High gas prices affect military motorists too
May 19, 2011
FORT DRUM, N.Y. -- If "Gas Pains" and "Pain at the Pump" headlines grab your attention, you may have wondered at least once what criteria is used to determine the price of gas at Army and Air Force Exchange Service stations on Fort Drum.
And given the fact that most AAFES merchandise is not taxed, some might find it especially curious that gas prices on post don't differ much from the prices outside the gate.
But there's a good reason for it. A 75-year-old law called the Hayden Cartwright Act (4 USC, Section 104) requires all military exchanges to pay state and local taxes on gasoline. In addition, another law requires exchanges to pay a federal tax on gas, too.
"Charging sales tax can be like pulling the emergency brake on shoppers used to the tax-free benefit that the Exchange provides on almost everything, except gas," said Judd Anstey, a spokesman at AAFES headquarters in Dallas. "But the Exchange, and by extension its customers, is required (by law) to pay (taxes)."
As of December, AAFES customers at Fort Drum were paying 57.2 cents in sales taxes for every gallon of gas. In addition to underground storage fees, which all gas retailers pay, and the actual cost of obtaining gasoline, prices on post can travel north and south the same way gas prices at off-post service stations fluctuate.
But AAFES officials are sensitive to their customers in the military community, which is why gas prices on post typically range on the lower end.
"The Fort Drum Exchange relies on a survey process to ensure prices are fair and competitive with the local community," Anstey said.
As a general rule, AAFES surveys at least five off-post gas stations previously determined to be its competitors. Anstey said the price is then set equal to the lowest price for each grade of fuel sold by those local service stations.
"Because market-based pricing is not contingent on cost, we survey and change prices as frequently as necessary to remain competitive," he said. "In fact, even though the Exchange fuel pumps charge sales tax on gasoline, the surveys can result in prices that are actually even below cost."
The sale of food and services at AAFES locations typically compensates for such a scenario.
Anstey said AAFES as a whole, which forwards roughly 67 percent of its profits to Army and Air Force Morale, Welfare and Recreation programs, has contributed more than $2.4 billion to quality-of-life improvements in military communities over the past 10 years.
Not everyone who works on military installations is authorized to purchase AAFES gas, and federal regulations require ID from authorized customers like uniformed service members, Family Members, AAFES associates, retirees and applicable DoD civilians who possess a basic Exchange purchase privilege authorization card.
Anstey said a small segment of the civilian work force - usually employees working overseas or on a temporary duty assignment - may be authorized to purchase AAFES gas.
Vincent A. James, AAFES general manager at Fort Drum, said "dynamic gas prices" provide the Exchange with a good opportunity to ensure customers know not only what procedures are in place for determining pump prices but also what other benefits exist.
"We are committed to surveying and changing prices as frequently as necessary," James said. "This process, combined with discounts available through the Military Star Card, is the engine that drives the Exchange's ability to deliver value at the pump."
While energy prices are beyond most retailers' control, AAFES officials tout the Exchange-administered Military Star Card as a helpful option for curbing added fuel expenses. Customers who use the card are not subject to additional fees incurred through other pay-at-the-pump options.
"As a result," Anstey said, "the Exchange is able to pass savings on to authorized shoppers by taking a nickel off each gallon dispensed."
He said in addition to daily savings, Military Star Card holders enjoy steeper discounts during certain holidays, such as a dime-per-gallon markdown May 27-30.