Hydrogen fuel.

Senator Caballero's hydrogen fuel tax legislation creates a state sales and use tax exemption for hydrogen fuel sales in California from July 2026 through July 2030. The exemption applies to hydrogen fuel sold at retail stations for use in fuel cell electric vehicles and hydrogen internal combustion engine vehicles.

The bill maintains existing local government authority to collect sales taxes on hydrogen fuel transactions. Counties, cities and districts may continue imposing local sales and use taxes. Additionally, state sales tax rates dedicated to local government funding, including revenues directed to the Local Revenue Fund 2011, remain in effect.

The California Department of Tax and Fee Administration must track and report annually to the Legislature on two metrics: the volume of hydrogen fuel sold at retail and the estimated gross receipts from those sales. The bill's findings indicate these reports will help evaluate whether the exemption achieves its stated purpose of establishing tax parity for zero-emission vehicles pending development of a new transportation funding framework that addresses hydrogen fuel.