Gas Sales Tax Repeal Floated in Multiple States
byMarch 17, 2022
No matter where you live in the U.S., you’ve probably noticed gas prices increasing significantly recently. According to AAA, as of March 11th 2022, “…[the] national average for a gallon of gas is $4.32, which is 26 cents more than a week ago, 84 cents more than a month ago, and $1.47 more than a year ago.”
What you may not know is that sales tax makes up a percentage of the price you pay at the pump. Taxes on gasoline are unique compared to the tax on, let’s say, a pair of shoes. Gasoline tax includes a combination of state and federal excise taxes – basically, a sales tax applied to specific products – in addition to other state and local sales taxes.
But because the price of gas has risen considerably, states are considering options to lessen the burden of sales tax on motor fuel purchases. Let’s take a look at what’s happening surrounding gasoline taxes, and why this use case is important to watch for all retailers.
States are moving to temporarily repeal gasoline taxes
At least 20 states are currently working out what to do about rising gas prices:
- Michigan lawmakers sent a bill to Gov. Whitmer’s desk that would temporarily remove the 27 cent per gallon gas tax, though some analysts say that consumers may not see the savings, as gas stations could elect to hold the prices steady
- Georgia is set to pass HB 304, which could lead to savings of 29 cents per gallon
- New York legislators are considering measures to reduce the 48 cents in gas tax New Yorkers pay per gallon
- Florida may institute a month-long gas tax holiday that would reduce motor fuel taxes by 25 cents per gallon as a part of HB 7071
- Indiana may have a $5 billion surplus, and some lawmakers are proposing a temporary suspension of gas taxes that could cost the state $300 million
- California may have an even larger budget surplus of more than $45 billion, and there is debate over suspending the gas tax for six months and other forms of tax relief for Californians
Sales tax rates are not set in stone
The debate over gas taxes is just the latest example of how sales tax rates can often change. For companies looking to become sales tax compliant, they must collect the correct amount of tax on every product their business sells. Sales tax compliance is not something that is achieved and then forgotten about – it is something that must be constantly optimized as the world changes.
Take a look at some other recent changes in sales tax rates across the country. Michigan recently repealed the “pink tax” that was previously applied to menstrual products. Many states also have sales tax holidays – a time when retailers do not collect state sales tax on specific products. Iowa, for instance, has an annual sales tax holiday on clothing and footwear, while select Energy Star appliances are tax-free in Missouri for one week each year. Some states have a set annual sales tax holiday, while other states are required by law to renew their sales tax holidays every year. If your business is selling to multiple states, keeping track of these sales tax rate changes can burden your finance team.
Automation is the solution to the constant sales tax rate changes
Sales tax rates (and regulations) are always changing. It can be a full-time job just keeping track of these changes. When your business automates sales tax filing and remittance through TaxJar’s AutoFile, we track these changes on your behalf so you can focus on what’s important: growing your business. Contact our sales team to learn more about how we can help you with sales tax compliance.
2023 Sales Tax Preparedness Guide
Discover sales tax trends and changes that could impact your compliance in 2023. You’ll also find helpful information on product taxability, and how to manage hitting economic nexus thresholds in new states this shopping season.Read now