Act 143 encourages the use of alternative fuels by reducing the fuel tax to reflect the energy content of alternative fuels.  Act 143 applies to taxable years beginning after December 31, 2001.

Act 143 reduces the tax rates for alternative fuels in sections 243-4 and 243-5, Hawaii Revised Statutes (HRS), by taxing alternative fuels at tax rates which are a percentage of the tax on diesel fuel.  The percentages are based on the energy content of alternative fuels compared to diesel fuel. ¹

Currently, alternative and liquid petroleum fuels are taxed at the same rate per gallon putting alternative fuels at a tax disadvantage on a cost-per-mile basis.  Alternative fuels contain less energy per unit than liquefied petroleum based fuels, therefore, alternative fueled vehicles burn more fuel per mile than vehicles burning liquefied petroleum based fuels.

By reducing the cost of alternative fuels more businesses and residents may be encouraged to use vehicles that consume alternative fuels.

The Department will be revising various fuel tax forms because of Act 143.

Current forms and other tax information are available at the Department's website at:   www.state.hi.us/tax.  On Oahu, forms may be ordered by calling the Department's Forms Request Line at:  587-7572.  Persons who are not calling from Oahu, may call:  1-800-222-7572 (toll-free) to receive forms by mail or by fax.
 

/s/
MARIE Y. OKAMURA
Director of Taxation

HRS Section Explained:  HRS Section 243-1, 243-4 and 243-5

1. The rates for different alternative fuels will be:

 1)  For Ethanol, 0.29 times the rate for diesel;
 2)  For Methanol, 0.22 times the rate for diesel;
 3)  For Biodiesel, 0.50 times the rate for diesel;
 4)  For Liquefied Petroleum Gas, 0.33 times the rate for diesel; and
 5)  For other alternative fuels, the rate shall be based on the energy content of the fuels as compared to diesel fuel, using a lower heating value of 130,000 British thermal units per gallon as a standard for diesel, so that the tax rate, on an energy content basis, is equal to half the rate for diesel fuel.