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By Hank Behar
The Indiana legislature took a fiscal burden off the shoulders of the state’s petroleum marketers by reducing the pre-paid gasoline sales tax rate from $0.1940 to $0.099 per gallon, a reduction, in one move, of 49 percent.
Effective Feb. 1, 2009, the ruling will reduce the overpayments retailers have been making to the state by $15 million -- money they could get back only by filling out refund forms and waiting patiently for the check to arrive.
"This represents a significant victory for the Indiana Petroleum Marketers and Convenience Store Association," said Scot Imus, executive director of the association. "We’ve been working aggressively on this for the past two months, because if the reduction wasn’t made, many small businesses would have been forced to close as a result of severe cash flow shortages. We now plan to continue our efforts to ensure that long-term modifications to the pre-paid process are put into place so that this situation doesn’t happen again."
For the record, here is the notification being sent to gasoline distributors by the Indiana Department of Revenue:
Effective Feb. 1, 2009, the prepaid sales-tax rate on gasoline in Indiana will be $.099 per gallon. The first payment using the new rate will be due Feb. 25, 2009.
The Department of Revenue has determined this change based on the most recent statewide average of the retail price per gallon of gasoline. The source for this price is the U.S. Energy Information Agency, released on January 26, 2009 for the month of November 2008.
The revised prepaid sales-tax rate of $.099 per gallon of gasoline will be in effect from February 1, 2009 through June 30, 2009 on sales to retailers.
Thank you for your attention to this matter. If you should have any questions regarding this change, please call (317) 615-2658.
Now Indiana’s petroleum marketers can look forward with even greater anticipation to their annual Midwest Petroleum and Convenience Tradeshow, "M-PACT- World Of Ideas," which convenes in Indianapolis March 24-26, 2009. The show is sponsored by the state associations of Illinois, Indiana, Kentucky and Ohio, and is designed to help small businesses, such as c-store owners and operators, suppliers, truck stop operators and car wash operators, as well as petroleum marketers. It will present the latest and most innovative concepts to help decision-makers keep their operations successful and profitable. John Stossel will be on hand as featured speaker. For more information please visit www.m-pact.org
"Watch out for a shrink in the float," advised Karen Dreyer, executive vice president of the Ohio Petroleum Marketers and Convenience Store Association (OPMCA). "The state needs money more than ever to balance its budget and we wouldn’t be surprised if they tried to shrink the float."
"Shrinking the float," means reducing the tax allowance for evaporation in storage tanks.
"The present float allows for a reduction of 1.9 percent in taxes," noted Dreyer, "of which 1.5 percent goes to the jobber and 0.4 percent to the retailer. If the state reduces the float -- that is, if they reverse the laws of physics and declare that gasoline is now evaporating at a slower rate -- then both jobbers and retailers will pay more taxes, which will inevitably affect prices. Not to mention the change that will have to be made in Ohio’s science text books."
The other item Dreyer has her eye on is the state tax on gasoline, which is now 28 cents per gallon. (The federal tax is 18.4 cents.) "A one-cent increase will bring in $64 million," Dreyer noted. "So the question is: will the legislature once again turn to the gas pump for more funds, or will it have mercy on the state’s drivers for a change? We’re hoping for the latter."
Is it unconstitutional in Ohio to tax off-premise tuna fish sandwiches?
In 2005 the Ohio legislature, via the budget, levied a Commercial Activities Tax (CAT) on food that is sold for off-premise consumption.
"We said, ‘No’," Tom Jackson, president and CEO of the Ohio Grocers Association (OGA) explained. "So we went to court to fight it on the grounds that such a tax violates Section 12.13 of the Ohio constitution. And so far we’re ahead."
By"ahead," Jackson means that a lower court decision against him was later reversed on appeal by a 3-0 vote in his favor, which is where the matter stands at the present moment.
The next, and final, step is the Ohio Supreme Court, where the ruling will either live or die -- if the court decides to take the case. If it doesn’t take the case, the appeal decision stands and Ohioans will be able to take their tuna fish sandwiches home with them, tax-free.
Will the Supreme Court take the case? "I am quite certain they will," Jackson said. "Then we’ll have a final decision. It’s been almost a four-year fight for us, so we welcome a resolution, and we’re confident it will be in our favor."
The alchemy of an economic crisis and a budget shortfall can actually produce gold sometimes. Take Wisconsin, where a $5.4 billion budget deficit is staring the state in the face. To meet the deficit, politicians are considering an "Oil Franchise Fee" that would be assessed on the gross receipts of the larger oil companies, ranging from 0.5 percent to 2.5 percent, depending on volume. The "gold" would be the added revenue flowing into the state’s transportation coffers.
But to the Wisconsin Petroleum Marketers and Convenience Store Association (WPMCA) it’s more like fool’s gold.
"It’s essentially a hidden gas tax on close to 100 Wisconsin based fuel suppliers – not the big oil companies," said Matt Hauser, WPMCA director of government affairs. "It would also increase the overall price of gasoline and create a patchwork of prices throughout Wisconsin based on the 0.5 percent to 2.5 percent taxing tiers. And it would impact product supply. The suggestion "that the proposal would include an ‘anti-pass-through’ provision, making it illegal for the oil companies to pass on the assessment costs to their customers, is not realistic; no state has ever successfully prevented suppliers from passing on this tax to retailers and consumers."
If passed, it is expected that the Oil Franchise Fee will also be legally challenged as unconstitutional on the grounds that it violates the Commerce Clause of the U.S. Constitution. Since the no-pass-thru feature would be precedent-setting and have far reaching implications for the major oil companies serving Wisconsin, it is expected they would pursue an extensive and expensive lawsuit against the state.
"The WPMCA and others," Hauser said, "hope that the Wisconsin legislature will recognize the Oil Franchise Fee as an ill-advised idea and find a less disruptive, more equitable funding alternative for the state."
A bottle law is threatened in Indiana.
The original idea behind the first bottle law back in 1953 was to minimize litter. That was when Vermont banned the sale of beer in non-refundable bottles, hoping the economic incentive to get their money back would encourage consumers to return their bottles, instead of tossing them onto the state’s highways.
That law was repealed four years later.
Then in 1971 Oregon passed the first "modern" bottle bill requiring refundable deposits on beer and soft drink containers, including soda, juice and milk. It did not trigger an avalanche of bottle laws. Today, only eleven states have them.
The effect of bottle laws on reducing litter in those 11 states is buried under an Everest of statistics that are mined by both sides of the issue. But one thing is certain -- bottle laws have a new mission in life: raising revenue.
So when Joe Lackey, president of the Indiana Grocery & Convenience Store Association (IGCSA), learned that a new 10 cent bottle law for Indiana was being proposed, his first reaction was to avoid a battle over the issue by appealing to leadership to head off the bill.
"Not only would the bill cause havoc in the marketplace by forcing retailers to build redemption centers, and cause bottlers to waste energy hauling empty bottles back to their plants, but there’s also the problem of the Department of Health," Lackey observed. "It probably won’t allow empties to be brought into stores. Then what are small retailers who have limited space supposed to do to accommodate their customers? And besides that, there’s the escheat issue, where the state grabs the revenue from the unredeemed bottles, leaving everyone else out in the cold. The proponents of the bill are claiming it will generate $25 million a year in new state revenues, and that makes it a tax!"
Representative Vern Tincher (D-Terre Haute) has filed HB 1570, which is the Mandatory Deposit or Bottle Bill. It’s been assigned to the House Environmental Committee but no hearing date has been set. If it is scheduled for a hearing, Lackey urges retailers and bottlers to contact members of the Environmental Committee and ask them to vote against it.
Every state except Alaska has a state gasoline excise tax but only six have a variable tax in addition to a base tax: Connecticut, Florida, Kentucky, North Carolina, Wisconsin and Nebraska.
However, in Nebraska the variable tax may be eliminated if the governor has his way. And that's fine with Tim Keigher, executive director of the Nebraska Petroleum Marketers Association.
"The governor's goal is to stabilize our tax structure and we think that's a good thing, for both consumers and petroleum marketers," Keigher said. "It will eliminate a lot of paper work, cut bureaucratic costs and enable everyone to anticipate more accurately what their gasoline costs will be."
The variable gas tax in Nebraska, which has been around since 1980, is based on fuel consumption and road-building requirements and is adjusted every year on January 1 and July 1. This past January 1 the variable rate was set at 13.9 cents, up from 13.5 cents, which when added to the base tax of 12.5 cents a gallon brings the total state tax in Nebraska to 26.4 cents per gallon, up 0.4 cents. That will cost the average Nebraskan who drives 12,000 miles a year in a car that gets 20 miles to the gallon, an additional $2.40 for the year.
The governor indicated he wants to set the total state rate at an even 26 cents a gallon, which add to the federal tax of 18.4 cents will set the total excise taxes in Nebraska at 45.7 cents a gallon. According to the American Petroleum Institute, this places Nebraska just shy of the national average of 45.0 cents a gallon, almost midway between New York (total taxes: 59.7 cents a gallon) and Alaska (total taxes 18.4 cents). (Diesel taxes are higher, since the federal rate is 24.4 cents a gallon vs. 18.4 cents on gasoline, and, in most cases, the state tax on diesel fuel is also higher than the tax on gasoline.)
"However, what’s most important to Nebraska petroleum retailers is not the tax rate in California, Illinois, New York, etc., but the tax rate of the states surrounding Nebraska. Nebraska needs to remain competitive with Iowa, Kansas, Missouri, etc. on their motor fuel tax, but currently we’re at a $0.044 cent per gallon disadvantage with Iowa," Keigher noted. "Having 60 percent of our state’s population a stone’s throw away from a state with a $0.044 cent per gallon advantage makes it very difficult for Nebraska motor fuel retailers, so our objective now is become more competitive with our surrounding states."