Citizens Research Council of Michigan
 
Publications Tax Outline Economic Development State Budget Analysis Ballot Issues Almanac
 
Home
Contact CRC
CRC in the News
About Us
Staff
Directors
Links
 
E-Mail Updates
Search CRC Website
 
 TAX OUTLINE
PDF
CONTENTS
CHANGES
GLOSSARY
REVENUE
 
 TAX DESCRIPTIONS
INCOME
BUSINESS
SALES
PROPERTY
TRANSPORTATION
 
Democracy Works When People Support It
 
CRC Column

 

 DIESEL FUEL

LEGAL CITATION:
M.C.L. 207.1001 et seq.; 2000 PA 403; Sec. 9, Art. IX, state Constitution.
YEAR ADOPTED: 1951 The Gasoline Tax (1925 PA 150), the Diesel Fuel Tax (1951 PA 54), and the Liquefied Petroleum Gas Tax (1953 PA 147) were recodified by the Motor Fuel Tax Act, 2000 PA 403.
BASIS OF TAX: Privilege of using highways.
MEASURE OF TAX (BASE): Diesel fuel sold or used in operating vehicles on public highways.

Exemption for diesel fuel used in or for

  1. vehicles owned by the state or federal government;
  2. vehicles owned or leased and operated by units of local government;
  3. school buses owned and operated by private nonprofit parochial, or denominational schools, college, or universities;
  4. off-highway use;
  5. home heating oil;
  6. export;
  7. as other than motor fuel;
  8. for use in trains.

Refund of tax on diesel fuel purchased for use in ten or more person capacity vehicles operated under a municipal franchise.
RATE: 15 cents per gallon, except 12 cents per gallon on diesel that contains at least 5% biodiesel. The reduced rate is effective until September 1, 2016, or until the cumulative tax revenue difference for gasoline containing at least 70% ethanol and diesel fuel containing at least 5% biodiesel taxed at 12 cents per gallon compared to what would have been collected at the 19 and 15 cents per gallon rates is greater than $2.5 million, whichever is sooner.
ADMINISTRATION: Department of Treasury.
REPORT AND PAYMENT: Due by 20th of each month.
DISPOSITION: Michigan Transportation Fund (See Gasoline Tax).
2006-07 COLLECTIONS:

 $114,180,000
2006-07 COLLECTIONS/UNIT:

 $7.6 million per 1 cent

Diesel Fuel Taxation in Michigan

Public Act 668 of 2002 eliminated the two-tier system of diesel fuel taxation under the Motor Fuel Tax Act (2000 PA 403) and centralized the collection of diesel fuel taxes in Michigan. Prior to PA 668, a portion of the diesel fuel tax (9 cents per gallon) was collected at the supplier level and the remainder (6 cents per gallon) was collected at the retail level. The total fuel tax collected from each level was equal to 15 cents per gallon. As a result of PA 668 (effective April 1, 2003) the entire 15 cents per gallon is collected at the supplier level. This change in tax collection made diesel fuel taxation consistent with gasoline taxation. Both the gasoline and diesel tax are collected by the supplier and passed along to the consumer and reflected in the per-gallon "pump" price.

PA 668 was part of a package of legislation that aimed to simplify the collection of diesel fuel taxes. Another piece was PA 667 of 2002, which amended the Motor Carrier Fuel Tax, a tax on motor fuel consumed in Michigan. PA 667 changed the definition of "motor carrier'" to only include interstate motor carriers. This change effectively made intrastate motor carriers exempt from the Tax and therefore only subject to the Motor Fuel Tax. PA 667 also lowered the Motor Carrier Fuel Tax from 21 cents per gallon to 15 cents per gallon and eliminated the Sales Tax refund for fuel purchased in Michigan. This change brought the Motor Carrier Fuel Tax in line with the Motor Fuel Tax, at 15 cents per gallon.

Michigan is one of only a few states that collect sales tax on motor fuels. Michigan is further unique in that it includes applicable federal motor fuel taxes in the base when calculating the sales tax due on motor fuel purchases. Michigan does not, however, include the state motor fuel taxes in the base for determining sales tax liability.

To address the long-standing disincentive for interstate motor carriers to purchase fuel in Michigan caused by the levy of sales tax on motor fuel, changes to the Use Tax were made to make interstate motor carriers who drove in Michigan subject to the Tax. Both the Sales and Use Tax are levied at 6%. Under PA 669 of 2002, interstate motor carriers who paid 15 cents per gallon under the Motor Carrier Fuel Tax are also subject to the 6% Use Tax. The changes incorporated in these three laws simplified the collection of diesel fuel taxes and resulted in motor carriers, both interstate and intrastate, being taxed at the same rate, regardless of where motor fuel was purchased: 15 cents per gallon plus 6% (Sales Tax or Use Tax).

Historic Michigan Motor Fuel Tax Revenue

 

 

 

 

 

 

Last Updated July 21, 2008