Fuel Market Volatility and the Knowledge Gap: A Practical Playbook for Tax Teams

Tax teams responsible for motor fuel excise compliance are facing pressure from two directions simultaneously. Volatile fuel markets are scrambling filings even when rates haven’t changed. Simultaneously, accounting firms, businesses, and government agencies are experiencing what’s often referred to as the “silver tsunami”: a loss of institutional knowledge as veteran tax professionals retire faster than they can be replaced, taking decades of judgment with them.

To navigate these pressures, tax leaders need standardized filing processes that can withstand market volatility while creating intentional systems to preserve institutional knowledge before experienced professionals retire.

Why crude oil swings wreak havoc with tax filings

A common misconception is that wild swings in crude prices must be affecting fuel tax bills, but that usually isn’t the case. A barrel at $120 and a barrel at $60 typically carry the same per-gallon excise tax. What actually changes are buying behaviors. Operators draw down storage rather than restocking at a premium, or they top off every available tank when prices dip. That behavioral shift, not the rate, is what drives gallons, refunds, and payments to swing month to month.

A large filing variance may be entirely legitimate, but if no one documents the reason, explaining it during an audit 18 months later becomes significantly more difficult. The real challenge is that source data lives in enterprise resource planning and inventory platforms that were never built to feed a filing system directly. Tax professionals are often left acting as translators, extracting data from multiple systems, reformatting it manually, and aligning it with jurisdiction-specific filing requirements. Every manual touch is one more chance for something to go wrong.

This is where automation can provide meaningful value. Continuous validation of transaction-level data helps identify anomalies while the underlying business events are still fresh, making variances easier to explain and reducing downstream corrections. Software that checks transaction-level data continuously, instead of once right before a return is due, flags the cause of a swing while it’s still fresh rather than a year later. Think of an amended return as a diagnostic check rather than simply a cleanup exercise. It often signals broader process issues that deserve attention.

Tax holidays increase risk

Gas tax holidays add another layer of complexity when filing returns. Retailers typically hold fuel that was already taxed before the suspension kicked in. Timing can also make it worse. A suspension starting or ending mid-month forces one filing period to reflect two tax treatments. On top of that, not every state issues a revised form to match. This places additional responsibility on tax teams to monitor state guidance rather than relying solely on filing software.

The biggest trip-up isn’t mid-holiday, though; it’s at the very end. Miss the day a suspension actually expires, and you’ll keep filing at the discounted rate after the tax holiday has ended. Missed expiration deadlines can result in a series of underpayments, with time and money wasted on amendments and tax penalties.

Here’s what to do:

Give a tax holiday’s expiration date the same attention as a permanent rate change’s effective date.
Create separate calendar reminders for the effective and expiration dates to avoid missing the transition back to standard rates.

CPI-linked rates: The rate you can’t set and forget

A few states peg their motor fuel tax rate to the CPI or to average retail prices rather than to a fixed amount. Small rate adjustments can seem insignificant until they’re applied across millions of taxable gallons. These indexed rates can also be updated with a delay, so the rate table in your system today may already be stale.

Here’s what to do:

Check the state’s published rate schedule before every filing to ensure you’re not using outdated information.
Flag indexed-rate states for extra review each cycle.

The silver tsunami threatens institutional knowledge

Risk multiplies when you add workforce turnover to the mix. Few accounting programs devote meaningful attention to motor fuel excise tax, leaving most professionals to learn through experience. When a veteran retires, they take all of their experience and institutional knowledge with them. Without documented processes, new hires often spend months rebuilding institutional knowledge instead of adding value immediately.

Succession planning has to be deliberate, not something that happens by accident in the gap between a retirement announcement and someone’s last day.

Here’s what to do:

Put it in writing before it walks out the door. A fuel tax process that only exists in one person’s inbox and memory isn’t a process; it’s a countdown clock to chaos.
Partner new hires with veterans on live work, not just training modules. Working on a real audit or a messy reconciliation with a senior mentor is one of the best ways to learn on the job.
Shift institutional knowledge from individuals into documented workflows, centralized repositories, and technology that supports compliance.

Today’s tax professionals and their teams are facing unprecedented challenges. Due to ongoing geopolitical disruptions, fuel pricing and supply chains don’t appear to be stabilizing any time soon. By 2030, all baby boomers will have reached the age of 65, roughly 20% of the U.S. population. Not all of them will retire at once, but the daily retirement rate is expected to reach its historical maximum between 2024 and 2027, averaging more than 11,000 people per day. Workforce demographics suggest these challenges will only intensify over the coming decade.

Organizations that invest now in standardized processes, documentation, and technology will be better positioned to maintain compliance, respond to audits efficiently, and minimize operational risk, even as market conditions and workforce demographics continue to evolve.

ABOUT THE AUTHORS:

Bob Donnellan is a motor fuel tax subject matter expert at IGEN. He has more than 40 years of industry experience, specializing in compliance, reporting, audit defense, and tax system strategy. Over his career, he’s advised companies across the fuel supply chain on complex state and federal motor fuel tax issues and helped shape industry best practices through leadership in the Federation of Tax Administrators (FTA). Bob has trained over 1,000 tax professionals and state auditors, served as an expert witness, and played a role in developing innovative tax reporting systems and resources that are still used today.

Kelly Grace is director, advisory–ECS–motor fuels and excise tax at top 30 accounting firm Weaver. She has more than 14 years of experience in professional accounting with a focus on complex fuel excise and sales and use tax matters, with experience building, testing, and implementing tax logic for Avalara, IGEN, Sabrix, SAP, and Right Angle. She is well-versed in planning and directing federal and state motor fuel and sales tax audits. She manages co-sourcing tax compliance projects for companies in all 50 states and researches and advises clients (refineries, fuel terminals, pipeline operators, retail stations, end users) on new and updated state and federal tax laws affecting clients’ businesses. Kelly is a certified public accountant in Pennsylvania, a member of the Pennsylvania Institute of Certified Public Accountants (PICPA), the Pennsylvania Bar and the Federation of Tax Administrations, Motor Fuel Sections. She earned her Bachelor of Science in accounting and economics from the University of Delaware and her Juris Doctorate from the Temple University Beasley School of Law.

Photo credit: Alexandra Koch/Pixabay