Restoring the ‘Local’ in a Tax

Buy a gallon of gasoline for your car in Los Angeles and the city and county get a share of the sales tax the state collects. Buy a gallon of jet fuel at Los Angeles International Airport and it’s quite possible the “local” share of the tax goes to the city and county of San Francisco.

This odd state of affairs needs to be changed. It comes about because of an old ruling by the State Board of Equalization that the sales tax on jet fuel is assessed at the point at which the contract for the fuel is negotiated. And in many cases, this is in the San Francisco headquarters of Chevron. Or it could be the downtown Los Angeles offices of Atlantic Richfield. Those two firms are the biggest dispensers of jet fuel in the state.

The situation is even worse if you are a city or county official in Ontario or Orange County or San Diego. Chances are the “local” share of the sales tax collected on jet fuel at those airports will wind up in the coffers of either Los Angeles or San Francisco.

A two-pronged effort is underway in Sacramento to change this situation. The Board of Equalization has begun the cumbersome administrative process to tax the fuel at the airport. And Assemblyman Joe Baca (D-Rialto) is sponsoring AB 66 to achieve that change by state law. The board should be encouraged to proceed, but the surest way of bringing fairness to the situation is to enact Baca’s bill.

San Francisco officials are indignant. No surprise. Assemblywoman Carole Migden (D-San Francisco) vows to fight for this “rightful entitlement” to the money. But there is no entitlement. The state has several options for assessing sales taxes and can pick whichever it wants. San Francisco doesn’t even have an airport--SFO is in San Mateo County.

Chairman Ernest J. Dronenburg Jr. of the Board of Equalization is correct when he says that if you pay for having an airport then you should have the benefit of the tax.

This posed a bit of a dilemma for Los Angeles officials since the city benefits from the sales tax paid to Arco. But when the city toted up the figures, it learned it would receive an additional $1.2 million under the Baca bill. The city now supports the measure. Good thinking.