Special fuels taxes

AN ACT Relating to reducing taxes on special fuels; amending RCW 1
82.38.030 and 82.38.075; and creating a new section.2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:3
NEW SECTION. Sec. 1. The legislature finds that increased tax 4
rates on diesel result in increased prices on food and goods. 5
Vehicles that use special fuels, such as diesel, are a mainstay in 6
food production and Washington's economy. Freight is moved by 7
vehicles that rely on special fuels. The legislature recognizes that 8
fuel prices in neighboring states tend to trend lower than 9
Washington, sometimes more than a $1 difference per gallon. This 10
difference encourages people to buy fuel out of state. The 11
legislature finds reducing the special fuels tax may encourage more 12
people to buy fuel in Washington, reduce the cost of Washington grown 13
products, and improve the economy. Therefore, this act removes the 14
special fuels tax increase that went into effect July 1, 2025, and 15
planned future increases.16
Sec. 2. RCW 82.38.030 and 2025 c 417 s 101 are each amended to 17
read as follows: 18
(1) There is levied and imposed upon fuel licensees a tax at the 19
rate of 23 cents per gallon of fuel. 20
H-2418.1
HOUSE BILL 2404
State of Washington 69th Legislature 2026 Regular Session
By Representatives Ybarra, Jacobsen, and Engell
Read first time 01/13/26. Referred to Committee on Transportation.
p. 1 HB 2404
(2) Beginning July 1, 2003, an additional and cumulative tax rate 1
of five cents per gallon of fuel is imposed on fuel licensees. This 2
subsection (2) expires when the bonds issued for transportation 2003 3
projects are retired. 4
(3) Beginning July 1, 2005, an additional and cumulative tax rate 5
of three cents per gallon of fuel is imposed on fuel licensees.6
(4) Beginning July 1, 2006, an additional and cumulative tax rate 7
of three cents per gallon of fuel is imposed on fuel licensees.8
(5) Beginning July 1, 2007, an additional and cumulative tax rate 9
of two cents per gallon of fuel is imposed on fuel licensees.10
(6) Beginning July 1, 2008, an additional and cumulative tax rate 11
of one and one-half cents per gallon of fuel is imposed on fuel 12
licensees. 13
(7) Beginning August 1, 2015, an additional and cumulative tax 14
rate of seven cents per gallon of fuel is imposed on fuel licensees.15
(8) Beginning July 1, 2016, an additional and cumulative tax rate 16
of four and nine-tenths cents per gallon of fuel is imposed on fuel 17
licensees. 18
(9) Beginning July 1, 2025, an additional and cumulative tax rate 19
of six cents per gallon of fuel is imposed on fuel licensees.20
(10) Beginning July 1, 2025, an additional and cumulative tax 21
rate of three cents per gallon of special fuel is imposed on fuel 22
licensees. 23
(11) Beginning ((July 1, 2027, an additional and cumulative tax 24
rate of three cents per gallon of special fuel is imposed on fuel 25
licensees)) the effective date of this section, the cumulative tax 26
rate per gallon of special fuel must be reduced so that it is the 27
same as it was on July 1, 2016. 28
(12)(((a))) Beginning July 1, 2026, the fuel tax rates imposed 29
under subsections (1) through (9) of this section must be increased 30
annually by two percent and the resulting fuel tax rate must be 31
rounded to the nearest one-thousandth of $1. 32
(((b) Beginning July 1, 2028, the fuel tax rate imposed under 33
subsections (10) and (11) of this section must be increased annually 34
by two percent and the resulting fuel tax rate must be rounded to the 35
nearest one-thousandth of $1.))36
(13) Taxes are imposed when: 37
(a) Fuel is removed in this state from a terminal if the fuel is 38
removed at the rack unless the removal is by a licensed supplier or 39
distributor for direct delivery to a destination outside of the 40
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state, or the removal is by a fuel supplier for direct delivery to an 1
international fuel tax agreement licensee under RCW 82.38.320;2
(b) Fuel is removed in this state from a refinery if either of 3
the following applies: 4
(i) The removal is by bulk transfer and the refiner or the owner 5
of the fuel immediately before the removal is not a licensed 6
supplier; or 7
(ii) The removal is at the refinery rack unless the removal is to 8
a licensed supplier or distributor for direct delivery to a 9
destination outside of the state, or the removal is to a licensed 10
supplier for direct delivery to an international fuel tax agreement 11
licensee under RCW 82.38.320; 12
(c) Fuel enters into this state for sale, consumption, use, or 13
storage, unless the fuel enters this state for direct delivery to an 14
international fuel tax agreement licensee under RCW 82.38.320, if 15
either of the following applies: 16
(i) The entry is by bulk transfer and the importer is not a 17
licensed supplier; or 18
(ii) The entry is not by bulk transfer; 19
(d) Fuel enters this state by means outside the bulk transfer-20
terminal system and is delivered directly to a licensed terminal 21
unless the owner is a licensed distributor or supplier;22
(e) Fuel is sold or removed in this state to an unlicensed entity 23
unless there was a prior taxable removal, entry, or sale of the fuel;24
(f) Blended fuel is removed or sold in this state by the blender 25
of the fuel. The number of gallons of blended fuel subject to tax is 26
the difference between the total number of gallons of blended fuel 27
removed or sold and the number of gallons of previously taxed fuel 28
used to produce the blended fuel; 29
(g) Dyed special fuel is used on a highway, as authorized by the 30
internal revenue code, unless the use is exempt from the fuel tax;31
(h) Dyed special fuel is held for sale, sold, used, or is 32
intended to be used in violation of this chapter; 33
(i) Special fuel purchased by an international fuel tax agreement 34
licensee under RCW 82.38.320 is used on a highway; and35
(j) Fuel is sold by a licensed fuel supplier to a fuel 36
distributor or fuel blender and the fuel is not removed from the bulk 37
transfer-terminal system. 38
p. 3 HB 2404
Sec. 3. RCW 82.38.075 and 2025 c 417 s 102 are each amended to 1
read as follows: 2
(1) To encourage the use of nonpolluting fuels, an annual license 3
fee in lieu of the tax imposed by RCW 82.38.030 is imposed upon the 4
use of liquefied natural gas, compressed natural gas, or propane used 5
in any motor vehicle. The annual license fee must be based upon the 6
following schedule and formula: 7
8 VEHICLE TONNAGE (GVW) FEE
9 0 - 6,000 $ 45
10 6,001 - 10,000 $ 45
11 10,001 - 18,000 $ 80
12 18,001 - 28,000 $110
13 28,001 - 36,000 $150
14 36,001 and above $250
(2) To determine the annual license fee for a registration year, 15
the appropriate dollar amount in the schedule is multiplied by the 16
cumulative fuel tax rate per gallon of special fuel effective on July 17
1st of the preceding calendar year and the product is divided by 12 18
cents, except for 2026, when the cumulative fuel tax rate must be 19
calculated using the 2024 amount . The annual license fee must be 20
rounded to the nearest five cents. 21
(3) The department, in addition to the resulting fee, must charge 22
an additional fee of $5 as a handling charge for each license issued.23
(4) The vehicle tonnage fee must be prorated so the annual 24
license will correspond with the staggered vehicle licensing system.25
(5) A decal or other identifying device issued upon payment of 26
the annual fee must be displayed as prescribed by the department as 27
authority to purchase this fuel. 28
(6) Persons selling or dispensing natural gas or propane may not 29
sell or dispense this fuel for their own use or the use of others 30
into tanks of vehicles powered by this fuel which do not display a 31
valid decal or other identifying device. 32
(7) Commercial motor vehicles registered in a foreign 33
jurisdiction under the provisions of the international registration 34
plan are subject to the annual fee. 35
p. 4 HB 2404
(8) Motor vehicles registered in a foreign jurisdiction, except 1
those registered under the international registration plan under 2
chapter 46.87 RCW, are exempt from this section. 3
(9) Vehicles registered in jurisdictions outside the state of 4
Washington are exempt from this section. 5
(10) Any person selling or dispensing liquefied natural gas, 6
compressed natural gas, or propane into the tank of a motor vehicle 7
powered by this fuel, except as prescribed in this chapter, is 8
subject to the penalty provisions of this chapter. 9
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