How Much Tax Are You Paying On That $2 Gasoline, and Where Does It Go?

Over at the AJC, James Salzer reports that for the purposes of collecting sales tax, for the next six months the price of gasoline is $2.946 per gallon. That’s despite pump prices falling below $2 in much of the state. Why? Because instead of figuring out what the tax is at the time you buy that gas, the price for the purpose of calculating the sales tax is fixed every January and July for the next six months.

In July, 2014, Governor Deal decided not to raise the sales tax price because gas prices were higher than expected The sales tax price remained frozen at the beginning of this year because prices are lower than expected. The volatility in the price of gas can have a big effect on the revenue for the DOT. On Tuesday, new DOT Chief Russell McMurry told lawmakers at a budget hearing that DOT would expect to lose around $86 million over six months if the sales tax price was lowered to match the retail price.

What really caught my eye in the Salzer story, though, was this:

So instead of paying a 4 percent tax on $2 per gallon at the pump, consumers are paying 4 percent on $2.946 per gallon. On 10 gallons of gas, the difference is about 36 cents.

That only tells part of the story.

In reality, consumers are paying between a 6 and 8 percent sales tax on gasoline due to county SPLOSTs, E-SPLOSTs, HOST or MOST taxes. In Fulton, DeKalb and Clayton counties, there’s 1 percent for MARTA, and in the regions that passed the 2012 TSPLOST, there’s 1 percent for transportation. That means on a ten gallon gas purchase, consumers are paying around 76 cents more than they would be expected to.

Here’s yet another way of looking at it. With the sales tax rate locked in at $2.946 per gallon, the average consumer is paying 28.1 cents in Georgia taxes per gallon, including the 7.5 cent per gallon excise tax. Of that, the DOT actually gets 16.3 cents to pay for maintenance and construction of roads and bridges. That’s the excise tax, plus 3% from the state sales tax. The other “penny,” plus the county sales taxes go elsewhere. Drop that to the $2 per gallon you’re actually paying at the pump, and the numbers are 21.54 cents vs. 14 cents per gallon. For these examples, I’m assuming a 7% combined state and county sales tax rate, and I’m ignoring the federal excise tax on gas of 18.4 cents per gallon.

One final thought: If you drove a vehicle that gets 25 miles per gallon 15,000 miles last year, you paid $168.60 in state gas excise tax and sales tax, based on the numbers I used in the preceding paragraph. Of that, $97.80 went to the state DOT, and $70.80 went elsewhere.

6 comments

  1. TuckerDawg says:

    The AJC was correct in it’s estimated impact on consumers. The executive order only freezes the state rate. The Governor has no authority to freeze local rates. There is a bulletin from the Department of Revenue you can read here: https://dor.georgia.gov/sites/dor.georgia.gov/files/related_files/document/Prepaid%20State%20Tax%20Rates%20Effective%20January%201%2C%202015.pdf

    Here’s a quote to save you some time: “The Executive Order suspending any change in the Prepaid State Tax rates by freezing the current rates does not apply to “Prepaid Local Tax” (i.e., local sales and use tax).”

    Here is a link to the bulletin on the local rates, which did drop: https://dor.georgia.gov/sites/dor.georgia.gov/files/related_files/document/Prepaid%20Local%20Tax%20on%20Motor%20Fuel%20Sales%20Effective%20January%201%2C%202015.pdf

    • TuckerDawg says:

      You should edit your blog post further to explain that motor fuel taxes are assessed at the distributor level, unlike true sales taxes which are retail level taxes paid by consumers. This is why retail motor fuel purchasers are generally not permitted to file for refunds (i.e., because they didn’t engage in a taxable transaction). Your post makes it seem like taxes are charged at the consumer pump, which is not the case.

      It is true that he cost of the tax is likely passed onto the consumer, but it is difficult to pinpoint exactly how much of the price at the pump is “tax” because fuel may be stored for a period of time between the taxable distributor level sale and the non-taxed retail level purchase. Market economics can cloud the price at the pump to the extent that specifically allocating any amount to “tax” isn’t going to lead to clean numbers.

      • Jon Richards says:

        Thanks for providing additional information. Using a county sales tax price of $2.599 per gallon of gasoline, that would mean consumers are paying 62 cents more than would be expected when purchasing ten gallons of gas, rather than 76 cents. And in the following paragraph, the tax per gallon is 27.1 cents rather than 28.1 cents using the state and county/local taxable prices. In my final paragraph, you would pay $162.60 annually, with $64.80 not going to the DOT.

        And while I appreciate TuckerDawg’s point that because the sales tax is paid at the distributor level, tax allocation becomes more difficult, for our discussion here, I’m not sure that makes a difference. In the end, the state is assessing a 4% sales tax and local governments are assessing between 1 and 4% sales tax on each gallon sold at retail. The retailer might be selling some gas that was taxed at a different sales tax price than what is currently set, or he might be absorbing some of the tax charged in the same way retailers have sales where “we pay the sales tax for you,” ultimately, state and local governments are getting their money.

        And thanks to Al for noting below that the 1% sales tax assessed in counties that passed the TSPLOST are not paying that tax on gas.

  2. Al Gray says:

    TIA/TSPLOST does not apply to motor fuels. From the bill –

    A tax imposed under this article shall not apply to:
    (1) The sale or use of any type of fuel used for off road heavy duty equipment, off road farm or
    agricultural equipment, or locomotives;
    (2) The sale or use of jet fuel to or by a qualifying airline at a qualifying airport;
    (3) The sale or use of fuel that is used for propulsion of motor vehicles on the public highways. For purposes of this paragraph, a motor vehicle means a self propelled vehicle designed for operation or required to be licensed for operation upon the public highways

  3. Newtonian says:

    Sales taxes on motor fuel (state and local) are collected at the wholesale level to assure that they are remitted properly. Prior to this change, retailers could in theory underestimate the amount of sales, etc. The tax is pre-collected at the time of delivery.

    The first year of pre-collection resulted in a large increase in total taxes collected. Imagine that.

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