tax rates. Contains requirements for enactment and becomes effective on signature of the Governor (Proposition 108).
Background
Motor vehicle fuel, commonly known as gasoline, that is possessed, used or consumed in Arizona is currently taxed at a rate of 18 cents per gallon. Use fuel that is used in the propulsion of light class motor vehicles is taxed at the same rate as motor vehicle fuel, while use fuel used in the propulsion of use class motor vehicles is taxed at 26 cents per gallon. There is no use fuel tax on alternative fuels. An additional excise tax of 1 cent per gallon is imposed on motor vehicle fuel and other petroleum products placed in underground storage tanks. The motor vehicle fuel and use fuel tax is presumed to be a direct tax on the consumer but is collected and remitted to ADOT by suppliers for the purpose of convenience. Suppliers add the taxes to the price of motor vehicle fuel in order to recover it from consumers.
Revenues collected from taxes on motor vehicle fuel are deposited in the Highway User Revenue Fund and are distributed as follows: 1) 50.5 percent to the State Highway Fund; 2) 19 percent to counties; 3) 27.5 percent to incorporated cities and towns; and 4) 3 percent to incorporated cities with a population of 300,000 or more persons (A.R.S. §§ 28-5606; 28-6538; and 49-1031).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Allows ADOT, for fuel sources other than motor vehicle fuel, use fuel and aviation fuel that are used to propel a motor vehicle, to establish a tax in an amount determined by the Director of ADOT that is consistent with the tax of the motor vehicle class that the motor vehicle is replacing.
2. Specifies, for an electric vehicle that is less than 10,001 pounds gross vehicle weight rating either:
a) an average of the tax amount paid by a comparable vehicle that uses motor vehicle fuel; or
b) a tax that is comparable to the motor vehicle fuel tax based on the motor vehicle's kilowatt-hour usage to a gas gallon equivalent.
3. Allows ADOT to use the following conversion standards for the motor vehicle class type that the motor vehicle is replacing to help determine the tax:
a) for a motor vehicle that uses an internal combustion engine, a standard gas gallon equivalent for compressed natural gas or a standard diesel gallon equivalent for liquid natural gas; and
b) for a motor vehicle that does not use an internal combustion engine and is more than 10,001 pounds gross vehicle weight rating, a diesel gallon equivalent or a usable diesel gallon equivalent.
4. Defines usable diesel gallon equivalent as the conversion of use fuel to a common energy density, such as British thermal units or joules, and compensating for the natural heat loss of internal combustion engines so that the rate is as close as possible to its internal combustion engine counterpart regarding the amount collected for its use of the roads and bridges in Arizona.
5. Contains a statement of legislative intent.
6. Makes technical and conforming changes.
7. Requires for enactment the affirmative vote of at least two-thirds of the members of each house of the Legislature (Proposition 108).
8. Becomes effective on signature of the Governor.
Prepared by Senate Research
February 27, 2025
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