Illinois Mulling 'Border-Based' Fuel Taxation Legislation

Land of Lincoln looks to level gas-price playing field in Iowa, Kentucky, Missouri

Jerry Costello

SPRINGFIELD, Ill. -- Lawmakers in Springfield are proposing to allow the market of motor fuel in neighboring states to determine the sales tax on fuel in Illinois communities near the border, said a report by St. Louis Today. State representatives Jerry Costello (D) and Richard Morthland (R) are crafting legislation that calls on the Illinois Department of Revenue to monitor fuel and gasoline taxes in the bordering states of Iowa, Kentucky and Missouri.

According to Costello and Morthland's legislation (HB3836), if Iowa, Kentucky or Missouri have a sales tax on fuel of less than 6.25%, the department will be required to reduce Illinois' sales tax to 1.25% within 30 miles of the bordering state. The legislation would also require the department to raise Illinois' sales tax to 6.25% on fuel if the bordering state's sales tax is 6.25% or higher.

"It is well known that oftentimes gas is cheaper on the other side of the river in Missouri and many Illinoisans travel there to fill up their tanks and buy other goods," Costello said.

Illinois is currently one of only several states that include a sales tax on motor fuel, said the report. Missouri does not have a sales tax on fuel and charges a gas tax of 17 cents per gallon, compared to Illinois' gasoline tax of 19 cents per gallon, on top of the current 6.25% sales tax.

Costello said the current legislation is a work in progress and they are hoping to make adjustments that would account for states like Missouri that do not impose a sales tax on motor fuel.

"Missouri's taxation policy regarding gasoline results in lowers prices, and we should do everything in our power to keep tax dollars in Illinois and deliver cheaper gas for local residents," Costello said.

Morthland's district borders Iowa, where he said it is not uncommon for gas stations to have more cars with Illinois license plates than Iowa license plates, since gasoline is typically cheaper there, the report said.

Since the fluctuated tax rate would only apply to Illinois stations within 30 miles of the border, Morthland said he wonders what to do with the stations located 31 miles away. "Are we going to hurt gas stations that are right near the 30-mile boundary? I don't know," he said. "At least we'll be recouping those losses in Illinois, in consequence to a handful of gas stations near the boundary."

Costello told the newspaper that the current legislation won't pass as is, but they are working to make adjustments that will give the bill more traction.