Sales tax ‘holiday’ leads to rapid drop in pump prices

At left, a gas station on MD Route 404 in Queen Anne on Friday, two hours before Gov. Larry Hogan signs a “holiday” gas tax bill. Right is the same station on Monday, three days after the 36-cent-per-gallon break went into effect. The leave is scheduled to last 30 days. Photos by Bruce DePuyt.

Maryland’s first gas tax exemption appears to be working.

Gasoline prices have fallen dramatically since state leaders rushed through legislation to shield motorists from Maryland’s 36-cent-per-gallon fuel tax.

On Friday, the day the tax exemption went into effect, the average price of a gallon of regular fuel in Maryland was $4.17, according to AAA. On Tuesday, it stood at $3.78, down 39 cents.

Kirk McCauley, government relations manager for the Washington/Maryland/Delaware Service Station and Automotive Repair Association, said “99%” of stations pass the savings on to consumers.

“I have only had positive responses from the dealers. And the customers are happy,” he said. “Nobody wants to be called a gouger. It worked damn well.

Gas stations in Maryland pay the state gasoline tax in advance when they take delivery. They then recoup their expenses when consumers fill up. This arrangement has led to speculation that the stations could pocket some or all of the savings.

State leaders said they were confident on Friday that station owners would abide by the spirit of the law. Comptroller Peter VR Franchot (D), a gubernatorial candidate, said he would lower his ‘gavel’, as the state’s chief tax collector, if stations did not lower prices.

The General Assembly tax holiday bill was amended at the request of the Comptroller’s Office to reimburse stations for levies they paid in the days leading up to the holiday. This allowed them to lower prices as soon as Hogan signed the bill, McCauley said.

“Most retailers get a product from a wholesaler and then charge the tax to the customer,” he said. “We prepay the tax when the gas is put into the ground.”

Georgia and Maryland were the first states in the country to suspend gasoline tax collection. Twenty others are considering similar moves, according to Kiplinger.

Georgia’s tax holiday runs until May 31. Maryland’s will expire on April 16 unless lawmakers vote to extend it.

Fuel prices attract attention because they fluctuate often and consumers see them in their daily commute. Corn prudence of economists that for most people the savings will be relatively modest.

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