Station owners absorbing new tax, they say

Competition prevents gas stations from passing along the cost of a new tax.

By DON SHILLING

VINDICATOR BUSINESS EDITOR

Operators of independent gasoline stations want you to know that they feel your pain — sky-high prices are costing them money, too.

Escalating prices push up their credit-card fees and create higher payments under a new state tax that took effect in July.

Station operators last week made their first payments on the new commercial activity tax, or CAT.

Sharon Trkula, who operates Sharon’s BP in Champion, didn’t enjoy writing a $1,400 check to the state to cover the first four months of the tax.

“They’re penalizing me for buying and selling gas,” she said.

Trkula said she figures the tax bill is just another cost she will have to absorb because competition is forcing her to keep prices as low as she can.

The new tax arises from a 2005 change in how businesses are taxed. Taxes on profits, equipment and inventory are being phased out and replaced with the CAT, which is a tax on gross receipts.

State officials said the law change would make the state more attractive to manufacturing businesses, rejecting complaints from grocers and others that the CAT was unfair.

Gas station owners received a two-year delay on having to pay the tax. Lobbyists tried to persuade state officials to revise the law but failed, said Ed Weglarz, executive vice president of the Associated Food and Petroleum Dealers.

“We’re going to have to see some people go out of business for them to see the ramifications,” he said.

Station operators are threatened because higher gas prices mean more taxes but not higher profits, he said.

The CAT is levied as a percentage of gross sales. Whenever gas prices rise, a station’s total sales increase, and so does its tax bill.

Weglarz said most stations can’t pass along the tax to customers. Grocery stores, department stores and wholesale clubs are operating gas stations in order to draw in customers, so they are keeping prices down.

“When you compete against people who don’t care about making money on gas, it’s tough,” he said.

Though some taxes are being eliminated because of the CAT, the taxes that are expiring don’t amount to much for station operators, he said.

The CAT is 0.25 percent of gross sales, which amounts to about three-quarters of a cent for each gallon of gas sold at today’s prices. The tax’s percentage will increase in future years.

Retailers aren’t the only ones paying the tax, however. Oil companies pay when they sell to wholesalers, and wholesalers pay when they sell to retailers.

Wholesalers are in the same situation as retailers — faced with higher taxes as gas prices rise.

“Just because you deliver a tanker load of gas doesn’t mean you make a tanker load of money,” said Vivian Naome, treasurer of Bridgeport Gas, a wholesaler based in Boardman.

The company also operates gas stations in Belmont and Harrison counties, which have a profit margin of 2 percent in a typical year.

“In a good year, you can make 5 percent, but that doesn’t happen very often,” Naome said.

Trkula said she bought gas for $3.05 a gallon and is selling it for $3.09. Once she pays electricity bills, insurance bills and other costs, there usually isn’t anything left over.

She said she’s glad she has her husband’s income.

“This is what I enjoy doing. I don’t do it to make a paycheck,” she said.

The other escalating cost for station operators is credit card fees. They pay 3 percent of the amount that’s charged, which continues to grow as gas prices rise.

Weglarz said the rising credit card fees are a burden to station operators because they aren’t receiving any extra value as they pay more.

Trkula said she’s paying $3,000 a month to the credit card companies.

“Three percent? Why? I’m being penalized for taking credit cards,” she said.

Trkula, who’s operated her station for 11 years, said people sometimes ask her if owning a gas station would be a good business to enter. Because of the escalating costs, she passes along simple advice: “Don’t do it.”

shilling@vindy.com