The lobbying group for Indiana's gasoline station operators is pushing legislation that would close a long-time loophole in the way sales taxes on gasoline are collected.
Senate Bill 479, now in committee, would eliminate end-of-month "true ups" by station operators in favor of having the full 7 percent sales tax collected when the gasoline is delivered to the station, according to Indiana Petroleum Marketers and Convenience Store Association Executive Director Scot Imus.
"Up until now, it has basically been an honor system," Imus said. "It's as if you and I were paying our income taxes without a W-2."
Imus acknowledges it may seem odd that an industry lobbying group would be pushing for something that could actually increase total taxes paid. But a suspicion on the part of many gasoline station operators that direct competitors were cheating on sales taxes led to pressure to change the way the tax is collected, Imus said.
In some cases, cheaters may have pocketed the ill-gotten gains, but in other cases there was evidence they were gaming the system to undercut competitors just down the street, he said. The association estimates in the past eight years, Indiana has missed out on about $50 million in sales tax collections because of unscrupulous operators gaming the system.
"Our members want to comply with state law, but they often have to compete with operators who are evading taxes day in and day out," he said.
Luke Oil owner Tom Collins Sr. said he supports the legislation both as a retailer and as president of the Indiana Petroleum Marketers and Convenience Store Association. In 2012, the legislation failed to win full General Assembly approval. Now, with Department of Revenue audits conducted last year revealing widespread tax evasion, he thinks the bill has a much better chance.
"For all the credible honest retailers, it just became an uneven playing field over the years," Collins said.
Imus believes the bill will also benefit consumers in the long run.
Under the bill, the amount due in sales tax will be set every month, as compared to every six months currently. So the tax a retailer tacks on at the pump will follow price swings more closely, Imus said. That should avoid situations where sudden price spikes can be "priced in" to the sales tax calculation for six months.
The association realizes some consumers may have benefited from a discount of a few pennies per gallon from tax cheats passing on some of their savings at the pump, Imus said. But the benefit to the state as a whole and bringing transparency to the tax system should far outweigh any small savings a limited number of consumers received.
Collection of the tax is complicated because of the volatility of gasoline prices as well as state and federal excise taxes that are heaped on.
Under the current system, station operators pay about 80 percent of the sales tax due up front to the wholesaler when a tanker truck delivers to the station, Imus said. The state then counts on the station operator to pay the rest of the sales tax due in a self-accounting at the end of the month.
The new system also will be simpler in that it will eliminate some end-of-the month paperwork for the more than 3,000 gasoline station operators in the state.