Hoping to stop gasoline bootlegging and capture more tax revenue, the Utah Department of Transportation wants gasoline taxes collected at the pump rather than from fuel distributors.
UDOT Executive Director Eugene Findlay said his department has heard of distributors purchasing fuel out of state then smuggling it into Utah without paying taxes on it. The distributor then sells the bootlegged fuel at the market price and reaps an extra profit because he avoided paying the 19-cent-per-gallon tax to the state.No distributor has been caught evading the state motor fuels tax, but Findlay said his department has heard of it happening.
Regardless, Findlay appears convinced it does go on and the best way to stop it is to have tax collected at the pump. Then retailers, not distributors, would pay the state tax. The change wouldn't affect motorists, but Findlay is confident it will result in added revenues for roads.
Findlay bases that prediction on revenue increases since tax collection on diesel fuel was changed to the retail pump. Previously, truckers didn't pay taxes when they purchased diesel. Instead they paid it monthly, based on the miles they drove in the state. Now, they pay taxes every time they fill up in Utah, then apply for rebates for miles driven out of state on diesel purchased in Utah.
In the first quarter after the change, fuel tax revenue was up 10 percent, Findlay said.
But gasoline retailers and jobbers doubt a similar increase would occur if tax on all gasoline were collected at the pump. They say the collection of taxes on gasoline doesn't present the same problems diesel tax collection did. The only way collections could increase is if rumors of bootlegging are true.
"Everybody thinks it (bootlegging) is going on, but no one has caught anybody," said Gerry Tedrow, executive director of the Western Petroleum Marketers Association. "You would have to be pretty brave to do it. If you cheat on taxes, they will throw you in jail."
But Tedrow's not complaining about the proposed change Findlay would like the Legislature to address in its upcoming session.
He explained it actually wouldn't change anything because most gasoline distributors - marketers or jobbers in industry jargon - own service stations, too, so the tax is collected at the pump anyway.
Retailers aren't complaining either. "We could hold the (tax) money in the bank and earn interest on it before it is collected by the state," said Paul Ashton, executive director of the Utah Petroleum Retailers Organization.
"But I can't imagine the headache of auditing thousands of gas stations vs. a few hundred jobbers," he said.
Findlay said the State Tax Commission is reviewing any added cost of collecting at the pump before making a proposal to lawmakers.