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Indiana's Gas Stations Stressed By Tax Law
December 09, 2008 -
INDIANPOLIS -- Several Indiana gas stations soon may be taxed out of business unless they get a reprieve from Gov. Mitch Daniels or the state's general assembly, according to a report by the Indianopolis Star.
Indiana's 2,600 gas stations are the only retailers forced to prepay the state's 7 percent sales tax, according to the report. All of the others collect sales taxes and then remit them to the state each month. Gas station owners were required to pay in advance starting in 1988 after several defunct gas stations burned the state for unpaid sales tax. Now, operators pay ahead when they get a bulk delivery of fuel, according to a formula that's recalculated every six months.
The Indiana Department of Revenue recalculated the rate that will take effect Jan. 1, according to the report. However, the formula is based on gas prices during the summer, though retail prices are currently less than half of what they were then.
Retailers must pay the state 19.4 cents per gallon in sales tax up front, but will be collecting just 8.1 cents per gallon based on current prices, the report noted. The state will settle up with retailers at the end of the month, but that means they won't get paid back for at least 30 days.
"You could see a lot of [retailers] go out of business," Jay Ricker, owner of Ricker's Convenience Stores, told the newspaper. "The state's basically getting an interest-free loan from them."
A station that pumps 100,000 gallons a month will prepay $19,400 in sales tax while it collects just $8,100, an $11,300 float until the state pays it back.
Station owners can use the tax collected on sales of non-gas items, such as cigarettes and candy bars, to offset the tax at month's end.
Still, Ricker told the newspaper, he will have to borrow money to prepay the taxes.
"Ideally, they'd be able to pass along the cost to the customer," Scot Imus, executive director of the Indiana Petroleum Marketers and Convenience Store Association, told the paper. "But that's unlikely in the highly competitive market."
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