SB1547 • 2026

alternative fuel tax

SB1547 - alternative fuel tax

Energy Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: David C. Farnsworth
Last action: 2026-02-17
Official status: Senate minority caucus
Effective date: Not listed

Plain English Breakdown

The candidate explanation included an incorrect statement about the voting requirement, which was corrected based on the official source material. The bill requires a two-thirds vote initially but can still be enacted with a three-fourths vote if vetoed by the governor.

Alternative Fuel Tax

This bill removes an exemption for alternative fuel vehicles from a use fuel tax and establishes new taxes based on the type of alternative fuel used.

What This Bill Does

Removes the current exemption that allows alternative fuel vehicles to avoid paying the use fuel tax.
Establishes a yearly tax for light motor vehicles using alternative fuels, with rates depending on whether they are powered by electricity alone or in combination with other fuels.
Sets specific taxes for heavy-duty vehicles based on their gross vehicle weight and number of axles, also considering the type of alternative fuel used.

Who It Names or Affects

Owners and operators of light motor vehicles that use alternative fuels, such as electric cars or those using propane or natural gas.
Operators of heavy-duty vehicles with gross vehicle weight over 26,000 pounds or three axles or more, if they use alternative fuels.

Terms To Know

Usable diesel gallon equivalent: A way to measure the energy content of different types of fuel so that taxes can be calculated fairly compared to traditional gasoline and diesel.

Limits and Unknowns

The bill does not specify how much revenue will be generated from these new taxes.
It is unclear what happens if the governor vetoes this act, but it could still pass with a three-fourths vote in both houses of the legislature.

Bill History

2026-02-17 Senate
Senate minority caucus
2026-02-17 Senate
Senate majority caucus
2026-02-16 Senate
Senate consent calendar
2026-02-04 Senate
Senate second read
2026-02-03 Senate
Senate Rules: PFC
2026-02-03 Senate
Senate Appropriations, Transportation and Technology: DP
2026-02-03 Senate
Senate first read

Official Summary Text

SB1547 - 572R - Senate Fact Sheet

Assigned to
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COMMITTEE

ARIZONA STATE SENATE

Fifty-Seventh
Legislature, Second Regular Session

FACT SHEET FOR
S.B. 1547

alternative fuel
tax

Purpose

Removes the
exemption of alternative fuel vehicles from the use fuel tax and establishes a
use fuel tax for alternative fuel vehicles based on the type of alternative
fuel used and class of motor vehicle. 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 $0.18 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 $0.26 cents per gallon. There is no use fuel tax on alternative
fuels. An additional excise tax of $0.01 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 the Arizona Department of
Transportation (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.

Subjects
a light motor vehicle that is powered by alternative fuel to a use fuel tax
that is:

a)

for vehicles that are exclusively fueled by electricity, an annual
amount equal to $120 multiplied by the per gallon use fuel tax ratio prescribed
for nonalternative fuel vehicles to $0.18;

b)

for vehicles fueled by a combination of electricity and motor vehicle
fuel, use fuel or other natural gas, an annual amount equal to $60 multiplied
by the per gallon use fuel tax ratio prescribed for nonalternative fuel
vehicles to $0.18 in addition to the per-gallon tax on the other non-electric
fuel source;

c)

for vehicles fueled by propane or compressed natural gas, an amount
equal to $0.18 on a gas gallon equivalent of 5.66 pounds multiplied by the per
gallon use fuel tax ratio prescribed for nonalternative fuel motor vehicles to
$0.18; and

d)

for
vehicles fueled by any other source of fuel, an amount to be determined by the
Director of ADOT that is consistent with the tax of the motor vehicle class
that the alternative fuel vehicle is replacing and that is indexed at the same
per gallon use fuel tax ratio imposed for nonalternative fuel motor vehicles to
$0.18.

2.

Subjects
a heavy-duty vehicle that is powered by an alternative fuel and that has gross
vehicle weight rating over 26,000 pounds or that has three axels or more to a
use fuel tax that is:

a)

for heavy-duty vehicles exclusively fueled by electricity, an amount
equal to $0.0143 per kilowatt hour consumed multiplied by the per gallon use
fuel tax ratio prescribed for use class nonalternative fuel motor vehicles to
$0.26;

b)

for heavy-duty vehicles fueled by a combination of electricity and motor
vehicle fuel, an amount equal to $0.0143 per kilowatt hour consumed multiplied
by the per gallon use fuel tax ratio prescribed for use class nonalternative
fuel motor vehicles to $0.26 in addition to any taxes paid on the other
non-electric fuel source;

c)

for heavy-duty vehicles fueled by propane or natural gas, an amount
equal to $0.26 on a gas gallon equivalent of 5.66 pounds, multiplied by the per
gallon use fuel tax ratio prescribed for use class nonalternative fuel motor
vehicles to $0.26;

d)

for heavy-duty vehicles fueled by liquid natural gas, an amount equal to
$0.26 on a usable diesel gallon equivalent of 6.06 pounds multiplied by the per
gallon use fuel tax ratio prescribed for use class nonalternative fuel motor
vehicles to $0.26;

e)

for heavy-duty vehicles fueled by hydrogen, an amount equal to $0.26 on
a usable diesel gallon equivalent of 2.2 pounds, and reduced by 45 percent and
then multiplied by the per gallon use fuel tax ratio prescribed for use class
nonalternative fuel motor vehicles to $0.26; and

f)

for
heavy-duty vehicles fueled by any other source of fuel, an amount to be
determined by the Director of ADOT that is consistent with the tax of the motor
vehicle class that the alternative fuel vehicle is replacing and that is
indexed at the same per gallon use fuel tax ratio imposed for use class nonalternative
fuel motor vehicles to $0.26.

3.

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 close to its internal combustion engine counterpart regarding the
amount collected for the vehicle's use of the roads and bridges in Arizona.

4.

Contains a statement of legislative intent.

5.

Makes technical and conforming changes.

6.

Requires for enactment the affirmative vote of at least two-thirds of
the members of each house of the Legislature (Proposition 108).

7.

Becomes effective on signature of the Governor.

Prepared by Senate Research

February 6, 2026

LMM/KS/ci

Current Bill Text

Read the full stored bill text

SB1547 - 572R - I Ver

REFERENCE TITLE:
alternative fuel tax

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SB 1547

Introduced by

Senator
Farnsworth

AN
ACT

Amending section 28-5606, Arizona
Revised Statutes; relating to alternative fuel tax.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 28-5606, Arizona Revised
Statutes, is amended to read:

START_STATUTE
28-5606.

Imposition of motor fuel taxes; definitions

A. In addition to all other taxes provided by law, a
tax of
eighteen cents

$.18
per
gallon is imposed on motor vehicle fuel possessed, used or consumed in this
state.

B. To partially compensate this state for the use of
its highways:

1. A use fuel tax is imposed on use fuel used in the
propulsion of a light class motor vehicle on a highway in this state at the
same rate per gallon as the motor vehicle fuel tax prescribed in subsection A
of this section
, except that there is no use fuel tax on
alternative fuels
.

2. A use fuel tax is imposed on use fuel used in the
propulsion of a use class motor vehicle on a highway in this state at the rate
of
twenty-six cents

$.26
for
each gallon, except that there is no use fuel tax on
alternative
fuels and
use class vehicles that are exempt pursuant to section 28-5432
from the weight fee prescribed in section 28-5433 are subject to the use
fuel tax imposed by paragraph 1 of this subsection.

3. Through December 31, 2024, a use fuel tax is
imposed on use fuel used in the propulsion of a motor vehicle transporting
forest products in compliance with the requirements of section 41-1516 on a
highway in this state at the rate of
nine cents

$.09
for each gallon
, except that there is no use
fuel tax on alternative fuels
.

C. The motor vehicle fuel and use fuel taxes imposed
pursuant to this section and the aviation fuel taxes imposed pursuant to
section 28-8344 are conclusively presumed to be direct taxes on the
consumer or user but shall be collected and remitted to the department by
suppliers for the purpose of convenience and facility only.� Motor vehicle
fuel, use fuel and aviation fuel taxes that are collected and paid to the
department by a supplier are considered to be advance payments, shall be added
to the price of motor vehicle fuel, use fuel or aviation fuel and shall be
recovered from the consumer or user.

D. Motor vehicle fuel and use fuel taxes imposed
pursuant to this section on the use of motor vehicle fuel and use fuel and the
aviation fuel taxes imposed pursuant to section 28-8344 on the use of
aviation fuel, other than by bulk transfer, arise at the time the motor
vehicle, use or aviation fuel either:

1. Is imported into this state and is measured by
invoiced gallons received outside this state at a refinery, terminal or bulk
plant for delivery to a destination in this state.

2. Is removed, as measured by invoiced gallons, from
the bulk transfer terminal system or from a qualified terminal in this state.

3. Is removed, as measured by invoiced gallons, from
the bulk transfer terminal system or from a qualified terminal or refinery
outside this state for delivery to a destination in this state as represented
on the shipping papers if a supplier imports the motor vehicle, use or aviation
fuel for the account of the supplier or the supplier has made a tax
precollection election pursuant to section 28-5636.

E. If motor fuel is removed from the bulk transfer
terminal system or from a qualified terminal or is imported into this state,
the original removal, transfer or importation of the motor fuel is subject to
the collection of the tax. If this motor fuel is transported to
another qualified terminal or reenters the bulk transfer terminal system, the
subsequent sale of the motor fuel on which tax has been collected is not
subject to collection of an additional tax if proper documentation is retained
to support the transaction.

F. In addition to any other taxes
levied by this state, a motor vehicle that is powered by an alternative fuel is
subject to the following:

1. A light motor vehicle that is
fueled:

(
a
) Exclusively
by electricity shall pay an annual amount equal to $120 multiplied by the ratio
of the motor vehicle fuel tax imposed by subsection A of this section to $.18.

(
b
) By a
combination of electricity and motor vehicle fuel, use fuel or natural gas
shall pay an annual amount equal to $60 multiplied by the ratio of the motor
vehicle fuel tax imposed by subsection A of this section to $.18 in addition to
the per-gallon tax on the fuel source other than electricity.

(
c
) By propane
or compressed natural gas shall pay an amount equal to $.18 on a gas gallon
equivalent, which is 5.66 pounds, multiplied by the ratio of motor vehicle fuel
tax imposed pursuant to subsection A of this section to $.18.

(
d
) By any
other source of fuel not listed in this paragraph, the department shall
establish a tax in an amount to be determined by the director that is
consistent with the tax of the motor vehicle class that the motor vehicle is
replacing and shall be indexed at the same ratio of motor fuels imposed
pursuant to subsection A of this section to $.18.

2. A heavy-duty vehicle that is
over twenty-six thousand pounds gross vehicle weight rating as
established by the manufacturer or that has three axles or more and that is
fueled:

(
a
) Exclusively
by electricity shall pay an amount equal to $.0143 per kilowatt hour as
consumed, which is the usable diesel gallon equivalent, multiplied by the ratio
of the use fuel tax imposed by subsection B of this section to $.26.

(
b
) By a
combination of electricity and motor vehicle fuel shall pay an amount equal to
$.0143 per kilowatt hour as consumed, which is the usable diesel gallon
equivalent, multiplied by the ratio of the use fuel tax imposed by subsection B
of this section to $.26 in addition to any taxes paid on the other fuel source
other than electricity.

(
c
) By propane
or compressed natural gas shall pay an amount equal to $.26 on a gas gallon
equivalent, which is 5.66 pounds, multiplied by the ratio of the use fuel tax
imposed by subsection B of this section to $.26.

(
d
) By liquid
natural gas shall pay an amount equal to $.26 on a usable diesel gallon
equivalent, which is 6.06 pounds, multiplied by the ratio of the use fuel tax
imposed by subsection B of this section to $.26.

(
e
) By hydrogen
shall pay an amount equal to $.26 on a usable diesel gallon equivalent, which
is 2.2 pounds, and reduced by forty-five percent, multiplied by the ratio
of the use fuel tax imposed by subsection B of this section to $.26.

(
f
) By any
other source of fuel not listed in this paragraph, the department shall
establish a tax in an amount to be determined by the director that is
consistent with the tax of the motor vehicle class that the motor vehicle is
replacing and shall be indexed at the same ratio of use fuel tax imposed by
subsection B of this section to $.26.

G. For the purposes of this section:

1. "Heavy-duty
vehicle" has the same meaning prescribed in 42 United States Code section
16104(
a
).

2. "Light motor vehicle"
has the same meaning prescribed in section 28-5491.

3. "Usable diesel gallon
equivalent" means the conversion of use fuel to a common energy density,
such as British thermal units or jules, and compensating for the natural heat
loss of internal combustion engines so that the rate is close to its internal
combustion engine counterpart regarding the amount collected for the vehicle's
use of the roads and bridges in this state.

END_STATUTE

Sec. 2.
Legislative intent

The legislature intends to ensure that
operators of motor vehicles that are powered by alternative fuel as defined in
section 1-215, Arizona Revised Statutes, are paying an amount that is
proportionally equal to the amount that operators of motor vehicles powered by
motor fuel as defined in section 28-5601, Arizona Revised Statutes, for
the purposes of highway use and maintenance.

Sec. 3.
Requirements for enactment; two-thirds vote

Pursuant to article IX, section 22,
Constitution of Arizona, this act is effective only on the affirmative vote of
at least two-thirds of the members of each house of the legislature and
is effective immediately on the signature of the governor or, if the governor
vetoes this act, on the subsequent affirmative vote of at least three-fourths
of the members of each house of the legislature.