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66 During the 2003 to 2007 time period, states spent on taxes. To measure the effect of these factors on collection cost average $381.8 million on administering diesel and gasoline rates, states that fell into each relevant category (e.g., distrib- motor fuel taxes. From 2003 to 2007, operating costs as a per- utor or terminal rack point of taxation) were identified and cent of total tax collections were very consistent, ranging grouped, and the associated administrative costs are reported from a low of 0.9% in 2005 to a high of 1.4% in 2004, with an for each group. The results of this analysis are presented in average of 1.1%. The consistency in operating cost is a com- Table 22 for the 2003 through 2007 time period. mon phenomenon in mature tax systems, with costs associated with collections, administration, and enforcement programs The average collection expense as a percent of total motor experiencing limited growth from year to year. fuel tax collections among the 44 states reporting data was The major operating cost elements reported by states sur- 1.1%. veyed for this report included Motor-fuel tracking systems and the size of the motor fuel tax collections program had a negligible impact on operat- Distributor, IFTA, and refund audit programs; ing cost levels. Refund and distributor report processing; Operating costs in states that border low-tax states were Motor-fuel tracking systems; slightly higher than average at 1.3% of total tax collections. Licensing and bonding programs; Operating costs in states with international borders were On-road dyed fuel inspections; and lower than the mean estimated collection cost rate at 0.8%. Electronic reporting transaction costs. The point of taxation had little effect on collection expense rates. There were too few states reporting at the first receipt/ Among the states completing surveys for this study, the aver- sale or retail level to derive any conclusions. age salary plus fringe benefits for auditors ranged from approx- imately $50,000 to $75,300 annually. Other cost elements The finding on point of taxation could be construed as reported by states included indirect costs (e.g., training, human counterintuitive given that as the point of taxation moves up resources, office support, and information services), taxpayer the distribution chain, there are fewer taxpayer forms to education programs, and third-party debt-collection services. process and fewer taxpayers to audit; however, moving the point of taxation to the terminal rack also results in more refund requests and associated processing and auditing costs. 4.2.7 State-by-State Data for 2007 The costs associated with the refund process could counter- Highway Statistics presents motor fuel operating costs for all balance the reduced distributor auditing and return process- 50 states plus the District of Columbia. In 2007, however, 19 ing costs. states did not report collection expenses. Two steps were taken to fill in the gaps created by the unreported amounts. For 4.2.9 Data from Eight Sample States states that did not report collection expenses during the 2003 through 2007 timeframe, the average collections expense rate Table 23 presents more total operating cost and total tax rev- of 1.0% was assigned. For states that reported data for at least enue data for each of the eight sample states identified in the 1 year during the 2003 to 2007 timeframe, the average values previous section. Data collected for each state will be used as for years when the state did report data were used to fill in the the basis for the cost comparative analysis within fuel tax sys- 2007 value. In 2007, net state motor fuel tax collections in the tems and with other revenue systems to be discussed in Chap- United States reached $39.4 billion while operating costs were ter 5 of this report. In 2007, motor fuel tax collections in these estimated at $405.1 million, or 1.0% of total tax collections. states reached $11.4 billion, up from $10.3 billion in 2003. Most state-reported values were near the mean collection cost Motor fuel tax collections in these states represent 29.0% of the rate of 1.0%, though reported values did reach as low as 0.1% nation's total motor fuel tax collections. and as high as 3.7%. The collection cost rate for Indiana was The survey results presented in this section summarize the estimated at 5.2%; however, that value was not reported by major operating cost characteristics reported by the states that Indiana. The value reported in Table 21 was calculated by the have completed the survey: California, Colorado, Florida, and research team based on previous years' reports from Indiana. Idaho. The primary motor fuel tax administrative categories addressed in the questionnaire for each program are as follows: 4.2.8 Data Grouped by Auditing costs, Different Characteristics Administrative program costs, Section 4.2.2 identified several factors expected to have an Enforcement costs, and impact on the costs associated with administering motor fuel Collection costs.

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67 Table 21. Motor fuel tax collections and collection expense, 2007. Net Motor Fuel Tax Collection Expenses Collection Expense as % of State Collections ($000s) ($000s) Tax Collections Alabama $680,013 $18,175 2.7% Alaska 1 31,638 316 1.0% Arizona 2 728,385 3,642 0.5% Arkansas 462,190 17,191 3.7% California 3,418,725 22,569 0.7% Colorado 567,680 3,693 0.7% Connecticut 676,813 4,615 0.7% Delaware 2 117,218 2,227 1.9% Dist. of Col. 1 26,776 268 1.0% Florida 2,233,129 24,761 1.1% Georgia 934,173 6,602 0.7% Hawaii 2 85,561 684 0.8% Idaho 237,411 3,597 1.5% Illinois 1,338,373 30,449 2.3% Indiana 2 879,793 45,749 5.2% Iowa 444,086 1,258 0.3% Kansas 1 439,590 4,396 1.0% Kentucky 2 563,168 1,126 0.2% 1 Louisiana 639,748 6,397 1.0% 2 Maine 238,796 478 0.2% Maryland 758,834 7,774 1.0% 2 Massachusetts 669,357 6,024 0.9% Michigan 1,027,933 8,903 0.9% Minnesota 674,682 766 0.1% 1 Mississippi 431,432 4,314 1.0% 2 Missouri 704,183 2,817 0.4% 2 Montana 193,453 1,161 0.6% Nebraska 332,467 2,000 0.6% Nevada 520,736 1,221 0.2% 2 New Hampshire 151,965 608 0.4% 2 New Jersey 589,571 5,896 1.0% New Mexico 289,747 9,787 3.4% 1 New York 2,197,646 21,976 1.0% North Carolina 1,656,334 29,540 1.8% North Dakota 124,839 874 0.7% Ohio 1,894,435 15,773 0.8% Oklahoma 410,639 1,000 0.2% 2 Oregon 412,950 1,652 0.4% Pennsylvania 2,106,731 13,708 0.7% Rhode Island 1 146,104 1,461 1.0% South Carolina 535,261 1,347 0.3% South Dakota 130,076 2,642 2.0% Tennessee 849,662 12,239 1.4% Texas 3,086,196 31,330 1.0% Utah 372,747 2,677 0.7% Vermont 94,961 693 0.7% Virginia 932,996 7,573 0.8% Washington 1,119,386 6,987 0.6% West Virginia 1,107,615 1,525 0.1% Wisconsin 1,006,012 1,368 0.1% Wyoming 105,251 1,265 1.2% Total 39,377,467 405,096 1.0% 1 States that did not report collection costs during the 2003 to 2007 time period were assigned the average state collection ratio of 1.0%. 2 For states that reported data for at least 1 year during the 2003 to 2007 time period, average values from the years that were reported were used to fill in 2007. Source: FHWA, Highway Statistics, 2007