December 1, 2022

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Sales Tax ‘Holiday’ Leads to Prompt Drop in Pump Prices

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

Maryland’s first-in-the-nation gas tax holiday appears to be working.

The price of gas has dropped significantly since state leaders rushed into law legislation intended to shield motorists from Maryland’s 36-cent-per-gallon tax on fuel.

On Friday, the day the tax holiday took effect, the average price for a gallon of regular in Maryland stood at $4.17, according to AAA. On Tuesday, it stood at $3.78, a 39-cent decline.

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

“I’ve had nothing but positive responses from dealers. And customers are happy,” he said. “No one wants to be called a gouger. It’s worked pretty darn good.”

Maryland service stations pre-pay the state’s gas tax when they take delivery. They then recoup their outlay when consumers fuel up. That arrangement led to suspicion that stations might pocket some or all of the savings.

State leaders expressed confidence on Friday that station owners would comply with the intent of the law. Comptroller Peter V.R. Franchot (D), a candidate for governor, said he would lower his “hammer,” as the state’s chief tax collector, if stations didn’t lower prices.

The General Assembly’s 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. That allowed them to drop prices as soon as Hogan signed the bill into law, McCauley said.

“Most retailers get a product from a wholesaler, then charge the customer for tax,” he said. “We pre-pay the tax when the gas gets put in the ground.”

Georgia and Maryland were the first states in the nation to suspend collection of the gas tax. 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. It is expected to cost the treasury $93 million in lost revenue.

Fuel prices attract attention because they fluctuate often and consumers see them in their daily travels. But economists caution that for most people the savings will be relatively modest.