Since this fuel is not used to propel motor vehicles over public highways, removing its tax exemption would not cause the revenue to fall under any preexisting dedications or allocations.
Current law allows railroads to purchase motor fuel on a tax-free basis.
This can be done in one of two ways. Either the fuel can be delivered directly from a bonded supplier into the fuel supply tanks of a railway engine, or the rail company can have the fuel delivered on a tax free basis into its bulk storage facilities by obtaining a bonded user permit. The theory behind this exemption is that the motor fuels tax is basically a use tax. Since off-road fuel uses are not responsible for highway costs they should not be subject to the fuel taxes. The state should eliminate the motor fuel tax exemption for railroads.