$3.12 is the current price for a gallon of gasoline in Pennsylvania, highest in the country! Ever wonder how a gas station arrives at that number? Let’s take a look…

Baked into the cake of the $3.12 price are numerous items such as highway taxes, delivery fees, crude oil costs, etc. The price of crude oil is roughly 70% of the cost (delivery fees, heavy vehicle highway tax, marketing, etc.) The other 30% is reserve for taxes. There are two main taxes when it comes to fuel… federal gasoline tax of 18.4¢/gal and state gasoline tax. Pennsylvania’s 2018 fuel tax is 57.6¢/gal. Add these two together and each gallon of gasoline has 76 cents of fuel tax. The taxes are even more for diesel, kerosene, and other alternative fuels.

The idea is that these taxes go towards the cost of maintaining roads, highways, etc. Makes sense right? You drive on the road so a portion of the cost to maintain it should be paid for by you. But what if the fuel you purchase doesn’t get used on roadways? What if you are buying gas for lawnmowers, forklifts, skid steers, etc.? The fuel this equipment uses is never going to be used on a roadway so why should you pay highway taxes on it? Bottom line is you shouldn’t!

Businesses are eligible for a credit on non-highway fuel purchases. For example, let’s say a construction contractor consistently fills up a backhoe at a normal gas station. Knowing that the backhoe will never be driven on a roadway, a business is able to claim a credit for the highway taxes paid (excise tax refund). This is accomplish by submitting Form 4136 on the annual business tax return.

Individuals can also purchase some fuels at cheaper prices. For example, individuals who use home heating oil are able to purchase it tax free at certain gas stations (dyed vs undyed fuel). Credits are not allowed for personal use of fuel. Thus, there is no credit for homeowner’s who purchase gas to be used in lawnmowers, leaf blowers, hedge trimmers, etc.