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New Jersey cut its gasoline tax by 8.3 cents a gallon last Friday – a 16% cut in the state gasoline tax – but most motorists probably haven’t seen it rise. reflected in lower prices at the pump. And they may never do, according to advocates for people who sell gas and those who burn it.
The New Jersey Treasury Department announced the reduction in the gasoline tax on August 24, lowering the state levy to a new total of 42.4 cents per gallon for gasoline and 49.4 cents per gallon for diesel. The federal government taxes gasoline separately.
The reduction was the result of a projection that the former state tax per gallon rate on gross petroleum revenue would exceed its annual revenue target of $ 2 billion, and therefore should be lowered, under of the 2016 legislation increasing the tax.
For years, New Jersey boasted of one of the lowest gasoline taxes in the country, until the condition of its busy roads got so bad that the New Jersey Chamber of Commerce. Jersey pushed for a gas tax hike to replenish the state’s depleted transportation trust fund, and then Republican Governor Chris Christie reluctantly signed the law.
The reason why last week’s gasoline tax cut is unlikely to be noticeable at the pump is twofold, according to industry officials.
First, the gross revenue tax, which makes up the bulk of the state’s combined gasoline tax, is a wholesale tax, paid by gas station owners when they purchase large shipments of gasoline. gasoline or diesel fuel at a refinery or distribution site – “to the rack,” as wholesale purchases are known – via a distributor, said Sal Risalvato, executive director of the New Jersey Gasoline-Convenience-Automotive Association, a industrial group that represents the owners of more than 800 gas stations in the state.
A spokeswoman for the Treasury, Melinda Caliendo, called the gross revenue tax differently, saying it is paid by the distributor.
“The gas station owner doesn’t buy from the terminal holder, he buys from a distributor that brings fuel from the terminal holder to the gas station,” Caliendo said in an email. “As to who pays the tax, whether motorists or gas station owners, there are two distinct forces to consider here: first, how the law implements the tax and second, who ultimately bears the tax. account the burden of the tax. “
The “gasoline tax” actually consists of two separate taxes. Legally, the Petroleum Product Gross Revenue Tax (PPGR) is imposed on the first sale in New Jersey, which takes place between suppliers and distributors. This tax is collected by suppliers at the terminal. Legally, the fuel tax is imposed on consumers, but collected by suppliers. As a result, both taxes are typically collected by suppliers at the terminal and then returned to the state.
Typically, station owners purchase gasoline in 8,800 gallon shipments, which is the standard capacity of tankers that deliver gasoline and diesel to stations, often in different compartments on the road. the same truck. Typical distribution contracts require stations to only take full shipments, with penalties for not taking all delivered gas, Risalvato said.
Because gas stations buy such large amounts of fuel at a time, they usually have gasoline or diesel on hand that they had already purchased at the old tax when a new rate goes into effect, has said Risalvato. Therefore, station owners must continue to sell this gas at the same price they charged when they bought it at the highest tax rate, in order to get back what they paid for. If the stations immediately reduced the price at the pump to reflect the new lower tax rate, they would essentially pay that tax cut out of pocket, Risalvato said.
“If he receives his delivery Thursday, before the tax cut goes into effect, and it takes him five days to sell it, he is going to lose money on every gallon sold,” Risalvato said .
Caliendo has confirmed that it is up to gas stations to decide when and if they should pass a reduction in the gasoline tax on to motorists.
“There is no legal requirement for gas stations to lower the price,” Caliendo said in an email.
Risalvato said station owners typically pass on a reduction in the wholesale cost of fuel – whether it’s a tax cut or lower the price they pay suppliers – but owners will wait. to benefit from the reduced cost themselves, with their first wholesale purchase. below. Depending on the volume of gasoline that a station pumps out, this time lag between when the tax reduction takes effect and when motorists begin to benefit from it can range from a few days to a week or more.
This is all true, said Steve Carrellas, who heads the New Jersey chapter of the National Motorists Association, which advocates for drivers.
“Be patient,” Carrellas advised motorists, referring to the cost savings motorists typically see as a result of a reduction in the gasoline tax. “The change will come. “
Except in this particular case, that change might not happen, he, Risalvato and others said, due to the rise in oil prices and subsequent increases in wholesale gasoline and diesel prices. that resulted.
“They won’t see this 8-cent cut,” Risalvato, a former gas station owner, said of motorists. “Do you know why? Since Thursday, the day before the tax cut, the wholesale price of gasoline has increased by 10 cents a gallon.
The increase in the wholesale price of gas, Risalvato noted, was consistent with the rise in crude oil prices attributed to strong global demand for fuel, essentially the same dynamic that at the state level led to the reduction of gasoline tax Friday in New Jersey.
Granted, New Jersey motorists as a whole haven’t seen a drop in gasoline prices since the tax cut took effect. The statewide average price of gasoline on Tuesday was $ 3.22 per gallon, exactly the same as Thursday, the day before the cut took effect, said Robert Sinclair, spokesperson. from AAA Northeast, which includes New Jersey.
Federal and state taxes on gasoline now represent just under one-fifth of the price motorists pay at the pump.
New Jersey’s combined gasoline tax of 42.4 cents per gallon consists of an excise tax, or sales tax, of 10.5 cents per gallon, plus the tax on gross receipts per gallon of 31.9 cents. On top of that, there is a federal excise tax of 18.4 cents per gallon, for a total gasoline tax of 60.8 cents per gallon in New Jersey.
Diesel fuel, used primarily by trucks, is taxed at a higher rate, 73.8 cents per gallon, including the state excise tax of 13.5 cents and a gross revenue tax of 35 , 9 cents, plus a federal excise tax of 24.4 cents. Beyond taxes, there are also relatively modest state and federal level spill fund charges of 0.055 and 0.21 cents per gallon, respectively.
With typical profit margins on selling gasoline at around 10 cents a gallon, Risilvato, Carrellas and Sinclair said many gas stations don’t even rely on gasoline for money these days. Profit is the repair work or sale of coffee, cigarettes and other convenience items, a reality reflected in the very name of their main business organization, the Gasoline-Convenience-Automotive Association.
Experts agreed that the particularly transparent and competitive nature of the retail fuel industry makes it unlikely that station owners will try to save money from Friday’s tax cut, at least not for long. The obligation for stations to display prices in capital letters visible from the street allows motorists to vote with their accelerator pedals, forcing stations to reduce their margins as much as possible.
“The market will dictate what happens,” Sinclair said. “Usually the retailer is the lowest person on the totem pole in terms of earning money. “
REMARK: This article has been updated to include comments from the New Jersey Department of the Treasury.
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Steve Strunsky can be reached at [email protected].
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