Fuel is the single biggest expense a driver has. Our fixed expense for truck payment, insurance, communications equipment, etc. is $890 a week and will drop to $740 in 16 weeks when a couple of things get paid off. At $3.00 a gallon filling our tank runs about $600 and we do that three times a week or more. Even a solo driver will do it at least twice. I have to tell you that when I am home and fill up the Tahoe and it costs $60 or less it just doesn’t bother me anymore, and filling the Mazda is nothing to me now.

Of course we try and fill as cheaply as possible and since fuel is tied to a trip we try and match the amount of fuel we purchase to the length of the trip. We do try and keep at least a quarter of a tank in the truck at all times and in the winter in the north at least a half. I am more rigid about the latter rule than the former. There has already been a short term closing of I-80 in Wyoming this year and you just don’t want to get stuck somewhere with nothing in the tank and a few hundred other truckers who have already drained all of the diesel from the local truck stops.

Deciding what fuel costs is different for us than for you though. You have probably noticed the IFTA stickers on most big trucks. This year it is blue and an outline of the state where it was purchased is on it along with the year it is valid. There is a 90 day grace after January one to get the stickers in place (one on each side of the truck) but it is actually illegal to put it on before January first. IFTA is the International Fuel Tax Agreement and is administered by The International Fuel Tax Association . It is an agreement between the lower 48 states and the provinces in Canada that border the US about sharing fuel tax revenue. You see we pay fuel taxes in every state we drive in whether or not we purchase fuel there. There is an person at corporate whose job it is to handle this. Using data from our Qualcomm system this person nows where we have been and matches that with data about our fuel purchases to decide what we owe to whom. Below is a table showing our activity for September.

State Miles Mileage
Tax Rate
Diesel Fuel
Consumed
Fuel Tax incl
Surcharge Tax
Gal Tax Paid State Rate/gal Gal Due Mpg Used Mileage
Tax Amount
Fuel
Tax Amount
AL 133 0.0000 20.2 0.0000 0.0 0.1900 20.2 6.59 0.00 3.84
AR 275 0.0000 41.7 0.0000 0.0 0.2250 41.7 6.59 0.00 9.38
AZ 2707 0.0000 410.8 0.0000 50.8 0.2600 360.0 6.59 0.00 93.60
CA 2072 0.0000 314.4 0.0000 570.5 0.3730 -256.1 6.59 0.00 -95.53
CO 70 0.0000 10.6 0.0000 0.0 0.2050 10.6 6.59 0.00 2.17
FL 715 0.0000 108.5 0.0000 174.2 0.3167 -65.7 6.59 0.00 -20.81
GA 76 0.0000 11.5 0.0000 0.0 0.1580 11.5 6.59 0.00 1.82
IA 300 0.0000 45.5 0.0000 0.0 0.2250 45.5 6.59 0.00 10.24
IL 307 0.0000 46.6 0.0000 0.0 0.3500 46.6 6.59 0.00 16.31
IN 166 0.0000 25.2 0.2700 189.2 0.1600 -164.0 6.59 0.00 -23.47
KY 233 0.0285 35.4 0.3170 58.0 0.2150 -22.6 6.59 6.64 -1.25
LA 446 0.0000 67.7 0.0000 0.0 0.2000 67.7 6.59 0.00 13.54
MD 24 0.0000 3.6 0.0000 0.0 0.2425 3.6 6.59 0.00 0.87
MO 624 0.0000 94.7 0.0000 0.0 0.1700 94.7 6.59 0.00 16.10
MS 291 0.0000 44.2 0.0000 0.0 0.1800 44.2 6.59 0.00 7.96
NE 457 0.0000 69.3 0.0000 105.2 0.2710 -35.9 6.59 0.00 -9.73
NJ 163 0.0000 24.7 0.0000 0.0 0.1750 24.7 6.59 0.00 4.32
NM 1847 0.0437 280.3 0.0000 214.4 0.2100 65.9 6.59 80.71 13.84
OH 261 0.0000 39.6 0.0000 0.0 0.2800 39.6 6.59 0.00 11.09
OK 629 0.0000 95.4 0.0000 201.0 0.1300 -105.6 6.59 0.00 -13.73
PA 335 0.0000 50.8 0.0000 0.0 0.3810 50.8 6.59 0.00 19.35
TN 1307 0.0000 198.3 0.0000 147.3 0.1700 51.0 6.59 0.00 8.67
TX 5873 0.0000 891.2 0.0000 1025.4 0.2000 -134.2 6.59 0.00 -26.84
UT 475 0.0000 72.1 0.0000 164.3 0.2450 -92.2 6.59 0.00 -22.59
VA 654 0.0000 99.2 0.2100 0.0 0.1750 99.2 6.59 0.00 20.83
WV 54 0.0000 8.2 0.0000 201.3 0.3220 -193.1 6.59 0.00 -62.18
WY 407 0.0000 61.8 0.0000 70.2 0.1400 -8.4 6.59 0.00 -1.18

Total 20901 3,171.5 3,171.8 -0.3 87.35 -23.38

For now ignore the mileage columns, I’ll get back to those later. The columns are pretty self explanatory and the bottom line is the last column which indicates if we have over or under paid. Negative being over paid. Naturally any state we didn’t purchase fuel in, zero in the Gal Tax Paid column, has a positive number. The idea is to try and balance the positive and negative numbers to get as close to zero or better even end up with a negative total meaning we are owed money. What all this means is that when I look at fuel prices I don’t just need to know the pump price but I want to know the amount of tax in a given state. eTrucker keeps a chart of taxes and average prices that helps sort this out. On 10/31/10 in Texas the tax was 20 cents a gallon and the price of fuel, including tax, was $2.97 a gallon. Next door in Oklahoma the tax is 13 cents and the price is $2.923. As a non-commercial driver you would want to purchase fuel in Oklahoma and save almost a nickel. However I look at the price before taxes and see that in Texas the pre-tax price is $2.77 vs. OK where it is $2.793. Two cents less Texas. Granted at the pump I pay the higher price but since I will be burning part of this fuel in another state I am storing up tax money to pay to a state I have not purchased fuel in. We look to purchase fuel in states with high taxes, low absolute costs and where we won’t be driving a lot to store up tax money. Obviously we also need to purchase fuel in any state where we are going to burn a lot, so most trips through Texas involve a purchase as do trips in CA where we plan on heading north out of Los Angeles. Another twist is that fuel at our terminals is usually significantly cheaper than at a truck stop so we try and purchase there when possible.

Additional issues. Several states have mileage charges as well, the other columns. We get hit for each mile we drive on the road. We try to avoid those states when possible. As a company driver when I drove from Texas to Oregon we spent a lot of time in New Mexico. Now I drive up US-287 out of Amarillo, through Oklahoma and then Colorado and Wyoming. The difference in miles is negligible and it saves $17.00 in mileage taxes. It is a balancing act between fuel burned and charges. Coming out of Los Angeles it is a couple of miles shorter to go across northern New Mexico but we spend over 100 extra miles in NM compared to the southern route which again means more taxes paid. However, coming out of central California the northern route makes sense as the southern route is 100 miles longer and burns a lot more fuel plus adds on miles we are not even paid to drive.

Oregon is the worst. They charge over 16 cents a mile but have no fuel tax for companies that have cut a deal with the state. Sixteen cents a mile is much more than we would pay by the gallon. Naturally we try and avoid driving there now. That is why I ended up on a snow covered pass on Washington last week because we wanted to drive in Washington, not Oregon.

Notice in the chart when it came to fuel taxes we actually ended up being owed money but when the mileage charges kicked in we lost out and had to pay $63.97 in additional taxes. This was a good month. Not understanding how things worked in Oregon in August we purchased a tank full of fuel because the price looked so good compared to California and Washington. Two problems, we drove a lot of miles in the state and didn’t accumulate any tax money. Our payment was over $150 last month. Even if we drive in Oregon we don’t want to purchase fuel there because it gets us nothing.

So you look at this and are probably going ‘Holy crap Batman, how do they earn anything after paying for fuel?” Our little friend the fuel surcharge. During one of the gas crises the trucking companies realized they couldn’t keep up with the rapid fluctuation in fuel costs and essentially agreed to price loads with a fixed amount for fuel costs per mile and add on a surcharge based on the Department of Energy calculated weekly price for fuel. There are lots of problems with this system not the least of which is it is backwards looking and applied, at least partially, in a forward manner. It also doesn’t account for wide variations in prices across the country. But it is better than nothing. So if on Tuesday DoE says fuel cost $3.06 a gallon we get paid an additional 28.6 cents per mile. Obviously this charge has been passed on the the customer, heck probably a higher charge has been passed to the customer. This is a flat rate per mile so if I am doing a good job of conserving fuel I make more money. Over the course of a year an increase in fuel economy of one MPG can equal thousands of dollars. It is weird but as fuel prices go up I can actually make more money.

Truly independent drivers can subscribe to services that will tell them just what the prices were along the route they traveled the days they traveled them in order to refine this surcharge. This cuts way down on over or under charging the customer.

I hope that was clear, the process still confuses me.

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