After the news of the cyber attack on the Colonial Pipeline on May 7, 2021, New Jersey to Texas consumers stepped on the metal to get to the gas station and fill their tanks. The offer is running out; Gas prices rise; and the minds flicker.
In response to the crisis, Georgia Governor Brian Kemp declared a state of emergency, which was not surprising. He also signed an executive order temporarily suspending fuel taxes in Georgia.
The state of emergency for oil shortages came into effect on Monday, May 10, 2021, at 9:54 p.m. and is valid until Saturday, May 15, 2021, at 11:59 p.m. – unless it is renewed by the governor. The fuel and diesel fuel taxes, the excise taxes on the sale of motor and diesel fuel, will be suspended for just five days.
The suspension applies to all fuels subject to the Georgia fuel excise duty levied under OCGA Section 48-9-3. These include aviation fuel, clear diesel, compressed natural gas, ethanol, gasoline, gasoline, liquefied natural gas, and liquefied propane gas, among others. Fuel excise tax generally does not apply to fuels sold for off-highway use (e.g. jet fuel and colored diesel). Georgia Treasury Department guidance will be available shortly.
Is it worth the effort? And who does the temporary tax break really help the most? Affected companies or consumers?
Why put the brakes on fuel tax collection?
Governor Kemp said this by way of explanation: “We will take steps to relieve the Georgians of the cost burden if the colonial power recovers through the suspension of fuel taxes.”
John Beaty, Avalara’s general manager, excise duties, said, “This is a relief for companies buying and selling fuel at this unprecedented time in Georgia. And it could ease the load on the pump for consumers, especially considering that we are on the eve of summer vacation travel. “
Indeed, the tax savings could help offset price increases for consumers. The average gasoline price has increased from around $ 2.227 on May 1, 2021 to as much as $ 3. The current gasoline excise tax rate is $ 0.287.
With the rise in vaccinations and the easing of social distancing and travel restrictions, people are eager to head out to visit friends and family. Some won’t let plumbing or higher pump prices compromise their newfound freedom. Do you remember the efforts some people made to secure toilet paper and other essentials in the early days of government orders at home?
And there’s evidence that people are panicking about buying fuel, as they were with toilet paper last year. Lowering the price of fuel by suspending the tax could increase panic hearing, which in turn could increase panic and unnecessarily reduce supply. Despite requests from Governors and Energy Secretary Jennifer Granholm, 11 states and Washington, DC, had reported temporary outages by Wednesday afternoon.
In addition, while the tax suspension could ease the burden on businesses, it is likely to add to their burden of complying with excise duties. This is especially true for companies that deal manually with compliance as they need to isolate these transactions for the five day period.
Companies have had little (if any) time to prepare to stop collecting current fuel taxes. If no extension is granted, they have to recreate their survey protocols within a few days.
Will other states ride Georgia’s draft?
John Beaty doesn’t think other states will suspend fuel taxes after the Colonial Pipeline incident. The states are usually heavily dependent on fuel tax revenues, so even a few days without this revenue could mean a severe blow to the Georgian treasury.
However, Georgia has also temporarily increased the weight limit on delivery trucks and banned price erosion – and it is not alone here. To help keep fuel flowing, the US Department of Transportation’s Federal Motor Carrier Safety Administration has issued a regional emergency statement for 17 states as well as Washington, DC. These measures should outlast the fuel tax suspension in Georgia by at least a few weeks.
Take that away
The Georgia-based Colonial Pipeline is working on restoring services, and Governor Kemp expects Colonial to be fully operational this week. Businesses may only have a few days left to take advantage of the temporary tax break and make sure they get it right.
For affected companies, the five-day fuel tax suspension in Georgia underscores the importance of having a team available – a dedicated partner like Avalara, focused on monitoring and adapting tax compliance to regulatory changes.
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Gail Cole is a Senior Writer at Avalara. Its mission is to uncover unusual tax facts and make complex laws and regulations easier to digest for accountants and business people.