Hydrogen fuel.

Senator Caballero's proposal to exempt hydrogen fuel from California state sales and use taxes aims to establish tax parity for zero-emission vehicles through a temporary measure lasting until 2030. The exemption, which would take effect January 1, 2026, applies to the sale, storage, use, and consumption of hydrogen fuel within California.

The measure maintains existing local revenue streams by explicitly excluding the exemption from local sales and use taxes, as well as from state tax revenues dedicated to local government funding through mechanisms like the Local Revenue Fund 2011. This preserves the tax authority of counties, cities, and special districts under both the Bradley-Burns Uniform Local Sales and Use Tax Law and the Transactions and Use Tax Law.

To track the exemption's implementation, the California Department of Tax and Fee Administration must report annually to the Legislature beginning March 1, 2027. These reports will document the volume of hydrogen fuel sold at retail in California and the estimated gross receipts from those sales. The exemption contains a sunset provision that automatically repeals it on January 1, 2030, allowing the Legislature to evaluate its effects before considering any extension.