Taxes and FuelCloud: The Power of Automation in Action
Any organization managing their own fuel knows how valuable even a small savings per gallon can be in reducing their overall fuel prices. We were surprised, then, to find in a recent review that less than a quarter of our customers were taking advantage of our automated tax refund tools, effectively ignoring or significantly overcomplicating a major source of fuel tax savings. With 22 states now enforcing some form of variable fuel tax tied to the cost of gas and diesel, monitoring and filing fuel tax refunds has never been more important for a business.
With April 15 just around the corner, it seems like a good time to talk about taxes. Specifically, what fuel taxes are, how impactful off-road fuel tax refunds can be to your fuel prices , and how FuelCloud can help with the most arduous parts of the tax refund process: keeping a complete record of on- and off-road transactions, and auto-completing tax forms with the transaction data already in the FuelCloud system.
The Short Version of Fuel Taxes
Let’s start with the basics: gasoline and diesel are taxed at both the federal and state level. Federal gasoline and diesel taxes (18.4 cents per gallon and 24.4 cents per gallon, respectively) have remained unchanged since 1993, but state taxes on gasoline and diesel vary widely - from 14.66 cents per gallon in Alaska to 53 cents in California (as of January 2020 - full list of state fuel tax rates can be found here). Further complicating matters, as of June 2019, 22 states enforce some form of variable gas tax, meaning that the amount of tax changes alongside the price of gas and diesel.
Whether your tax rates are high or low, the important detail is that these taxes are only intended to be applied to on-road vehicles. Certain off-road vehicles and equipment are exempt from taxes, and refunds can be issued if you complete the required paperwork correctly.
“If you complete the required paperwork correctly” is easier said than done. At a high level, organizations who want to get a refund on their off-road fuel use need to keep an accurate, audit-proof record on on-road and off-road fuel use - a difficult challenge in of itself. But each state also has specific requirements for the paperwork and records that must be submitted to get the tax refund, as well as when and how frequently those refund requests must be filed. This added complexity scares businesses off from pursuing their full refund - with many other demands on their plates and not enough hours in the day, navigating a tax refund process doesn’t seem like it’s worth the time.
What FuelCloud can do
As much as FuelCloud would love to be able to do your taxes for you, we can’t do that. We also legally can’t give you advice on how to manage your taxes, so the choice of whether and how you file for a tax refund is up to you. What we can do, however, is track your fuel exceptionally well, and give you the power to use that fuel data for your tax purposes.
FuelCloud allows vehicles to be tagged as tax exempt in the FuelCloud dashboard, and subsequently tracks tax exempt transactions for that vehicle automatically. FuelCloud can generate a report on tax exempt fuel use from that data. With this data, FuelCloud can automatically complete the federal tax refund form. The system can also provide state refund forms and transactional data for all states that allow for refund claims. Admins can download these forms, review them for accuracy, and file them without the hefty manual labor that filling these forms out used to require.
This automation has major advantages. Most directly, administrators can save hours of time previously spent manually completing tax forms and reconciling inventory discrepancies.
FuelCloud can also help the tax refund process by providing basic protections against the most common areas of volume tracking. For example, because admins can protect tax exempt fuels behind separate CloudBoxes from taxable fuel, FuelCloud limits the opportunities for misuse or misallocation of tax-free fuel.
The true test of our tax features is how they stand up to audit. While the number of audits our customers have faced is few, we do have some anecdotal evidence that we’re doing things right: a customer of ours received the first perfect score on a fuel tax audit in the history of that customer’s state thanks to FuelCloud’s transaction tracking and allocation tools.
Ultimately, how an organization chooses to manage their fuel and taxes is entirely their own decision, and there are plenty of variables to consider. The guiding principle behind our software-first approach to fuel management, however, is that ‘complexity’ shouldn’t be a reason why an organization does or does not make a decision. The tax tools are perhaps the clearest example of how FuelCloud’s automation tools can lower the barriers that fuel managers face on doing what they want to do with their fuel. Whether and how those managers choose to use those tools is entirely their decision.