Gasoline taxes you pay.

Budget deficit and taxes are main points of discussion these days, both in federal and state governments. California Governor and some local mayors want to increase sales tax. Let’s take an example of sales tax on a product that is also a major concern for every consumer these days – Gasoline. There are two kinds of taxes on each gallon sold. There are some fixed taxes and some variable taxes. For example in California there are following fixed taxes per gallon:-

  1. 18.4 cents per gallon federal tax.
  2. 35.7 cents per gallon state tax.
  3. .001155 cents per gallon as Lead Poisoning prevention fee (although there is no leaded gas being sold in California).
  4. .0011547 cents per gallon as Oil Spill Prevention Charge (although all the oil spills are supposed to be cleaned and paid for by the gas station owner).
  5. .00171 cents per gallon as Federal Oil Spill Recovery Fee (this fund probably is to bail out BPs of the world to clean up their mess).
  6. 2 cents per gallon as the Underground Storage Tank Fee.

So a total of 56.3345 cents for every gallon sold in California goes for fixed taxes. But that is not all. On top of all these taxes there is a sales tax that varies with the street price. That tax has to be backed out of the street price that the consumer sees at a gas station. So as the gas price goes up, so does the revenue collection by the states.

  The underground storage tank maintenance fee is supposed to provide revenues for programs designed to expedite the cleanup of leaking underground petroleum storage tanks in California. It was established in 1991. The fee rates per gallon for the following periods are:

$ 0.006 January 1, 1991–December 31, 1994

$ 0.007 January 1, 1995–December 31, 1995

$ 0.009 January 1, 1996–December 31, 1996

$ 0.012 January 1, 1997–December 31, 2004

$ 0.013 January 1, 2005–December 31, 2005

$ 0.014 January 1, 2006–December 31, 2009

$ 0.020 January 1, 2010–

So we can see that the rate has gone up from .06 cents per gallon to 2 cents per gallon since 1991, more than three fold increase in the past twenty years.

 This fund guarantees up to $995,000.00 to a station owner. But the requirement is to have one million dollar coverage for all gas stations. So for the remaining $5000.00 the station owner has to guarantee own funds or have an insurance coverage. A gas station selling an average of 100,000 gallons a month (which is about the average) ends up paying $24,000.00 dollars a year to the state for having coverage of $995,000.00. On the other hand the same gas station can buy two million dollar insurance for about $500.00 from any reputable insurance company. The owner has no choice but to pass this expanse on to the consumer.

 The question to be asked is where has that fund gone. We have not had any major disaster and leaking gas tanks for a long time. In 2009 all gas station owners were forced by the state to do an upgrade called EVR upgrade at an average cost of $50,000.00 per station. They had to take loans or use their own funds. This Underground Storage Tank Fee could have been used to help them do the upgrade that the state was forcing them to do any way.

There is another factor that needs to be added. The credit card processing fees paid by the gas station owners. It can be any where from 1.9 percent to 2.5 percent of the street price. In other words if you see a $4.00 price on the street, that also includes the credit card fee of 8-10 cents per gallon. A lot of gas station owners on the west coast are giving a discount for paying with cash or proprietry credit cards, like Chevron, Shell and so on. The reason is because they don’t have to pay that credit card fee to the bankers on these transactions. They pass that savings on to the consumers. The higher the street price goes, higher the credit card fee becomes, because it is a percentage of the street price and not a fixed price. ARCO on west coast is cheaper than other brands. One of the major reasons is that they do not accept credit cards, hence no credit card fee burden. They accept Debit Cards but they charge the fee to the consumer. If more people start paying with cash, they can reduce their gas bill by 8-10 cents per gallon.

 Please ask you elected representatives for answers to these questions. May be there are some things we don’t know but we definitely deserve an explanation.

This entry was posted in Taxes and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s