Maryland gas tax holiday starts March 18, 2022

Maryland lawmakers didn’t sit idle when gasoline prices started to soar. The General Assembly of Maryland fast-tracked a gas tax holiday bill, which Governor Larry Hogan signed as soon as it hit his desk on March 18, 2022. The Maryland gas tax holiday, also called a motor fuel tax suspension, takes effect immediately.

The following taxes are suspended during the gas tax holiday, which runs March 18 through April 16, 2022:

• 36.1 cents per gallon of gasoline

• 36.85 cents per gallon of diesel

While this should make a noticeable difference at the pump, the Maryland Comptroller reminds that gas prices will likely continue to fluctuate due to the volatile global economy.

The motor fuel tax holiday is different from the state’s sales tax holidays. While sales tax is normally applied at checkout and noted on invoices and receipts, the Comptroller explains that state gas tax “is paid by the retail owner/seller as soon as he/she receives the gasoline in their tanks.” Since most fuel sellers have already prepaid the tax on the gasoline and diesel fuel they’re selling tax free starting March 18, the Comptroller’s office will issue refunds to qualifying retail and wholesale sellers (i.e., a person possessing tax-paid qualifying fuels for sale on March 18, 2022).

The following fuels qualify for the tax holiday:

• Gasoline, other than aviation gasoline

• Special fuels, other than turbine fuel

• The gasoline gallon equivalent of clean burning fuels, excluding electricity

According to the Maryland Sellers FAQ Gas Tax Holiday, “qualifying retailers holding tax-paid fuel for sale on the premises on March 18, 2022, may request a refund advance. A qualifying retailer wishing to request a refund advance must take an inventory of tax-paid fuel on hand at the beginning of the tax-free period and submit the application with supporting documentation by the posted deadline.” The form and instructions can be found here. Though an owner of multiple retail stations may submit one form for all locations, “a tank gauge, stick, or meter reading for each product type at each location must be submitted with the form.”

Refund requests for tax-paid motor fuel on the premises on March 18 must be submitted by May 2, 2022, preferably by emailing requests to gastaxholiday@marylandtaxes.gov. The Comptroller will review refund requests daily and issue refunds by paper check. If the qualifying retailer has a tax balance or outstanding liability subject to offset, the refund will be applied to the balance.

Qualifying retailers that didn’t possess any tax-paid fuel for sale on March 18 may not request a refund advance. Refunds are also not available to end-use consumers who may erroneously pay motor fuel tax during the motor tax suspension period.

Qualifying retailers and wholesalers must take inventory of tax-unpaid motor fuel at the end of the gas tax holiday, April 17, 2022. The Comptroller explains: “Within 30 days of the end of the tax-free period, those holders must submit Maryland Form 779, Inventory – Tax Adjustment, and pay tax owed on tax-unpaid fuel held for sale on the premises that was not sold during the tax-free period. The form will be found at marylandtaxes.gov.” See the Maryland Sellers FAQ Gas Tax Holiday for additional information.

During the gas tax holiday, motor carriers who are IFTA (International Fuel Tax Agreement) licensed and traveling in Maryland can purchase qualifying motor fuel tax free and travel nontaxable miles in Maryland.

IFTA returns must still be filed for the quarters that include the Maryland tax-free period. To ensure miles per gallon (MPG) are accurately reported, motor carriers must include both tax-paid and tax-free fuel purchases on the IFTA return. However, these receipts “are not to be included in the Maryland tax paid fuel gallons reported on the return.”

Miles traveled in Maryland during the duration of the gas tax holiday should be reported as non-IFTA miles. See this memorandum for more details.

At this point, the state motor fuel taxes on gasoline and diesel are scheduled to come back into effect on April 17, 2022. However, the Maryland Comptroller is encouraging Maryland residents to contact their state legislators “regarding any possible extensions.” Comptroller Peter Franchot had originally called for a 90-day suspension.

“Gas tax holidays are nothing new,” says John Beaty, General Manager of Excise at Avalara. “Given the current climate and environment, I would not be surprised to see more. We generally pay a lot of taxes per gallon of fuel: federal excise tax; state tax; and county, local, and special taxes. A gas tax holiday is a quick and easy way for states to make fuel a bit more affordable for consumers.”

Beaty adds that while gas tax holidays typically don’t require retailers to pass the exemption on to the consumer, most retailers will cut prices at the filling station.

Maryland is the first state to respond to rising fuel prices with a gas tax holiday, but by a hair. On March 18, 2022, Georgia Governor Brian Kemp also signed into law bill that exempts all sales of motor fuel by licensed distributors through the end of May 2022. And Alberta, Canada, is suspending its fuel tax starting April 1, 2022. 

Other states and provinces will likely follow their example. Meanwhile, the United States Congress is considering a federal gas tax holiday that would suspend the federal 18.4-cents-per-gallon tax through 2022. 

Though gas tax holidays tend to be popular with consumers, reducing tax collections doesn’t mean there is a reduction in the purpose for which the tax exists. “Taxes serve the purpose of raising revenue to pay for consumer wanted services,” says Scott Peterson, Vice President of Government Relations at Avalara. “For example, Nevada’s law automatically increases the Nevada fuel tax by a corresponding amount if the federal government lowers its fuel taxes because the state needs the total amount of money to pay for their highway needs.”

If other fuel tax holidays are enacted, they could take effect immediately like Georgia's and Maryland’s. Beaty says it’s not uncommon for a state to change a law and have it become effective immediately. “That’s why it’s really important for businesses to monitor all of the jurisdictions that can impact your business. Fuel and excise taxes change a lot, and excise tax is typically quite a bit higher than sales and use tax.” Failing to collect the proper amount of tax after a rate change can end up costing businesses a lot. Tax compliance software can help businesses stay on top of the changes that impact compliance.

If any other fuel tax holidays are enacted, we’ll report about them at the Avalara Tax Desk.