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Tax Alert: New Jersey Petroleum Products Gross Receipts Tax Set to Increase November 1

New Jersey’s Governor on Friday signed into law legislation that, among other things, will increase the petroleum products gross receipts tax. Effective November 1, 2016, the current rate of $0.04 per gallon on highway fuel and aviation fuel will have an additional 12.85% of gross receipts added to it (non-highway fuel has an additional 7%); this percentage will be converted to a cents per gallon rate to be adjusted quarterly. The cents per gallon rate will be based on the average retail price per gallon of unleaded gasoline, diesel and kerosene respectively. Although the Commissioner has not released the effective cents per gallon rates beginning November 1 (and there is a possibility they will seek to extend the implementation date), it is being reported that the overall New Jersey fuel tax rates will increase by $0.23 per gallon. A floor stocks tax will be imposed on unlicensed entities having tax-paid petroleum products in storage for sale as of October 31, 2016. With respect to diesel there are some additional changes. A temporary exemption from the new additional tax is allowed for diesel through the end of this year; for the first six months of calendar year 2017 the rate will be 70% of the rate for other fuels. Also, effective July 1, 2017, the current $0.04 per gallon rate will be increased to $0.08 per gallon. As well as increasing the rate, the legislation brings biodiesel within the definition of diesel and fuel grade alcohol within the definition of gasoline for purposes of the petroleum products gross receipts tax. In addition to changing the petroleum products gross receipts tax rate, the sales tax will be reduced to 6.875% on January 1, 2017 and to 6.625% on January 1, 2018.