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101 A P P E N D I X B Project: National Cooperative Highway Research Program (NCHRP) âIdentifying and Quantifying Rates of State Motor Fuel Tax Evasion.â Interview Introduction We are conducting research for the National Cooperative Highway Research Program (NCHRP), âIdentifying and Quantifying Rates of State Motor Fuel Tax Evasion,â that is intended to document methods of fuel tax evasion, examine differences between states in administration and enforcement that may affect fuel tax evasion and create a methodology and model designed to estimate motor fuel excise tax evasion rates which will be made available to the states as a tool for use in their tax evasion programs. State Enforcement and Auditing Practices How does your state collect motor fuel taxes? What point in the distribution chain does your state tax motor fuel? In the last 10 years, has your state moved the point of taxation? If so, what was the impact of this shift? If not, have you considered changing the point of taxation? What information do you require on your motor fuel excise tax forms? What sort of documentation must accompany motor fuel tax forms? How does your state enforce and audit fuel tax collections? How many motor fuel tax auditors and enforcement officers does your state employ full-time? Part-time? How have collection and enforcement procedures changed over time? Has your state been involved in joint audits with other states? With the IRS? How are gasohol and blended fuels treated? Do you use paper, electronic, or some combination for tax payments? Are refunds issued for non-taxable uses or some other purpose? If refunds, how are they administered? What information is required on refund claims? Interview Protocol
What are the major issues that arise when auditing motor fuel excise tax returns? How would you characterize best practices as they relate to motor fuel tax auditing? If you do not follow best practice, why not (e.g., laws, cost)? What are the penalties (civil and criminal) and fines for late payments, fraud and other forms of non-compliance? Are you aware of any studies relating to state enforcement and auditing practices? What are the overhead (e.g., administrative, compliance, enforcement) costs associated with your motor fuel tax programs, and what percentage of total tax collections do these costs represent? Can these estimates be verified in budget or other documents? What is the perceived impact of public awareness and involvement programs on evasion? Has your agency/company ever provided any public service announcements or education (e.g., on who should pay, no dyed fuel on road, or other aspects of your fuel tax program)? Evasion Techniques and Methods for Measuring and Curtailing Evasion What evasion techniques are you aware of from experience? What evasion techniques have you heard about as either occurring in other places or as conceptual possibilities? Are you aware of any studies that document motor fuel tax evasion techniques? Are you aware of any court cases or other public records that highlight innovative evasion techniques or the extent of evasion? Looking at specific enforcement issues, does your state perform on-road inspections for dyed fuel? How are on-road inspections conducted in your state? Do you ever, or have you in the past, been involved in joint inspection efforts with IRS? Has the dyed fuel requirement been effective? Consider both the inherent effectiveness and the level of enforcement in answering this question. Is a lack of uniformity or variation in tax rates / systems between your state and other neighboring states creating an opportunity or incentive to evade taxes in your state? Does your state coordinate with other government agencies, including inter- and intrastate as well as local and federal, regarding enforcement? Do you share information with your neighboring states? In what format (paper, electronic, etc.)? If you receive information from your neighboring states, what do you do with it? What would you do to improve coordination? What is the perceived revenue impact, or return on investment, of your enforcement programs? Which program elements are most successful? Have you found any correlation between new enforcement / compliance programs and evasion? For the recent past, can you provide gross and net assessment revenue (recoveries) by year by major fuel type? 102
Which specific state enforcement and compliance programs/practices are especially effective in reducing evasion? How can enforcement be improved in your state? What is the impact of organized crime on evasion? Industry Compliance Describe the process that your business undertakes to remit tax payments to state(s)? What has your industry done to improve excise tax compliance? What procedures must you go through to implement state motor fuel excise tax policy? What is the availability and shortcomings inherent in data reported to federal and state agencies? What discrepancies exist between how data are prepared for various state and federal agencies? What reports must be filed with federal and state agencies? What are the costs associated with complying with state/federal programs, expressed as a percentage of total tax payments? What drives these costs? How could these costs be minimized? What could state/federal agencies do to reduce compliance costs? What could state/federal agencies do to improve compliance and reduce evasion? Data Can you provide a general overview of data sources (e.g., motor fuel, economic, transportation) useful in tracking fuel usage? What are the methods of collection and data frequency? What agencies are responsible for data collection? How good is the data on fuel production, use and collections? What problems do you see with reporting practices, accuracy, availability, etc.? Does your state employ a motor fuel tracking system? Is this system effective? What is the availability and shortcomings of data in excise tax reports provided to federal and state agencies? Is the International Fuel Tax Association (IFTA) reporting program effective? How could it be improved? Are there discrepancies in how the data are prepared for various state and federal agencies? 103
104 Have there been changes in how motor fuel tax data have been reported over time? Why were they implemented? Tax Codes What are the most important provisions of your state tax code related to fuel tax evasion? If you could change your state tax code to minimize evasion, how would you? Are there recent tax code changes or proposed legislation related to motor fuel and other highway taxes in your state? How have or would these changes address evasion? Are there significant gaps or loopholes in state tax codes that could be used to evade the motor fuel tax reporting, assessment or collection process? How could tax codes be updated to curtail motor fuel tax evasion? Has your state prosecuted any fuel tax evasion cases? Please provide details. Do your stateâs prosecutors have a good understanding of motor fuel tax law? Variables Used to Estimate Demand for Fuel and Model Evasion If fuel is sold on Native American lands, is it reported? Does your state have motor fuel tax agreements in place with Native American Tribes? If not, what needs to be done to achieve such agreements? Do motor fuel tax rates in neighboring states and/or enforcement in those states affect your motor fuel tax collections? Does your proximity to international border affect collections? How? What is the relationship between the point of taxation and evasion? Does your state use a statistical model to forecast revenue? Would you share that model, or the name of a contact person who uses the model, with the research team? Perceptions of Evasion Has your state computed an estimate of evasion? Do you know of any previous studies that estimate evasion? How well do you think evasion is currently estimated? How might it be better estimated? Do you think evasion issues in your state are different from that in others? Why? Conclusions Recap of requests for specific information and data Arrangements for further contacts with agency personnel Scheduling next discussion meeting(s) Any questions/concerns?
