CCH Annual Consumer Taxes Survey
MARY DALE WALTERS
(RIVERWOODS, ILL., September 11, 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 reveals.
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 haven’t 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. Connecticut’s rate dropped from 32 cents per gallon – previously the highest in the country – to 25 cents. Nebraska’s 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 Maine’s rate increased from 19 cents to 21 cents.
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 gallon.
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 excise tax.
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 rates.
Local sales taxes are added to the state rate in 31 states. What’s 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. Oregon’s 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 state treasuries.
“The increased prices they’re 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.cch.com.
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