[LDB]

Diesel fuel, price versus cost.

6/30/07 *** Updated tax increases in MI and NC and decrease in NY. ***

3/1/07 ******* Updated with current state fuel tax rate chart. *******

8/16 ******** Update posted as a reply to this thread. See latest post for new and important information ********

Other than a truck payment fuel is the largest expense an owner/driver sees. Understanding the difference between price and cost and the part fuel taxes play in that relationship can mean hundreds, if not thousands, of dollars per year to the bottom line.

When you see numbers on a billboard or on the pump that is the price of the fuel. Those numbers are of very little importance other than comparing two facilities next door to or across the street from each other. The number of interest to us is the cost of the fuel.

When determining the actual cost of the fuel, there are two important numbers to know. The first is the state fuel used tax rate. The second is the state credit rate for gallons purchased. The first is the amount the state collects for every gallon burned within the borders of the state. The second is the amount of credit given for every gallon flowing into your tank(s) through a pump nozzle within the borders of the state.

For discussion we’re going to look at a run delivering in Tampa, FL. The principle is the same no matter what states you are looking at. Afterward we’re going to head toward Atlanta since we all know there’s no freight out of FL to speak of. We’ll deliver and have enough fuel left to make it at least half way back to Atlanta. We take a look on www.dieselboss.com and see that the Pilot in Ocala, FL is $2.919 and the Pilot in Valdosta, GA is $2.839 and the Pilot in Tifton, GA is $2.829. We take off heading for Tifton because every penny counts. The fact we just screwed up big time isn’t on our mind because we’re focused on price, not cost.

Here’s how it works out. We’ll say for discussion we have twin 80-gallon tanks. If we fuel in Ocala, FL we’ll buy 117 gallons for $2.919 price totaling $341.52. If we wait till Tipton we buy 137 gallons for $2.829 price totaling $387.57. We pat ourselves on the back thinking about that 9 cents a gallon we'll save. What we didn’t calculate is our fuel tax cost. We drive 439 miles in FL, on I75 mostly, getting in and out. We have to pay tax on the fuel used. At 9mpg we used 48.78 gallons. The tax rates for FL and GA are as follows:

FL 0.3057 0.3057
GA 0.141 0.141

The first number is the rate on fuel used and the second is the credit on fuel purchased. We owe .2937 times 48.78 gallons or $14.33 in tax to FL. We drive 412 miles in GA counting picking up our next load and getting to TN to exit the state. We used 45.78 gallons and owe $6.78 in taxes.

Now let’s look at the actual cost of fuel. In FL the price of the fuel was $2.919 but .2937 cents of that is fuel tax credit. That means the fuel actually cost $2.6253 per gallon. In GA our $2.829 per gallon bargain fuel costs $2.681 per gallon. By paying more in FL we actually save over 5.5 cents per gallon on the fuel cost.

On top of saving the 5.57 cents per gallon we also have to figure in the difference in fuel tax we owe. With a purchase in FL we get $34.36 fuel purchased credit. We use $14.33 in FL and have $20.03 left. Subtracting the $6.78 for GA still leaves $13.25 to carry into TN. If we purchased the fuel in GA we get $20.28 in credit on our purchase. We owe FL $14.33 which leaves $5.95 but we owe GA $6.78 so we have to take 83 cents out of our pocket to pay the rest of the fuel tax. Now we reach the TN border without $13.25 in remaining credit and without 78 cents in our pocket so besides paying 5.57 cents more per gallon for the “lower price� fuel we also are out another $14.03 in fuel tax costs. By buying “lower price� fuel we took an additional $20.55 out of our pocket between fuel cost and fuel tax expense. It gets even worse in states like VA, KY and IN where you get less credit for purchases than the charges for usage. If you can afford to spend an extra $20 every time you fill up then just go to the “lower price� station but if you prefer to keep your $20 then look at cost, not price.

The complete fuel tax table, minus Hawaii, follows:

State State Fuel Used State Credit Rate
Tax Rate for Gallons Purchased
AK 0 0
AL 0.19 0.19
AR 0.225 0.225
AZ 0.26 0.26
CA 0.367 0.367
CO 0.205 0.205
CT 0.37 0.37
DC 0 0
DE 0.22 0.22
FL 0.3057 0.3057
GA 0.149 0.149
IA 0.225 0.225
ID 0.25 0.25
IL 0.367 0.367
IN 0.27 0.16
KS 0.26 0.26
KY 0.222 0.166
LA 0.2 0.2
MA 0.21 0.21
MD 0.2425 0.2425
ME 0.279 0.279
MI 0.303 0.303
MN 0.2 0.2
MO 0.17 0.17
MS 0.18 0.18
MT 0.2775 0.2775
NC 0.299 0.299
ND 0.23 0.23
NE 0.271 0.271
NH 0.18 0.18
NJ 0.175 0.175
NM 0.21 0.21
NV 0.27 0.27
NY 0.3685 0.3685
OH 0.28 0.28
OK 0.13 0.13
OR 0 0
PA 0.381 0.381
RI 0.3 0.3
SC 0.16 0.16
SD 0.22 0.22
TN 0.17 0.17
TX 0.2 0.2
UT 0.245 0.245
VA 0.195 0.16
VT 0.26 0.26
WA 0.34 0.34
WI 0.329 0.329
WV 0.315 0.315
WY 0.14 0.14



Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 4958, 5447
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
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[greg334]

Great post but Michigan has a fixed tax and then we have a 6% sales tax on t total gallon price including the Fed and State fixed taxes. From the opponets of our great governor an article was written about how we are solving the state deficiet by the taxes on fuel. It was figured that if the feds suspend the tax and our state follows we would reduce the price of a gallon of fuel by .54 cents. I will look for the article to post the formula and URL.

[redytrk]

Leo you are making my head hurt.

Makes me glad I have a "C" unit. Pump price is the final price.
(Except in a few places, where we are supposed to be paying auto diesel prices (IN and Mi I think)

[LDB]

Don,

I don't think I'm making your head hurt, I think the bag is a little too tight. You do have a good point. I should have mentioned that only applies to D and E units. For B and C units the only key is checking the wholesale price at T/A to see if it's a good place to stop. Some of them are very good and others are no better than Pilot or J. The T/A in Jessup, MD is $2.919 on the pump and $2.703 wholesale plus the 4.5 cents Panther upcharge making it $2.748, a pretty good savings. I've called others and the wholesale was only a couple cents below the posted price. I think it was a glitch in the system that day because usually it's about a 20 cent spread but it's good to check.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 4958, 5447
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
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Support the entire Constitution, not just the parts you like.

[Sawbones]

OK, so I am lost totally! I have to pay taxes on the gas I use in addition to the taxes already added into the pump price? When and where do I pay this? And how come this never comes into the discussion of figuring if a run is worth taking? Am I still on earth, or even the milky way?

[RichM]

If you are a D or E unit and are apportioned you must pay fuel taxes to the states you run in,even if you do not buy fuel in that state. The miles you run within that state determines the fuel tax you will be charged for. The states determine how much the tax is for each mile you travel within that state. Some states are higher then others. If you bought fuel in that state the fuel tax has been paid. If you run more miles over the amnount of fuel you bought,you will be charged back for the additional amount of taxes needed to cover the miles involved. If you bought more fuel then was needed to cover your miles traveled you will get a credit from that state.

Taxes are also based on MPG,another reason to keep your speed down. If your unit averages 10 mpg that is all the state can insist on taking. I know this is real clear and answered everyone's questions. C Unit here I come.

[Sawbones]

CLEAR AS MUD HE SAID IT!
Now, how do these here Gestapos know who I is, and where do they get their pretty little numbers to charge me? I give up this info? Yeah right! I have not see a log book that says, how many miles I traveled ina state. Now see this is what I was asking about a few weeks ago in my rant for news and info outside of what we always see here. I NEVER would have known this info. And how many of you would bake me a cake to get out of the federal pokey? That's what I thought. Now maybe, when he climbs out of that C unit, he cake make a mud pie with that mud and do some splain to this poor confused nurse. Or else I may have to dig that rustic scapel out of the tackle box to do some carving.

[RichM]

Joe If you run for a carrier they will probaly record your miles and fuel purchases within the states you traveled in. Once a quarter these figures are calculated and sent to the states involved. you should receive a report covering your operations,best to audit this report on your own. Example if the report says you traveled 700 miles in California and you bought no fuel you are liable for and will be charged the CA fuel tax for the 700 miles. Now if you did not travel in CA you need to bring it to your carriers attention.

I can't speak for the other companies but FEDEX used to require a mileage trip report where you reported the mileage into and out of that state. They also needed a copy of all fuel receipts to determine if you bought enough fuel or bought over the amount required.

These days FEDEX tracks your miles and fuel purchases with Q/Com and Com Data and it is quite accurate. If you buy your fuel without using Com Data you need to send in a copy of your fuel receipt.

[LDB]

What size unit do you drive? This discussion of determing the cost of the fuel applies to D and E units. For smaller units the price is also the cost. The tax is already in the price at the pump. In a D or E unit you have to subtract the fuel tax out to get the cost of the fuel. If you are this unfamiliar with it I'm guessing you are either less than 3 months into this (because your carrier will give you a quarterly fuel tax report) or you drive a vehicle no larger than a C unit so it doesn't apply to you. If you are in a D or E unit read through it again a few times until it's clear and also talk to your carrier about explaining it to you.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 4958, 5447
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.

[Sawbones]

Leo,
I am not in a unit yet, I am merely a wannabee waiting on the stars to allign. But I get the picture a little better now. Thanks!

[Tennesseahawk]

This is a good post, Leo. I tried in the other post to explain it in a few words, but didn't do a good job, I guess. GA was one of them I said to stay away from. IN and OH are two more. I was surprised at how economical it is to buy in PA, however, since their taxes are .38/gal. The cost may seem more than buying in OH, but you have to remember: OH, IN, and a couple other states either charge you half or none of the state fuel taxes at the pump. It all comes back to you at the end of the quarter.

Also, I was looking for a site like fuelboss. I won't be guessing to fill up in NE instead of IA anymore.

[LDB]

The ones where you really get it are Indiana, Kentucky, New York and Virginia. They give you less credit for buying than they charge you for using. Georgia is ok except for having very low fuel tax. Some people are going to think "great, I don't want to pay a lot of tax." but if you read the example of Forida vs Georgia you see where one fillup costs $20 more in Georgia even though the price is less. Ohio is ok too for being even tax rate and is also a high tax rate so as long as the base price is good that's a good state to fill in. It's all about learning how it works and then working it to your advantage.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 4958, 5447
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.

[Tennesseahawk]

Leo, you missed what I was saying tho. Ohio, Indiana, Kentucky, and I think Michigan don't charge all of their taxes when you buy the fuel. Rather, they wait until the end of the quarter then charge you the rest if what you owe. For example... lets say OH charges half at the pump. When you buy, you're credited for .14 of their .28 fuel taxes. You get hit for the other .14 when your company does your fuel taxes. I think that's deceptive and unfair. As Greg said, Mich hits you with some unsavory practices also.

[Broompilot]

So am I right by saying

KY

NY

Are the two states that do not give equal credit? I understand what Leo wrote, and I appriciate his research nice job Leo.

[LDB]

I believe the largest differential is 4.5 cents that's postponed. I've heard it explained on XM by Kevin Rutherford but can't quote it. I just make it a habit to not fuel in those 4 states and try to research before I fill.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 4958, 5447
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.