Excise Tax Rate on Propane Autogas Permanently Reduced January 1, 2016

The National Propane Gas Association (NPGA) reports that federal law will soon be making it easier for Americans to use propane autogas. Effective January 1, 2016, this law permanently reduces the tax rate on propane autogas and levels the playing field for all alternative fuels.

Why is this important to the propane industry?
One gallon of propane contains 73 percent of the energy contained in one gallon of gasoline. In other words, it takes 1.37 gallons of propane to equal the energy value of one gallon of gasoline. However, both fuels are taxed at the same rate under current law. Because of this energy disparity, consumers pay more in taxes for propane autogas than for gasoline.

For example, a gasoline-powered truck using 20,000 gallons in a year would pay $3,660 in federal excise taxes. To obtain the equivalent energy content of 20,000 gallons of gasoline, a propane-powered truck would require 27,400 gallons of propane, resulting in $5,014 in federal excise taxes.

Excise tax equalization alters the calculation for the excise tax levied against propane used as an auto fuel to be based on an energy content rather than the current volumetric calculation. Due to the lower energy content of propane compared to gasoline, this will result in lower excise taxes being levied on propane used in auto fuel applications.