SB 419

SB419:v95#DOCUMENT

Bill Start

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

Senate Bill

No. 419

An act to add and repeal Section 6368.3 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL'S DIGEST

SB 419, Caballero. Hydrogen fuel.

Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes.

This bill would, on and after July 1, 2026, provide an exemption from the taxes imposed by the Sales and Use Tax Law for the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, hydrogen fuel, as defined.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

This bill would provide that the exemption created by the bill does not apply to local sales and use taxes or transactions and use taxes.

Existing law imposes or dedicates certain state sales and use tax rates for local funding, including through the Local Revenue Fund 2011.

This bill would provide that the exemption created by the bill does not apply to those state sales and use tax rates imposed or dedicated for local government funding, including those rates for which revenues are deposited into the Local Revenue Fund 2011.

Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.

This bill would also include additional information required for any bill authorizing a new tax expenditure.

This bill would take effect immediately as a tax levy.

Digest Key

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

Section 6368.3 is added to the Revenue and Taxation Code, to read:

6368.3.

(a) On or after July 1, 2026, there are exempted from the taxes imposed by this part the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, hydrogen fuel.

(b) For the purposes of this section:

(1) “Hydrogen fuel” means a fuel composed of molecular hydrogen intended for consumption in a surface motor vehicle or electricity production device with an internal combustion engine or fuel cell that meets any of the following criteria:

(A) The fuel is sold by a hydrogen fuel station.

(B) The fuel is sold for use in a hydrogen fuel cell electric vehicle.

(C) The fuel is sold for use in a hydrogen internal combustion engine vehicle.

(2) “Hydrogen fuel cell” means an electrochemical energy conversion device in which molecular hydrogen and an oxidant react to generate electricity as intended by the manufacturer.

(3) “Hydrogen fuel cell electric vehicle” means a vehicle that uses a hydrogen fuel cell for a means of propulsion.

(4) “Hydrogen fuel station” means a business selling hydrogen fuel by dispensing the hydrogen fuel directly into a consumer’s vehicle.

(5) “Hydrogen internal combustion engine vehicle” means a vehicle that is fueled exclusively by hydrogen by injecting hydrogen fuel into an engine which detonates the gaseous fuel for a means of propulsion.

(c) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section does not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws.

(2) Notwithstanding subdivision (a), the exemption established by this section does not apply with respect to any tax levied pursuant to Section 6051.2 or 6201.2, pursuant to Section 35 of Article XIII of the California Constitution, or any tax levied pursuant to Section 6051 or 6201 that is deposited in the State Treasury to the credit of the Local Revenue Fund 2011 pursuant to Section 6051.15 or 6201.15.

(d) For the purposes of complying with Section 41, the Legislature finds and declares all of the following:

(1) The specific purpose that the exemption will achieve is to create immediate parity in the rate of taxation for zero-emission vehicles until California adopts a new future-facing transportation funding mechanism that contemplates hydrogen as a fuel source for mobility applications.

(2) Detailed performance indicators to measure whether the exemption meets the purpose described in paragraph (1) are the following:

(A) The estimated amount of hydrogen fuel sold at retail in the state each fiscal year.

(B) The estimated gross receipts from the sale of hydrogen fuel in the state each fiscal year.

(3) On or before October 1, 2027, and annually thereafter, the California Department of Tax and Fee Administration shall analyze the performance indicators in paragraph (2) for the previous fiscal year and shall report its findings, in compliance with Section 9795 of the Government Code, to the Legislature.

(e) This section shall remain in effect only until July 1, 2030, and as of that date is repealed.

SEC. 2.

This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.