What a California Mileage Tax Means for Employers
- Richard Sykes
- 14 hours ago
- 2 min read
California's pushing hard to get everyone into electric cars, but that means the old gas tax money for fixing roads is drying up big time. So now they're looking at a mileage tax—basically charging drivers per mile instead of per gallon.
Here's the deal in simple terms:
The state's been testing this "road charge" idea. They ran a pilot from August 2024 to January 2025 where volunteers tracked their miles and paid a fake fee (around 2.8 cents per mile in the test). Results are still being crunched, with a full report expected later this year or so. There's talk of bills like AB 1421 to keep studying it (extending the advisory committee way out to 2035), but no actual tax is law yet—it's still in the "maybe someday" phase.
For bosses in California, though, this could hit the wallet pretty quick if it happens. Why? Because of Labor Code Section 2802. That law says employers have to pay back employees for any legit work-related costs they rack up on the job. No shifting business expenses onto workers.
California courts have long said this covers using your personal car for work stuff—like sales calls, home health visits, construction sites, whatever. Employers usually just pay the IRS mileage rate (which for 2026 is 72.5 cents per mile) to cover gas, wear and tear, insurance, all that jazz. It's way easier than tracking every receipt.
Right now, if an average Californian drives about 11,400 miles a year total and maybe 10% of that's work-related (around 1,140 miles, not counting the daily commute), that's roughly $826 per employee per year in reimbursements at the current rate. For jobs where people are always on the road, it's a lot more.
If a mileage tax kicks in—say, hypothetically 5 cents per mile—that tax would be a straight-up extra cost the employee pays just because they're driving for work. Courts would almost definitely say employers have to reimburse that too, on top of the regular mileage pay.
Look at it like this: Employee drives 100 miles round-trip to see a client.
Regular reimbursement: 100 miles × 72.5 cents = $72.50 (covers normal car costs).
Mileage tax add-on: 100 miles × 5 cents = $5.
Total the boss pays back: $77.50 for that one trip.
Do that weekly? That's an extra $260 a year just from the tax part for one person.
The commute rule still helps a bit—regular drive from home to the office usually doesn't count for reimbursement (thanks to an old Supreme Court case). But if you're heading straight to a job site, client's place, or you're a field worker with no fixed office, that travel from home counts as work miles and gets reimbursed.
Bottom line: Employers need to watch this closely. If a real mileage tax ever passes, reimbursements go up, which could mean jacking up prices for customers, cutting back on travel (maybe more Zoom calls or whatever), or other ways to save cash. That might hurt sales, customer service, or even lead to layoffs in some spots.
It's not here yet, but for companies with mobile teams, it's definitely something to keep an eye on.