Diesel fuel, price versus cost.
7/15/09 updated with latest tax rates.
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 0.437 0.437
CO 0.205 0.205
CT 0.434 0.434
DC 0 0
DE 0.22 0.22
FL 0.3187 0.3187
GA 0.132 0.132
IA 0.225 0.225
ID 0.25 0.25
IL 0.434 0.434
IN 0.27 0.16
KS 0.26 0.26
KY 0.265 0.181
LA 0.20 0.20
MA 0.21 0.21
MD 0.2425 0.2425
ME 0.296 0.296
MI 0.262 0.262
MN 0.255 0.255
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 0.264 0.264
NH 0.18 0.18
NJ 0.175 0.175
NM 0.21 0.21
NV 0.27 0.27
NY 0.3875 0.3875
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 0.21 0.175
VT 0.26 0.26
WA 0.375 0.375
WI 0.329 0.329
WV 0.322 0.322
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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