NGVAmerica, the trade association that represents the U.S. natural gas vehicle industry, has released a draft of model legislation to address the state-level taxation of compressed (CNG) and Liquefied (LNG) natural gas. NGVAmerica members as well as other trade associations were represented on the task force that developed the model legislation. The goal is to ensure that natural gas is taxed on an energy equivalent basis with gasoline and diesel fuel, and that uniform conversion factors are used for these calculations.
There currently is no uniform method of taxing CNG and LNG at the state level in the United States. While many states attempt to tax CNG based on what they consider to be a gasoline gallon equivalent, only a small number of states currently tax CNG based on the National Conference of Weights and Measurements method for dispensing CNG (i.e., 5.66 pounds of CNG = 1 gasoline gallon equivalent).
NGVAmerica has observed the treatment of LNG is even more problematic as few states tax LNG based on its energy content. For the states that tax LNG based on a gallon of LNG, the result is a much higher effective tax rate than diesel or gasoline. A handful of states use sticker or decal tax systems that may be favorable to CNG or LNG vehicles but retaining the use of sticker or decal taxes as opposed to retail taxes is not compatible with creating a national market for CNG and LNG.
In addition to the draft model legislation, an introductory letter or support letter has been prepared along with a document describing this issue and summarizing current state taxation methods.