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Driving You Crazy: Why do gas stations have that 9/10th thing at the end of the gas price on the sign?

Gas tax
Posted at 4:43 AM, Dec 06, 2022
and last updated 2022-12-06 12:31:45-05

Carson from Parker writes, “What’s driving you crazy? Why do gas stations have that 9/10th thing at the end of the gas price on the sign?”

The practice of using that 9 tenths of a cent Carson started when Federal and State gas taxes were implemented on fuel. According to the state of Oregon, they passed the nation’s first per-gallon tax on gasoline in February 1919. Back then, the tax was set at one cent per gallon. Today, it’s 38 cents per gallon. Originally, the revenue was used for early road building projects including the Pacific Highway and the Columbia River Highway.

According to the Federal Highway Administration, the first federal tax on fuel started as a 1-cent per gallon excise tax imposed on gasoline sales as part of the Revenue Act of 1932. The new tax was set to expire at the end of June 1933; however, the National Industrial Recovery Act of 1933, which President Franklin D. Roosevelt approved on June 6, 1933, extended the tax and increased it to 1.5 cents.

Back then, gasoline cost only a few cents a gallon and since taxes were imposed in tenths of a cent, the fraction of a cent made a difference to consumer psyche. It’s the same reason you see prices at the grocery store end in 99 cents. It’s called “just-below pricing” and is used to make buyers feel like the price is lower than it really is.

In the 50’s, more and more Americans owned cars and began touring the country. Fueling stations popped up and erected large signs to attract drivers and display the price of their gas, keeping the tradition of the fraction of a cent pricing.

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The current Federal tax on a gallon of gasoline is 18.4 cents. It is 24.4 cents for a gallon of diesel. The highest gasoline tax of any state is Pennsylvania at 57.6 cents per gallon, 74.1 cents for diesel. The lowest state tax is Alaska at 8.95 cents per gallon for gasoline and diesel. Colorado’s gasoline tax is 22 cents for gasoline, 20.5 cents for diesel.

If you think that tenth of a penny isn’t that big of a deal, according to the U.S. Energy Information Administration, in 2021 about 134.83 billion gallons of finished motor gasoline were consumed in the United States. If gas stations rounded their price up to the nearest penny just to make it even, that move would cost consumers $135 million.

Denver7 traffic anchor Jayson Luber says he has been covering Denver-metro traffic since Ben-Hur was driving a chariot. (We believe the actual number is over 25 years.) He's obsessed with letting viewers know what's happening on their drive and the best way to avoid the problems that spring up. Follow him on Facebook,Twitter or Instagram or listen to his Driving You Crazy podcast on iTunes, Stitcher, iHeart Radio, Spotify or Podbean.