Georgia suspends motor fuel tax for five days. What’s the impact on business?

Update June 1, 2021: Governor Kemp renewed the executive order suspending the state excise tax on motor fuel. As of this writing, the suspension is set to end June 2, 2021, at 11:59 p.m.

After news of the cyberattack on the Colonial Pipeline broke May 7, 2021, consumers from New Jersey to Texas put the pedal to the metal to get to the gas station and fill their tanks. Supply is draining; gas prices are rising; and tempers are flaring.

In response to the crisis, Georgia Governor Brian Kemp declared a state of emergency, which wasn’t surprising. He also signed an executive order temporarily suspending motor fuel taxes in Georgia, which was.

The State of Emergency for Petroleum Shortage took effect at 9:54 p.m. on Monday, May 10, 2021, and is valid until 11:59 p.m. Saturday, May 15, 2021 — unless renewed by the governor. Thus, motor fuel and diesel fuel taxes, excise taxes on the sale of motor and diesel fuel, are suspended for a mere five days. 

The suspension applies to all fuels subject to Georgia motor fuel excise tax imposed under O.C.G.A. § 48-9-3. These include, but aren’t limited to, aviation gasoline, clear diesel, compressed natural gas, ethanol, gasoline, gasohol, liquefied natural gas, and liquid propane gas. The motor fuel excise tax generally doesn’t apply to motor fuels sold for off-highway use (e.g., jet fuel and dyed diesel). Guidance from the Georgia Department of Revenue will be forthcoming.

So, is it worth the hassle? And who does the temporary tax break help most, really? Affected businesses or consumers? 

Governor Kemp offered this, by way of explanation: “We are taking action to relieve some of the cost burden from Georgians as Colonial recovers by suspending fuel taxes.” 

According to John Beaty, general manager of excise at Avalara, “This does provide relief to companies that are buying and selling fuel in Georgia during this unprecedented time. And it could ease the burden at the pump for consumers, especially considering we’re on the eve of summer holiday travel.”

The tax savings could, indeed, help offset price increases for consumers. The average gasoline price has jumped from about $2.227 on May 1, 2021, to as high as $3; the gasoline state excise tax rate is currently $0.287.

With vaccinations on the rise and social distancing and travel restrictions relaxing, people are eager to hit the road to visit friends and family. Some won’t let lines or higher prices at the pump interfere with their newfound freedom. Remember the lengths some people took to secure toilet paper and other essentials during the early days of state stay-at-home orders?

And there’s evidence that people are panic-buying fuel, as happened with toilet paper last year. Lowering the price of fuel by suspending the tax could increase the panic hoarding, which in turn could increase the panic and unnecessarily reduce supplies. Despite pleas from state governors and Energy Secretary Jennifer Granholm, 11 states and Washington, D.C., had reported temporary outages by Wednesday afternoon.

Furthermore, while the tax suspension could provide relief to businesses, it will likely add to their excise tax compliance burden. This is especially true for companies that deal with compliance manually, as they’ll have to isolate these transactions for the five-day period. 

Businesses were given little (if any) time to prepare to stop charging applicable motor fuels taxes, and unless an extension is granted, they’ll need to reestablish their collection protocols in a matter of days.

John Beaty doesn’t think other states will suspend motor fuel taxes in the wake of the Colonial Pipeline incident. States tend to be heavily dependent on motor fuel tax revenue, so even a few days without it could be a big blow to Georgia’s treasury. 

However, Georgia has also temporarily increased the weight limit for supply trucks and prohibited price gouging — and here, it’s not alone. Governors of Alabama, North Carolina, Florida, and Virginia also issued executive orders temporarily waiving certain transportation and/or licensing requirements. Application of the executive orders may vary on a case-by-case basis throughout the industry.

Other states could follow suit. Furthermore, to help keep fuel flowing, the United States Department of Transportation’s Federal Motor Carrier Safety Administration issued a regional emergency declaration for 17 states, plus Washington, D.C. These measures should outlast Georgia’s fuel tax suspension by a couple of weeks, at least.

Georgia-based Colonial Pipeline is working to restore services, and Governor Kemp expects Colonial to be fully up and running later this week. Businesses may have just a few days left to take advantage of the temporary tax suspension and ensure they get it right.

For affected businesses, Georgia’s five-day motor fuel tax suspension underscores the importance of having a team at your disposal — a dedicated partner like Avalara focused on monitoring and adapting tax compliance to regulatory changes.