Assemblyman Fred Thiele, Jr. (I, D, WF-Sag Harbor) has introduced State legislation that would change the way that the State sales tax on motor fuel is calculated. In 2006, the State Legislature changed the way that the sales tax on gasoline was calculated from 4% of the retail purchase price to a flat eight cents per gallon. The well-meaning intent of the law was to cap the tax so that the State would not get a windfall when prices rose to $4 and $5 a gallon.

However, no thought was ever given to the situation where the retail price of gasoline might actual fall to below $2 a gallon before the imposition of tax. At $2 a gallon, four percent (4%) would yield the current 8 cents per gallon. Currently, the before-tax cost of gasoline is about $1.75 or less across New York State. The collection of 8 cents per gallon is yielding a sales tax rate of about 4.6% on each gallon as opposed to the 4% rate on all other commodities. This 4.6% rate is costing New Yorkers a penny a gallon at current market prices.

Thiele’s proposal would tax gasoline at 4% of the price or 8 cents a gallon, whichever is less. This would insure that regardless of swings in gasoline prices, consumers would be treated fairly. The sales tax could never exceed 8 cents, but consumers would reap the benefit of lower taxes when the before-tax price of gasoline goes below $2 as it is currently.

Thiele stated, “New York State has the highest gasoline taxes in the nation. Between the federal, state, and local taxes, the tax per gallon is 65-70 cents. This legislation would at least eliminate one inequality in the way we tax gas.”