How Should Bunker Fuel Be Treated From a Tax Policy Perspective?
Underlying Rationale for the SUT. The traditional public finance rationale for the SUT is that the provision of public services by governments facilitates, either directly or indirectly, the conduct of economic activity, including the buying and selling of goods. Thus, this rationale holds, levying a tax on the exchange of goods is a reasonable basis on which to partially fund governmental costs. An important element of this rationale is the presumption that final goods purchased by Californians will also be used in California, and California’s existing SUT provisions generally reflect this philosophy. For example: • Final purchases by California individuals and businesses for in–state use are taxed unless specifically exempted. Even in instances where the SUT is not collected by sellers or paid by taxpayers—such as on some mail order and Internet sales—this reflects the failure of taxpayers to comply with and remit the tax, not the state’s failure to impose the tax. Conversely, exempt
