Financial Challenges Facing California’s Independent Gas Stations

I was recently contacted by an independent gasoline station owner regarding the financial challenges facing these operators in California. Over the course of a few weeks, she provided numerous invoices on their wholesale fuel purchases, showing the staggering taxes and fees. 

“This single delivery of 4,547 gallons totaled $23,706.16, including substantial California and federal taxes and fees. In addition, independent operators must meet sales tax and underground storage tank tax and fee obligations administered by the California Department of Tax and Fee Administration,” she said.

I searched “UNL ETH 10 CARB RFG,” the $19,548.69 line item on the invoice, and was taken to the California Air Resources Board website, California Reformulated Gasoline page, where it explains it is a program to reduce emissions from motor vehicles.”

“The combination of high wholesale fuel costs, taxes, regulatory expenses, credit-card fees, payroll, insurance, utilities, and environmental compliance has created a serious cash-flow burden for small independent stations,” the gas station owner said.

“During the current energy crisis, we have not been provided a workable installment-payment option for these tax obligations.”

She said they have also contacted Governor Newsom’s office regarding these very legitimate concerns and were directed to submit comments through the Governor’s online system, because of the demands on the Governor and his staff. “For small businesses facing immediate financial pressures, this provides little opportunity to communicate the urgency of the situation directly,” she said.

The above invoice provides a practical example of what independent operators are facing. “High gasoline prices do not necessarily translate into high profits for the station owner. Without meaningful consideration of these financial pressures, California risks losing independent stations, small businesses, and the jobs they provide.”

She said the California Department of Tax & Fee Administration will suspend the business sales permit if taxes are not paid in a timely manner. “We have been ordering less and trying to be economical. As a small business you can keep going and move forward for a short period of time because you don’t have access to financial resources like major corporations who are not really investing in refineries or taking the initiative for drilling due to environmental regulations.”

She provided this gasoline tax example:

This is a recent invoice without any Diesel delivery. “Diesel fees and taxes are much higher. We need 2-3 deliveries per week and as a small business these invoices and taxes are really unaffordable.”

I was floored at the state fees and taxes, but perhaps even more shocked at the “prepaid sales tax” bill. Prepaid?

According to the California Department of Tax & Fee Administration, Fuel suppliers and wholesalers of gasoline/motor vehicle fuel, diesel, and aircraft jet fuel must pre-collect a per-gallon sales-tax prepayment at the terminal rack or on subsequent wholesale sales. Retailers later claim credit for those prepaid amounts on their regular returns.

From the CDFA sales tax website:

She said “We will pay UST & Remaining Sales Tax on these invoices at the end Q3. We are running a business on a non-existence margin, there is 2% credit card transaction fee, operational costs, and unaffordable permit fees.”

This is our most recent invoice regarding current fuel costs for independent station operators in California:

“I hope this documentation provides helpful insight into the ongoing financial pressures facing small businesses in the state and demonstrates the full severity and financial strain that independent stations are facing under these current conditions,” she added.

Notably, she said “California is closed for business and the service industry is at the verge of a collapse. Gavin Newsom likes to be on the fast track to Washington…”

“California’s current small business ecosystem is the opposite of economic democracy for all.”