Owning the wheel

By JOHN EWING
Truckers Connection

5/22/2008

Controlling Fuel Cost: Can it be done?

As fuel prices continue to bounce up and down, getting the most bang for your fuel dollars is more important than ever. Fuel is the number one cost for the owner-operator, and there are some common misconceptions about how you should be buying fuel to keep these costs down as much as possible. There are basically two primary issues that I want to address here. The first is where to purchase your fuel and again, there are two common mistakes owners make in this area.

I had a call on this a few days ago from one of our users who wanted to know how to use the IFTA reporting function of Truckers Helper to insure he was purchasing enough fuel in each state to cover his IFTA taxes. While this is a good way to be sure that you don’t owe IFTA anything at the end of the quarter, it’s not necessarily the best way to control your fuel cost.

You are going to pay the IFTA tax for each state regardless of where you buy fuel. When determining where you should buy your fuel you need to look not just at the IFTA tax but also at the other taxes that the state charges. For example, sales tax can add as much as eight or nine percent to the cost of your fuel. In order to get the most fuel for every dollar you spend, you need to take all the taxes out and figure out exactly what you’re paying for the fuel itself.

Every gallon of diesel has $0.244 cents of federal excise tax on it. Then the state IFTA tax is added along with any other taxes the state or locality may charge. If you’re good at Google and using a spread sheet you can find lists of these other taxes on the internet and then make up a spread sheet to help you calculate the actual cost for the fuel itself. If you’re not that good with math we’ve done the math for you and there’s a handy calculator that you can use at http://www.truckershelper.com. Look for the link to the Fuel Cost Calculator. Just enter the pump price and the state and the calculator will tell you how much you’re paying in taxes and the net cost of the fuel.

Here’s an example to show you how much difference this can make. Let’s say you’re coming into California from Phoenix, Ariz. You have a drop in the LA area, then a local pickup and you’re heading back out on I15 to Ogden, Utah. Now look at the table below.

The other often misunderstood concept is that you should purchase fuel wherever you can get the lowest pump price. Unless someone else is paying your IFTA taxes, you need to remain aware of the amount you are going to owe for IFTA. Generally speaking the states with the lowest IFTA tax will have the lowest pump price. But that may or may not represent a real savings. For example, Indiana has an IFTA rate of $0.16, this is collected at the pump and a surcharge of $0.11 which is not collected at the pump. Illinois has an IFTA rate of $0.367. So Indiana will typically have a lower pump price as it’s only collecting $0.16 of the $0.27 that you are going to owe. But unless that pump price is more than $0.207/gallon, you are putting less into your tank and more into the truck stop’s pocket when you buy fuel in Indiana instead of Illinois.

Trucking is a penny business and if you want to be successful in it you need to be aware of where every penny is going and maximize every penny spent.

 Till next month, be safe.

John Ewing is a former owner-operator and the author of The Truckers Helper, business management software for truckers. If you'd like to ask questions or make comments on this article please visit the forums at  www.thetruckershelper.com. He will be happy to answer any questions on trucking or managing your trucking business.