News
Don’t be fuelish
Secret to saving money at the pump lies deep in the heart of taxes

By Terry Scruton
senior writer
and Jami Jones
senior editor

There’s an old saying: Nothing in life is certain except death and taxes. But, that doesn’t mean state taxes at the pump have to spell certain death for your business.

If you are an interstate truck driver – whether you are an owner-operator with your own authority or leased to a company – you’re going to pay some sort of fuel-related taxes in every state you drive through. There’s no getting around it. But if you play it smart, you can use the state taxes collected at the pump to your advantage.

Every state charges some sort of taxes on fuel. These can include state excise taxes, state sales taxes and any number of special taxes designated for special projects or funds within a given state.

It’s important to note that Oregon does not collect state-related taxes from truckers at the pump with the proper permits.

It’s challenging to resist buying fuel in cheap tax states. You realize immediate savings – but it’s the impact of that cheap-tax fuel on your International Fuel Tax Agreement reporting that will get you.

The first step to buying fuel smart – not cheap – is to identify all of the state taxes collected at the pump and understand the implications of what paying or not paying those taxes will have on your bottom line.

The accompanying chart shows the total taxes collected by each state, according to the Spring 2006 American Petroleum Institute report, in the first column. When you subtract the state taxes, the remainder is a combination of the base price and federal taxes, which are collected at the pump by all states.

The same chart also shows the IFTA taxes and any IFTA surcharges for each state for the second quarter of 2006. Weight miles will also figure into buying fuel smart and those taxes are also included.

Again, it will be tempting to buy the cheapest low-tax fuel you can find. But, don’t forget that quarterly IFTA report.

Shortchanging yourself by purchasing fuel in a low-tax state, or in a state that has implemented fuel tax relief measures, could mean big bucks out of your pocket at the end of every quarter.

So, when you’re deciding where to buy fuel, it’s important to answer two questions:

  • Why pay more to a state than you’ll need to cover your IFTA obligation and pad the state funds by paying the “extra” state taxes that don’t even figure into your IFTA report?
  • Or worse yet, why buy low-tax fuel and wind up with a huge IFTA payment each quarter?

Consider this: You’re driving a route that takes you through both North and South Carolina. On May 31, the price of fuel in North Carolina was $2.839 per gallon, while in South Carolina it was $2.738 per gallon.

When just looking at the pump price, instinct tells you that you’re going to save more money by fueling up in South Carolina, instead of North Carolina. But, the base prices tell a different story.

North Carolina collects a total of 30.2 cents per gallon in state taxes. South Carolina collects a total of only 16.8 cents per gallon in state taxes.

North Carolina charges 29.9 cents per net taxable gallon for IFTA miles driven in the state. South Carolina charges only 16.0 cents.

It’s still tempting to buy fuel in South Carolina – lower pump price, lower state taxes, lower IFTA obligations. But is this the best buy for you?

If you run more miles in North Carolina than you do in South Carolina – yet you continually fuel in South Carolina, you are shortchanging the taxes paid and may very well not have enough at the end of the quarter in your account to cover IFTA taxes in North Carolina.

If you don’t mind writing a check – one that could be a sizeable IFTA payment – then your decision to buy the cheaper fuel worked for you. But what if you could have a refund each quarter? How could you accomplish this?

It’s simple. In this example, you would buy more of the high-tax fuel in North Carolina. Sure, it’s 10 cents more per gallon at the pump – but North Carolina also charges 13.9 cents more than South Carolina in IFTA taxes. Buying the high-tax fuel will actually help cover your IFTA obligation and could go a long way toward a refund each quarter.

Seasoned truckers have also tapped into one other neat little trick when deciding on buying fuel in a high-tax state or a low-tax state – competition.

The closer to the state line you get in a high-tax state that neighbors a low-tax state, more than likely you will see the pump prices starting to decline. Just because a state is charging a high tax doesn’t mean retailers won’t lower their pump prices just to draw in traffic. Truck stops are not going to give up business to another state if they can help it.

Once free-market competition comes into play, you could see the difference between North and South Carolina’s pump prices drop by several cents per gallon. That leaves you buying high-tax fuel, with a lower base price which, in turn, pads your IFTA account, but saves money in the long run.

The situation is not much better in Oregon. It seems like a great deal to get a permit and not pay state sales tax at the pump. This isn’t as rosy as it may seem.

First, you’re not paying anything into your IFTA account. And other states really don’t care if Oregon is collecting taxes or not. If you turn miles in any other state with an active IFTA obligation, you will pay.

Second, Oregon is one of the few states that charge a weight mile tax, which is figured on a per-mile basis. It’s in the neighborhood of 4 cents per mile.

So, if you average 6 mpg, you’ve got to figure you’re paying 24 cents per gallon tax. This gets pricey quick, and you’re still out IFTA in other states as well.

Oregon, which doesn’t collect state taxes from permitted truckers and states that eliminate state taxes for a “fuel tax holiday” or lower them to provide “relief” aren’t doing the big favor to truckers the lawmakers in those states want you to believe.

Take, for instance, recent comments made by Republican candidate for the Massachusetts lieutenant governor post, Reed Hillman, to “Land Line Now,” about his support for eliminating the state fuel tax from Memorial Day to Labor Day.

“Having the lowest fuel tax in the nation would bring a lot of economic activity into Massachusetts,” he said. “ … we’d attract truckers stopping at a Massachusetts truck stop rather than in Connecticut, Rhode Island or Maine and they’ll spend some money while they’re in the store. That’s going to help with the economic stimulus that we want and bring sales and meals tax into the coffers.”

The message is pretty clear – he flat out said the other taxes will make up for the loss of fuel tax revenue. And, what he may not realize is that truckers who continually buy the fuel with the “lowest tax in the nation” will more than likely be forking over sizeable IFTA payments at the end of the quarter.

In the end, there is no magic formula that will work for every trucker. Keep a running tab on your IFTA miles, taxes paid, etc., in addition to your trip planning. It could mean not only a nice refund every quarter – but the ultimate reduction in your cost-per-mile, even if it is just a few cents.

Editor’s note: Information in this article was contributed by Ann Barker of Custom Permits, Mary Dennis of OOIDA’s Business Services Department and a collection of business-savvy truckers.

State
Total state taxes
IFTA
IFTA Surcharge
Weight miles
AK
0.080
AL
0.213
0.1900
AR
0.228
0.2250
AZ
0.280
0.2600
CA
0.430
0.3300
CO
0.205
0.2050
CT
0.390
0.2600
DC
0.200
DE
0.220
0.2200
FL
0.279
0.2997
GA
0.251
0.1420
HI
0.431
IA
0.235
0.2250
ID
0.250
0.2500
IL
0.451
0.3500
IN
0.409
0.1600
0.110
KS
0.270
0.2600
KY
0.155
0.1410
0.063
0.0285
LA
0.200
0.200
MA
0.235
0.2100
MD
0.243
0.2425
ME
0.277
0.2700
MI
0.320
0.3020
MN
0.220
0.2000
MO
0.176
0.1700
MS
0.188
0.1800
MT
0.285
0.2775
NC
0.302
0.2990
ND
0.230
0.2300
NE
0.264
0.2610
NH
0.206
0.1800
NJ
0.175
0.1750
NM
0.190
0.2100
0.0438
NV
0.286
0.2700
NY
0.476
0.3875
0.0495
OH
0.280
0.2800
OK
0.140
0.1300
OR
0.243
0.1316
PA
0.392
0.3810
RI
0.310
0.3000
SC
0.168
0.1600
SD
0.240
0.2200
TN
0.184
0.1700
TX
0.200
0.2000
UT
0.245
0.2450
VA
0.181
0.1600
0.035
VT
0.260
0.2600
WA
0.310
0.3100
WI
0.329
0.3290
WV
0.270
0.2700
WY
0.140
0.1400
Sources:
Total state taxes-American Petroleum Institute Spring 2006 report.
IFTA and IFTA surcharges-International Fuel Tax Association Inc. second quarter report.
Weight mile=ProMiles.
Note: Some number have been rounded for consistency in presentation.
Aug/Sept Digital Edition