I wrote an article about fuel prices and the effect of IFTA fuel taxes on the actual cost of the fuel that's stickied in this thread. Here's another example, current as of today, 3/5/09. Using the significant discount available through my carrier I can buy fuel in Troy, IL. for $1.845 or in Foristell, MO for $1.704 per gallon. Well duh, there's a no brainer. Buy it in MO. right? No, not right at all. Buying in MO. gets you 17.0 cents fuel tax credit while IL. gets you .367 fuel tax credit. That means the fuel costs you $1.534 in MO. but only $1.478 in IL. That's $8.40 more in your pocket right off the bat on 150 gallons by buying the higher price fuel. That's because you only pay for the fuel. The fuel tax money is just on hold to be used as you burn the fuel.
Now let's burn that fuel by running from St. Louis to Chicago to Detroit and back for 1125 miles and we'll say we got 9mpg. That's going to burn 125 gallons. We bought 150 gallons so we have plenty of fuel. If we bought in MO. we got 150*.17 = $25.50 in fuel tax credit. If we bought in IL. we got 150*.367 = $55.05 in credit. To make the math a little easier we're going to say we drove 600 miles in IL, 75 in IN, and 450 in MI. We owe fuel tax to those states on fuel burned at the rates of IL - .367, IN - .27 and MI - .303. At 9mpg we used approximately 67 gallons in IL, 8.5 in IN and 50 in MI so we owe IL $24.59, IN $2.30 and MI $15.15 for a total of $42.04 in taxes due.
Well now, there's a fine kettle of fish if we bought in MO and only got $25.50 total credit. We're short of the amount needed by $16.54 so that has to come out of our pocket. We've also got 25 gallons of that fuel left that will be burned somewhere and we'll owe the taxes on that, also out of our pocket. If we'd bought that fuel in IL. they wouldn't be reaching into our pocket to collect fuel taxes. They'd take $42.04 out of our fuel tax "piggy bank" where we deposited it when we bought the fuel. They'd be paid up and happy and we'd still have $13.01 left in the pig from that purchase. The worst case scenario is we'll get dispatched out toward Chicago again and burn that fuel in IL and owe the tax at their rate. That would be 25*.367 = $9.18 so we'd still have $3.83 left in our IFTA piggy bank from that purchase, provided we bought the higher price fuel in IL. It's higher priced but has the lowest cost. If we bought based only on price then our pockets are a lot emptier because the cost is higher.
Now let's burn that fuel by running from St. Louis to Chicago to Detroit and back for 1125 miles and we'll say we got 9mpg. That's going to burn 125 gallons. We bought 150 gallons so we have plenty of fuel. If we bought in MO. we got 150*.17 = $25.50 in fuel tax credit. If we bought in IL. we got 150*.367 = $55.05 in credit. To make the math a little easier we're going to say we drove 600 miles in IL, 75 in IN, and 450 in MI. We owe fuel tax to those states on fuel burned at the rates of IL - .367, IN - .27 and MI - .303. At 9mpg we used approximately 67 gallons in IL, 8.5 in IN and 50 in MI so we owe IL $24.59, IN $2.30 and MI $15.15 for a total of $42.04 in taxes due.
Well now, there's a fine kettle of fish if we bought in MO and only got $25.50 total credit. We're short of the amount needed by $16.54 so that has to come out of our pocket. We've also got 25 gallons of that fuel left that will be burned somewhere and we'll owe the taxes on that, also out of our pocket. If we'd bought that fuel in IL. they wouldn't be reaching into our pocket to collect fuel taxes. They'd take $42.04 out of our fuel tax "piggy bank" where we deposited it when we bought the fuel. They'd be paid up and happy and we'd still have $13.01 left in the pig from that purchase. The worst case scenario is we'll get dispatched out toward Chicago again and burn that fuel in IL and owe the tax at their rate. That would be 25*.367 = $9.18 so we'd still have $3.83 left in our IFTA piggy bank from that purchase, provided we bought the higher price fuel in IL. It's higher priced but has the lowest cost. If we bought based only on price then our pockets are a lot emptier because the cost is higher.
