why duty free gas is at the heart of the bridge fight.
DETROIT The potential loss of millions of dollars in toll revenue explains much of the Ambassador Bridge Co.’s opposition to the construction of what would be a competing, publicly owned Detroit River crossing.
But to understand the tenacity with which the fight has been waged, and the lengths to which the bridge company has gone to defy the state over the design of its Gateway Plaza in Detroit, you must look at more than traffic over the span.
You have to consider what’s underground.
Beneath the plaza are thousands of gallons of gasoline and diesel fuel that are sold tax-free and at huge profit by the bridge company’s Ammex Detroit Duty Free Store.
Bridge owner Manuel (Matty) Moroun fought along multiple fronts for more than a decade before winning the right to sell duty-free fuel, finally triumphing in court in 2007.
By selling gasoline and diesel fuel at slightly below market prices, the Ammex fuel operation can net, based on prices last week, a savings of more than 60 cents per gallon (about US$9 for a 15-gallon fill-up) that nearby U.S. stations pay in gas and sales taxes.
“That goes directly into (Moroun’s) pocket,” said Bill Vollenweider, president of the Detroit Travel Center truck stop on I-75 just south of Detroit. “It’s a heckuva competitive disadvantage. He won the right to do it. But it’s not right.”
Moroun’s son, Matthew, said the gas sales produce healthy profits but “nowhere near 60 cents” a gallon.
How Ambassador Bridge won, protects its right to fuel sales.
The owners of the Ambassador Bridge won’t say how much money they make selling taxfree gasoline to Canada-bound truckers and travellers.
“There’s more than a million dollars involved. It’s not unfair to say that,” Matthew Moroun, son of bridge company owner Manuel (Matty) Moroun, told the Detroit Free Press on Friday. Probably a lot more. Gasoline and diesel fuel sold at the sprawling plaza on the Detroit side of the bridge typically are priced only a few pennies a gallon lower (US$3.84/ gallon for unleaded Thursday) than at nearby non-duty-free stations and truck stops. That means about 60 cents a gallon of what would be state and federal taxes anywhere else goes straight to the bottom line for the bridge owners.
It would be difficult to contest that the Ammex Detroit Duty Free Store is the most profitable fuel retailer in Michigan.
Maybe in the country. The Free Press could identify only one other duty-free gas station on the U.S.-Canada border — at a relatively remote crossing at International Falls, Minn.
Documents filed in one of the many lawsuits over Matty Moroun’s right to sell duty-free fuel show that the state taxes alone (about two-thirds of all fuel taxes) on Ammex sales would have been about US$2.4 million.
Combined with federal matching money, that would have brought the state about $7.5 million in funding for state highway construction.
If it could have been collected.
Critics of the bridge company — and in the midst of the battle over construction of a new international river crossing, they are legion — describe Moroun’s gas station profits as excessive.
“This is what happens when you give one operator a monopoly,” said Tom Shields, a Lansing-based consultant with the coalition promoting a publicly owned alternative to the Ambassador Bridge. “Charging the customers a virtual tax and putting the money in your pocket is all about greed.
“It’s no wonder they violated their agreement with the ... government and built their plaza to make sure every car and truck drives through their gas station.
They are making millions ... at the expense of Michigan taxpayers who are losing state and federal tax dollars to repair our roads.”
Matthew Moroun said Ammex profits are exaggerated, and the bridge company’s position in the marketplace distorted.
Matthew Moroun said the gas station doesn’t compete unfairly with retailers who collect taxes because “our market is limited. Anyone can stop at the gasoline station at Fort and Clark. The only people that can come to our duty-free operation are those that have chosen to drive across the border and go to Canada.”
He also likened tax-free fuel sales at the bridge to similarly tax-free sales of aviation fuel to airlines flying across the U.S. border.
Michigan tax and highway authorities beg to differ. The benefits of tax-free aviation fuel flow largely to consumers in the form of lower prices, they said; the benefits from the duty-free Ammex station flow almost exclusively to the bridge company.
The state Department of Treasury declined to comment at length about the Moroun gas station, issuing a one-sentence statement that “the department’s pleading in court reflect its position that all motor fuel sold in Michigan should be subject to Michigan tax.”
Both the state and U. S. Customs opposed the unique treatment of the Ammex station, which came after more than a decade of aggressive litigation by the bridge com- pany and its affiliates in state and federal courts.
Moroun lost many of the battles, but finally got the U.S. Court of International Trade to affirm the station’s status as part of a bonded duty-free warehouse. That ruling led to Michigan courts in 2007 denying the state’s right to impose fuel or sales taxes.
The bridge company argues that gas and diesel fuel are identical to other goods sold duty-free, such as tobacco and cigarettes, and should enjoy the same favourable tax treatment because they increase commerce in the country in which the transaction takes place but are consumed elsewhere.
The problem with that theory, Shields said, is that customs officials impose strict limits on other duty-free goods (for example, one bottle of liquor and one carton of cigarettes allowed into Canada from the U.S.), but fuel sales are limited only by the size of the vehicle’s tank.
In addition, Shields said, much of the Detroit-Windsor traffic comes from those who regularly cross the border and burn plenty of their fuel on Michigan highways.
Shields said he believes much of the intransigence the bridge owners have shown in their dispute with state transportation officials over the design of the ramps and plaza on the U.S. side stems from their desire to direct traffic to the gas pumps.
MDOT spokesman Bill Shreck said building the entryway according to the design he said was originally agreed to likely would result in reduced traffic volume at the Ammex station and store. Shreck said, however, that the department’s only objective is “to facilitate the movement of traffic through the crossing.”
“We can’t speculate” about why the bridge company has defended its preferred design so fiercely ( to the point of bridge company President Dan Stamper spending a few hours in jail for contempt of court last year), Shreck said. “We don’t know what the motives are.”
In the early years of the dispute over whether dutyfree sales at the Ambassador Bridge could include fuel, Bill Vollenweider, owner of the Detroiter Travel Center on I-75 in Woodhaven, organized a group of truck stop owners to seek congressional action to block what they viewed as unfair competition.
As the tax authorities did, they won a few skirmishes, getting language inserted in an energy bill.
But Matty Moroun won the war when the legislation itself died.
Today, Vollenweider describes himself as “very, very unhappy” about being on the wrong side of the Ambassador Bridge truck plaza’s competitive edge.
But “it’s the old story,” he said. “When you can’t do anything about it, you learn to live with it.”