The Indiana Department of Revenue just recalculated the rate that will take effect Jan. 1, 2009, the report said. Unfortunately, the formula is based on the high gasoline prices of the summer, even though retail gas prices are less than half of what they were then. Retailers will have to pay the state 19.4 cents per gallon in sales tax up front, but they will collect just 8.1 cents per gallon based on current prices.
The state will settle up with retailers at the end of the month, but they will not get paid back for at least 30 days. For station owners, whose average profit on a gallon of gasoline is just 3.8 cents, that is a big cash-flow problem.
"You could see a lot of [retailers] go out of business," Jay Ricker, the owner of Ricker's Convenience Stores, with 53 stations, told the newspaper. "The state's basically getting an interest-free loan from them."
A good-sized station in the area will pump 100,000 gallons a month, said the report. If the formula does not change, the station will prepay $19,400 in sales tax while it collects just $8,100, an $11,300 float until the state pays it back.
Station owners can use the tax collected on sales of nongasoline items such as cigarettes and candy bars to offset the tax at month's end.
Still, Ricker told the Star that he will have to borrow money to do it. Given the credit markets, that is an unpleasant prospect for Ricker.
For others, it may be impossible, the report said. "Ideally, they'd be able to pass along the cost to the customer," Scot Imus, executive director of the Indiana Petroleum Marketers & Convenience Store Association, told the paper. "But that's unlikely in the highly competitive market."
The float can work the other way. Station owners probably got a small benefit during the first six months of the year as gasoline prices climbed.
The ideal solution is to repeal the prepay requirement, the report said. The General Assembly did just that in 2000, but then-Gov. Frank O'Bannon vetoed the bill.
During his first term, Daniels ended previous administrations' practice of delaying state payments that forced schools and local governments into interim borrowing. The reason: The state should not force others to bear its costs. The same logic applies to station owners, said the Star.
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