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Posted: April 29, 2011 12:00 a.m.

Understanding Gas fees can be taxing

A lot of press, including this publication, has been dedicated to trying to figure out why gas prices, already high, are headed further upward due to an increase in state and local sales taxes, effective Sunday.

 

Some have called for Gov. Deal to cancel the increase (which he can't) or legislators to change the law (which they can). Georgia has a complicated manner of taxing motor fuel and it will require legislation to change things. Some "myths" need further explanation:

Myth 1: "Georgia Has One of the Lowest Gas Taxes in the Nation".

You hear this often from proponents of additional money for transportation. Such claims are based on Georgia's excise tax on gasoline, a flat 7.5 cents per gallon that is one of the lowest such taxes nationally.

But such claims do not take into account that Georgia is one of the few states that charge state and local taxes on motor fuel. This "hidden" gas tax goes to state, and local governments and together they add more than 20 cents per gallon to what you pay. In addition, because they are sales taxes based on selling price, they increase as fuel prices increase, a double whammy for drivers.

On May 1, the price you pay for gasoline will increase 2.8cents per gallon for the state tax and 2.1 cents per gallon for residents of Newton County (based on 3 percent local tax rate), adding nearly 5 cents per gallon to selling prices.

These taxes are pre-collected at wholesale and are included in the pump price. Because taxes are prepaid, the state adjusts the average selling price for which the tax is to be figured and collected.

The price adjustment is usually made twice a year, but there is a trigger clause that requires an additional adjustment when prices increase or decrease more than 25 percent since that last adjustment.

According to the American Petroleum Institute the total federal, state, and local taxes paid by Georgians was 39.2 cents per gallon, as of Jan. 1. This will increase to approximately 44.1 cents per gallon on May 1.

By comparison, the national average is 48 cents per gallon. Taxes in our neighboring states are as follows: South Carolina, 35.2 cents; Alabama, 39.3 cents; Tennessee, 39.8 cents; North Carolina, 51.2 cents; and Florida, 52.8 cents. As you can see, with both taxes Georgia's tax is rapidly approaching the national average and motorists will save 9 cents per gallon by stopping in South Carolina.

Myth 2: "We Used to Have Some of the Lowest Gas Prices - What Happened?"

Just as high prices push sales taxes on gas higher, low prices do the opposite. Remember when everyone used to say "fill up before you leave Georgia"? When gas prices were $2 or less, the lower sales tax reduced prices by at least 10 cents per gallon, compared with other states. Now that the Mideast remains in turmoil, these higher prices appear to be here for a while and Georgia's system of adding sales taxes based on selling price will add pain at the pump.

Myth 3: "Credit Card Points Are Free"

How many of us carry plastic that rewards us with miles/points, etc? What many of you may not realize is that retailers pay 2-3 percent of the selling price to the credit card companies when plastic is used. This adds about 8-10 cents per gallon to cost at today's retails.
Many merchants once charged one price for a cash purchase and another price for a credit purchase. Expect to see such two-tier pricing return as merchants seek to offer incentives to customers to pay with cash.

It's more unwieldy, but would it be worth a nickel a gallon?

For more on how Georgia stacks up against other states, gas tax wise, be sure to visit the API website at http://www.api.org/statistics/fueltaxes/upload/Gasoline-Tax-Map.pdf

Jim Tudor lives in Newborn. He can be reached at jtudor@aol.com.

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