Florida Drops Gas Tax for Month of August

Sam Karnick Heartland Institute
Published September 1, 2004

The state of Florida decided to give its taxpayers a couple of breaks during the month of August. For 31 days, the state cut its sales tax on gasoline, to the delight of local drivers. The sales tax on some other items was lowered as well in late July.

The state legislature and Governor Jeb Bush (R) approved House Bill 237, the Motor Fuel Tax Relief Act, in May, to cut the state’s gasoline tax for one month. The tax cut of 8 cents per gallon ran from 12:01 a.m. on August 1 and ended at midnight on August 31. It did not apply to diesel fuel.

In a separate action, the governor and legislature also cut the sales tax on books, clothing, and shoes that cost $50 or less, and on some school supplies costing $10 or less, effective from July 24 to August 1. According to a state-based taxpayer advocacy group, Florida Tax Watch, the legislature had reduced the clothing and book exemption to $50 from an originally planned $100 limit.

“I am delighted to welcome Florida’s tax holiday back in 2004,” Bush said upon signing the tax-holiday legislation into law in May. “I have always believed that it’s the right thing to do to help Florida drivers to keep more of their hard-earned money. “I am especially delighted that the legislature has exempted books from sales tax for the first time in this summer’s tax holiday,” said the governor.

Drivers Welcome August Tax Relief

According to a report by Georgia East in the August 2 South Florida Sun-Sentinel, one driver she interviewed had purposely refrained from refilling his tank on Saturday evening, July 31, deciding instead to wait until Sunday to take advantage of the 8 cents-per-gallon tax break.

“I usually never go below half a tank,” said Pete Vargas in East’s article. The fuel gauge of his car was on empty at the BP Connect Amoco station on University Drive in Davie. “I waited until today since I knew about the change,” Vargas told East. When the pump stopped at $28.19, Vargas seemed pleased and said it was worth the wait, according to the Sun-Sentinel article. Usually he pays almost $32 to fill up, he told the reporter.

“The gas-tax relief is expected to save Florida drivers an estimated $60 million,” Florida Attorney General Charlie Crist said. “My economic crimes division will conduct spot checks of the state’s 400 gasoline wholesalers to verify that their invoices reflect the 8 cents-per-gallon decrease.”

Crist urged consumers to use the attorney general’s toll-free hotline to report retailers they believed were not passing along tax savings. They could also file complaints through the Attorney General’s Web site.

Retailers Complying

“The numbers we see are encouraging; it’s clear that the majority of retailers are complying with the Motor Fuel Tax Relief Act of 2004,” said Kevin Bakewell, senior vice president for AAA Auto Club South, to the Orlando Business Journal as reported on August 5. “The prices are coming down and the savings, hopefully, will continue to move in the right direction toward the 8 cents that the legislature has guaranteed.”

According to the Sun-Sentinel, gas station owners seemed to be pumping up news of the tax relief, displaying bright yellow stickers that read, “We participate in Florida’s Gasoline Tax Cut.” Many had changed their signs by late Saturday evening on July 31 to highlight the reduction the next day.

Visits to some Florida gas stations by the Sun-Sentinel suggested most had indeed brought their prices down. At a Texaco in Hollywood on Saturday, July 31, power premium gasoline was going for $2.17 per gallon; on Sunday the price was $2.07, according to the Sun-Sentinel report. At the same station, the paper noted, regular was going for $1.92 per gallon on Saturday; on Sunday it went for $1.84.

East noted that a manager at a Mobil station in Fort Lauderdale said gas station owners were monitoring each other to see just how far other owners were willing to lower their prices. “This is a very price-competitive market,” he told the paper. “The question is, after this month what will happen?”

The sales tax holiday on the other items was estimated to have saved shoppers $35.5 million. According to a report in Florida Today by Brian Monroe and Scott Blake, “Some local retailers saw sales surge as much as 50 percent during the nine-day Florida sales-tax holiday, … buoyed by a back-to-school rush and, at the tail end, a tax break on gasoline as well.”

This is the first time Florida has had a sales tax holiday since 2001. The state also held sales tax holidays in 1998, 1999, and 2000.

S.T. Karnick ([email protected]) is senior editor of Budget & Tax News.