I discovered a while back that using so-called “red diesel” in a vehicle used on public roads is a rather serious offense, because it does not have the mandatory road taxes used to support the public infrastructures. Road diesel and gasoline sold in the US have taxes added on to the price that goes to support maintenance of the roads.
What happens when someone develops and registers a car that uses a nonstandard fuel? E.g. if I build or modify a car so that it runs on a mixture of vinegar and maple syrup, both purchased from the local grocery store, how does the law handle that, in theory? Do I have a road-tax free ride until the gummint passes a “Road Vinegar Tax”, or do I, in theory, have to track the amount of fuel that I use and remit a tax (calculated how?) to the feds and/or the state?
If that’s the case, why haven’t they tried to put a stop to bio-diesel?
I (probably incorrectly) was under the belief that most of the costs for maintaining roads came from the fees tacked on to keeping your license plates up to date.
Some (most?) states actually do require people who do the waste vegetable oil thing to self-report and submit fuel taxes (although this is rarely observed or enforced in my experience). This is under the rationale that anything that goes into a diesel engine is legally diesel though, so maybe if your vinegar car has a completely new type of engine you might be able to get around it until the legislature catches up.
Although with electric cars on the horizon, some states are trying to move away from fuel tax and towards either flat registration taxes or some sort of mileage-based system. If that happens, it wouldn’t matter what your car runs on.
IIRC one of the advantages of diesel many years ago was that it was substantially cheaper than gasoline. This was because only big trucks used it, so it was not as heavily taxed. Once diesel cars became widely available, the tax advantage slowly disappeared.
All federal roads are paid for by fuel taxes. I think most state roads are also financed by fuel taxes also, but it varies a lot by state, so it is possible that license fees are significant source of revenue in your state.
Frankly all the people who are avoiding fuel taxes by using vegetable oil or whatever are a rounding error compared to the people who aren’t paying sales taxes on internet purchases.
There will probably be some alteration in how roads are paid for as alternative fuels become more popular. Right now alternative fuels are being subsidized by the federal government and one of the ways that is happening is by not pursuing fuel taxes on the vehicles.
When you are talking about vehicles that can be fueled at home like electric and CNG vehicles, It is hard to think of any way they could be taxed, except for a license fee based on mileage.
For that matter, there is more pressure to collect license fees from bicyclists, since significant amounts of money is being spent on bike lanes and bike paths.
First, I think, but am not sure, the main reason for red diesel was because the road diesel was low-sulfur (less polluting); off-road equipment was allowed to use high-pollution fuel but the on-road vehicles needed to clean up.
Now, on the federal U.S. level, fuel and cars are regulated for manufacturers (pretty much defined as sellers). If you build your own muskrat-dropping powered car, good for you! Drive away! [Again, this is only from the point of view of federal regulations; your state may have something to say about the road-worthiness/safety/etc of your vehicle). Now, if you try and sell that car to someone else, all kinds of regulations now apply about MPG, emissions, etc. The same thing applies to fuel for on-road vehicles: you make your own biodiesel out of fryolater grease, you’re cool. If you sell that biodiesel, you’re now subject to all kinds of testing requirements.
Now, in general the feds don’t care about selling a few gallons of biodiesel here or there, and may have even given it some kind of formal OK in the last view years, but that’s the basic structure of regs.
A while back, perhaps 5 yrs ago there was in the news people filling up with gas cars converted to run on CNG at the price equivalent of under $1/gal. I believe the area they covered in it was in the SW US. I don’t recall them mentioning the road taxes.
Off-road applications are now bound by the low-sulfur (less 500 ppm) standard, and will by bound by the ulltra low sulfur standard (less than 15 ppm) in 2014. But even when off-road and on-road fuel standards are different, regular gas stations don’t stock it. This is partly because there’s just not much demand for it, but also because even though higher sulfur diesel might be allowed, some newer off-road equipment might still need the low-sulfur stuff.
So the red dye diesel you buy at the gas station is generally exactly the same stuff you get out of the on-road pump except with red dye. The taxation issue definitely is the main reason for it-- at least out here they list the fuel tax on the pumps and the red dye diesel costs exactly the tax less than on-road diesel.
The red die added to diesel is to show that it does not have any road taxes paid on it. Diesel sold in the US is low-sulfur. The only places that can use high sulfur diesel fuel have to have extensive filters, centrifuges. and scrubbers, and they are inspected to be sure that they are working properly. Add to that depending on the age of the engine the air quality board wantss to know how many hours the engine is running every year. The age of the engine will determine the type of scrubbers on the exhaust.
Yep. The fraction of vehicles operating on old french fry oil, propane or electricity is still small. Offhand, collecting road maintenance via a mileage charge when you register your vehicle annually seems workable to me, particularly for states with smog checks or safety inspections, which mean you have to physically take the car somewhere to have it tested. You could just roll in an official odometer reading with those procedures.
The comparison with internet sales taxes is apt - for years, mail order catalog sales were allowed to slide because so little merchandise was sold that way that recovering the revenue wasn’t worth it for the various states. Laws in several states now require online retailers to collect sales tax, which those online retailers are fighting. Likely they will lose.
They’ll lose for good reason. IIRC sales tax on an interstate transaction is unconstitutional.
What you and Joel are referring to are “use taxes” which is the responsibility of the consumer to send in to their respective state which interestingly enough is Constitutional since it is not a tax on a product exported from another state but IMPORTED into the state. Fulton Corp. v. Faulkner
But what about jurisdiction? Suppose someone in NYC has a car, but doesn’t drive it much, riding the subway most everywhere. During the year, they take the car out and drive up to Canada and spend lots of time driving around, and between, Montreal, Quebec City, and Moncton. When they show up for their odometer reading, are they going to be charged for all that wear and tear on Canadian roads that aren’t supported by US Federal or New York State taxes?
Probably, they’ll have to fill out a request for a refund based on their reduced mileage, presumably with documentation of the miles driven in other jurisdictions. Currently, people like farmers can file for road use tax refunds on road taxed fuel they purchased primarily for off road use.
How incredibly wasteful and ripe for fraud. The amount of record keeping alone will cost as much as the potential taxes collected in this manner. The government should just stick to tacking the tax on as a sales tax to the fuel. More efficient and less costly way of collecting the tax. Precision is not the goal.
The trouble is that as cars get more efficient, gas tax receipts go down even as miles driven go up. This could get even worse as electrics, plug-in hybrids and other fuel-at-home schemes catch on. I would agree that raising the gas taxes we have now would make more sense than counter-productive taxes on alternative fueled cars, but raising the gas tax is very difficult politically.
Of course, the whole “miles driven” part of the equation is a bit of a red herring. People like the gas tax, or at least don’t mind it as much as other taxes, because it seems like a use fee. The only trouble is that wear to the road surface is not directly correlative to fuel consumption. Big trucks are responsible for the vast majority of wear on highways, but don’t have correspondingly high fuel consumption (and thus fuel tax payments). In that way, gas taxes are sort of like a subsidy on the trucking industry since private cars pay most of the taxes and the trucks do most of the damage. But the alternative of making trucks pay their fair share would make the price of, well, everything go up and most people are happy with the gas tax arrangement as is.
So, anyways, the point is that it really doesn’t matter whether fuel is being used on-road or off-road or getting huffed by teenagers. The actual costs of maintaining the infrastructure are relatively inelastic. All that matters is that the states collect enough money to meet those costs and as private cars use less fuel, they’re going to have to find other sources of revenue.
I think there was a proposal a few year ago to require tracking devices on cars so the state could tell how many miles you drove in the state and tax you for it. Naturally, people were outraged. I don’t think it will happen. Count on the governments finding a way to do it.
It will be like VOIP. When I switched to Vonage 7-8 years ago, I was paying very little tax. As each jurisdiction caught on, I am paying more and more taxes. The feds may be subsidizing ethanol, but ethanol or not, I think many states still collect their per gallon tax.
In Florida at least you have to fill out an affidavit of vehicle mileage when you sell a car. This is to prevent Odometer fraud, which is a **Federal Crime **. This appears to be an easy crime to catch compared to other forms of tax evasion. As far as federal mileage taxes it could just be a line item by VIN number on the federal tax returns.
I wouldn’t have a lot of heartburn if all interstate highways were converted to toll roads. I live in Orlando and all the limited access highways here, except I-4, are already toll roads. With the E-pass and Sun-pass all the bookkeeping happens magically. You don’t even have to slow down for the new toll readers.
I suspect if we really did a fair assessment of the mileage-cost of various vehicles we would discover that most interstate trucks are very expensive compared to hauling cargo by train. I saw one study that said that one tractor-trailer at the 80,000 pound federal weight limit does as damage as 9,600 cars. It makes more sense to use railroads for heavier loads and only use trucks for local transport.
Light cargo like produce could probably stay on trucks, since the damage is an exponential function of the weight. A truck hauling 20,000 pounds wouldn’t even be on the same order of magnitude as a 80,000 pound load even if the bulk is similar.
For the record, truckers already have to do paperwork along those lines.
It’s an ever-loving trainwreck administratively. They can wind up owing one state money for gas tax and getting a refund from another.
Don’t think the government can’t do it. If public sentiment permits it, it could easily happen.
On edit: Oh yeah. It isn’t ‘gas tax’ in a semi, but you know what I meant.