Connecticut’s gas sales tax is returning
On Jan. 1, Connecticut began gradually restoring the 25-cents-per-gallon tax it imposes on gasoline sales at the retail level, which the General Assembly suspended in March 2022.
The gas tax holiday was initially set to run from April 1 through June 30, 2022, and was eventually extended to Nov. 30. On Nov. 28, legislators adopted a plan to gradually phase it out.
The full 25-cents-pergallon tax was waived through Dec. 31, 2022. Motorists will pay a nickel per gallon in tax through January — and then the rate will rise incrementally until May 1, when it returns to 25 cents per gallon.
Here’s what you need to know.
The gas tax holiday was passed in response to rising gas prices.
The Russian invasion of Ukraine drove up oil prices worldwide beginning in spring 2022, and legislators and Lamont had discussed some form of tax relief for several weeks ahead of passing the gas tax, which the House and Senate unanimously approved on March 23, 2022.
Retail prices for regular gasoline in Connecticut hovered around $4.30 per gallon on April 1 when the holiday began and peaked on June 14 at $4.98 per gallon, according to the AAA.
It saved Connecticut residents millions of dollars.
The program delivered about $270 million in relief to Connecticut motorists from April 1 through Nov. 30, and that tally will rise to $330 million before the tax discounts disappear entirely in May, according to state budget analysts.
Waiving the 25-centsper-gallon tax saved motorists about $3 each time they filled their cars, meaning someone who filled up their car once a week from April 1-Dec. 31 saved roughly $117.
The cost to the state of waiving the entire 25-cent retail gas tax was about $30 million per month.
Lawmakers decided in November to bring it back incrementally.
A measure approved on Nov. 28 waived the full tax through Dec. 31, then will reinstate it by five cents per month until the full 25cent-per-gallon tax is reimposed on May 1.
Here’s a breakdown of how the gas tax will rise over the next few months:
• Jan. 1: 5-cent retail tax
• Feb. 1: 10-cent retail tax
• March 1: 15-cent retail tax
• April 1: 20-cent retail tax
• May 1: 25-cent retail tax
Republicans in both chambers tried unsuccessfully to waive the entire tax through June 30.
During the special session on Nov. 28, Rep. Holly Cheeseman of East Lyme said rising home heating oil and electric bills this winter will strain household budgets, and Rep. Jay Case, R-Winsted, argued a new state highway usage tax starting Jan. 1 on large commercial trucks will exacerbate inflation and drive up the cost of groceries and other goods.
But Democrats argued that extending the holiday that long could weaken the budget’s Special Transportation Fund over the long term. Democratic leaders said the state would be better served to reassess the gas tax holiday later this spring.
The Republican proposal failed 21-12 in the Senate and 88-52 in the House, with both votes following party lines.
A second Connecticut tax affects the price of gasoline as well.
The state has a second tax that affects the price of gasoline, which was not suspended or discounted this past year.
Connecticut imposes an 8.1% wholesale tax when fuel is sold to local gasoline stations. A state-approved surcharge effectively boosts that rate to 8.81%, and stations routinely build the cost of that tax into the retail price they charge to motorists.
The amount consumers pay varies based on the average wholesale price of gasoline.
Whenever the wholesale price exceeds $3 per gallon, a cap enacted in 2012 limits the tax to 26.4 cents, as if the wholesale price were only $3.