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Illinois’ Tax Increases Worry Border Retailers

More drivers expected to fuel up in Indiana as increase looms
Photograph: Shutterstock

CHICAGO — Illinois c-store operators near the Indiana border are bracing for store and fuel sales hits after legislators voted to double the state’s 19-cent-per-gallon (CPG) gas tax, the Northwest Indiana Times reported. The 19-CPG increase is set to go into effect July 1.

The increase would make Illinois’ gas tax nearly a dime higher than Indiana’s 29-CPG tax and does not include the various city and county taxes. Indiana retailers are already enjoying a retail price advantage to Illinois competitors over the border. The metropolitan area of Gary, Ind., which sits just east of Chicago, had a retail average of about $3.02 per gallon, compared to the $3.28-per-gallon average for the Chicago metropolitan area, according to GasBuddy data cited by the newspaper.

Some Illinois residents near the border already drive into Indiana to fuel up, said Patrick DeHaan, the Chicago-based head of petroleum analysis for GasBuddy, Boston.

"It's nearly guaranteed to drive business to Indiana, especially for weekend travelers headed into Michigan from Illinois, filling up both on their way out and before they get home," DeHaan told the Times. "There aren't a significant amount of stations on the Illinois side of the Indiana/Illinois border, but those within a mile or two will struggle, especially other borders like Illinois and Missouri as well. Drivers that shop around will find easy savings by going into Indiana, and that will likely lead to a loss in gallon sales for Illinois."

William Fleischli, executive vice president of the Illinois Petroleum Marketers Association/Illinois Association of Convenience Stores, warned that the gas-tax increase will hit in-store and fuel sales.

"Borders will become wider and our customers will cross them to buy motor fuel, cigarettes and other ancillary items, costing the state tax dollars and companies profits," he told the Times. "Our motor-fuel volumes will go down 2% to 3% a year for about three years, then start to recover. Inside sales will go down 10% to 12% and may never recover."

With Illinois’ diesel tax increasing 5 CPG to 45.5 CPG, Fleischli warned that truckstops in the state “will be crushed.”

Gus Olympidis, CEO of Family Express, Valparaiso, Ind., told the Times that he does not expect a big change in business because Illinois drivers are already used to crossing the border to buy gas. Family Express, with nearly 70 locations in Indiana, does not have locations near the Illinois border.

"Already, there is an excise-tax differential that is sufficient for stimulating consumer migration to Indiana along the border," Olympidis said. "I am not sure that a greater differential will change anything."

Adding to retailers’ competitive worries, Illinois is also increasing its excise tax on cigarettes by $1 per pack. This would make the state tax $2.98 per pack, compared to 99.5 cents per pack in Indiana. And Illinois is levying a 15% tax on e-cigarettes.

 

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