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Increase to Maryland Fuel Tax Takes Effect July 1, 2013

Maryland is increasing its motor fuel tax effective July 1, 2013.  The increase has two parts: (1) an annual increase in the cents-per-gallon fuel tax, indexed to inflation; and (2) a new sales tax on the wholesale price of gasoline.  The current tax rates of $0.235 per gallon for gasoline and $0.2425 per gallon for diesel are anticipated to increase by approximately $0.04 per gallon on July 1, 2013.   

With respect to the cents-per-gallon fuel tax, beginning on July 1, 2013 and annually thereafter, the tax rate will increase.  The tax rates will be indexed to inflation (as determined by the Consumer Price Index) and will be announced by the Comptroller of Maryland by June 1.  The statute provides for the rates to remain unchanged if there is no growth in the Consumer Price Index.  The annual increase is capped and may not be greater than 8% of the tax rate in effect during the previous year.   Additionally, the statute requires taxpayers with tax-paid fuel in inventory on July 1 to remit any additional fuel tax owed on the inventory within 30 days; this is similar to a floor stocks tax.   The statute makes no changes to the point of taxation or any license categories or requirements. 

With respect to the sales tax, this is an entirely new tax on motor fuel in Maryland.  It will be collected with the motor fuel tax and the state is not requiring that motor fuel licensees obtain a sales tax registration.  The sales tax will be expressed in cents-per-gallon calculated based on a percentage of the annual average retail price of motor fuel.  As with the motor fuel tax, the Comptroller will announce the rates for 12-month period beginning July 1 by June 1.  The percentage rate to be used in the calculation is 1% in 2013, 2% in 2014 and 3% in 2015 and beyond. 

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