States Stay The Course With Gas, Sales, Cigarette Taxes
(RIVERWOODS, ILL., September 12, 2000) It may be a small consolation, but
motorists in a few states will be paying lower gas taxes on their high-priced gas this
summer, according to CCH INCORPORATED (CCH), a leading provider of tax and business
law and software. In general though, states have held the line on consumer taxes such as
their general sales tax and excise tax on gas and cigarettes, an annual survey by CCH
With state budgets in good shape, legislators and governors have seen little need to
increase taxes, CCH senior tax analyst John Logan, JD, noted.
"Cigarette taxes went through a round of increases in 1997 and 1998, and some
states raised gas taxes in 1999 when prices were low, but with a strong economy, states
havent been pressed to find additional sources of revenue."
Gasoline Taxes Decline
Three states actually lowered their per-gallon gasoline excise taxes from the July 1999
levels. Connecticuts rate dropped from 32 cents per gallon previously the
highest in the country to 25 cents. Nebraskas rate was shaved from 24.1 cents
per gallon to 23.9, while the rate in Nevada fell by a penny, from 24 cents per gallon to
23 cents. Two states raised their gas tax rates. In North Carolina, the rate crept upward
from 21.2 to 23.1 cents per gallon, while Maines rate increased from 19 cents to 21
Half the states and the District of Columbia charge 20 cents a gallon or more in
gasoline taxes. At four cents per gallon, Florida charges the lowest excise tax, but it
also collects an annually adjusted "fuel sales tax," which increased from 9.1
cents to 9.3 cents per gallon for 2000, bringing the total state tax to 13.3 cents per
Gas May Be Taxed in Many Ways
In fact, states often impose more than a simple cents-per-gallon tax on gasoline. Some
have per-gallon "environmental" fees in addition to their excise tax. A few have
preferential rates for "gasohol." In Hawaii, counties add their own significant
per-gallon excise taxes to the state tax. In New York, a petroleum business tax, a
petroleum testing fee, a spill tax and a prepaid sales tax are all added to the basic 8
cents-per-gallon gas tax.
Most states do not charge their normal sales tax on gasoline purchases, but many do,
and since sales taxes are based on purchase price rather than number of gallons sold, they
can become significant when the price of gas skyrockets.
This July, Illinois and Indiana rolled back their state sales taxes on gasoline, while
leaving their gas taxes unchanged. This afforded some "tax relief" to motorists,
who were paying some of the highest gas prices in the country, without jeopardizing
funding for state road building and repair, generally funded by the per-gallon gasoline
Sales Taxes Largely Unchanged
Only Maine has changed its sales tax since last year, lowering the rate from 5.5
percent to 5 percent as of July 1, 2000.
Five states still do not charge a sales tax: Alaska, Delaware, Montana, New Hampshire
and Oregon. (Delaware has a merchants and manufacturers license tax and a use
tax on personal property leases.) Elsewhere, rates range from a low of 3 percent in
Colorado to a high of 7 percent in Mississippi and Rhode Island.
But sales taxes are even more of a patchwork than gas taxes, since counties, cities and
other districts may collect their own sales taxes on top of the state levy. This means
that the sales taxes actually paid by consumers in Illinois, with a state rate of 6.25
percent or California, with a state rate of 4.625 percent, may be higher than in
Mississippi and Rhode Island, where no local sales taxes are added to the 7-percent state
Local sales taxes are added to the state rate in 31 states. Whats more, on a
nationwide basis, local taxes are changed frequently.
"Companies that have to collect sales tax in many jurisdictions, such as fast-food
restaurants or national retailers, usually subscribe to services that periodically report
sales tax rates by zip code or even street addresses," Logan noted.
Few States Change Cigarette Taxes
The vast majority of the states stuck to the same cigarette tax rates they had at this
time last year. New York hiked its rate from 55 cents to $1.11 per pack, now the highest
cigarette tax in the country. New Hampshire raised its tax from 37 cents to 52 cents per
pack, and smoking got more expensive in Louisiana, where the rate rose from 20 to 24 cents
per pack. Oregons rate declined, as previously scheduled, on January 1, 2000, from
68 cents per pack to 58 cents per pack.
Twenty-three states collect more than 40 cents for each pack of cigarettes.
Logan noted that smokers are indirectly funding additional flows of revenue into their
"The increased prices theyre paying for cigarettes are helping to finance
the settlement negotiated in 1998 between cigarette companies and the states."
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has served
four generations of business professionals and their clients. The company produces more
than 700 electronic and print products for the tax, legal, securities, human resources,
health care and small business markets. CCH is a wholly owned subsidiary of Wolters Kluwer
U.S. The CCH web site can be accessed at www.cch.com.
The CCH Federal and State Tax site can be accessed at http://tax.cchgroup.com.
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