AAFES gas prices explained Published June 2, 2008 AAFES Public Affairs DALLAS, Tex. -- -- With the price of gas steadily rising, many on Peterson are wondering how the Army and Air Force Exchange Service gas stations arrive at their prices. Below are some commonly asked questions and answers from Dwayne Ochs, Colorado Springs Consolidated Exchange General Manager. Q1: Why can't AAFES match or beat the lowest priced station downtown? A1: At times AAFES may match or beat the lowest prices downtown, and the policy allows for that. However, there are times when market conditions would cause the Exchange to sell below cost, negatively impacting the AAFES mission to fund Morale, Welfare and Recreation programs. There are a variety of business strategies that businesses use to keep their gas prices low. Some non-AAFES stores choose to price at a loss on gasoline while pricing other merchandise at much higher prices to make up for the loss. AAFES consistently offers competitive prices in the Shoppette. In fact, many of the prices for Shoppette items are similar to what can be found at discount retailers. When AAFES gas prices are compared to convenience stores off installation, the pricing is not always as competitive. Based on current margins for gasoline and the processes AAFES follows for purchasing, AAFES is losing $9.2 million that could be applied toward the mission to support MWR. AAFES customers shop there for many reasons. It is not always about the lowest price or numerous stores off post would not be selling gasoline at different prices. AAFES wants to insure they are able to afford to be open the hours customers want, staff the stores adequately and contribute the dividends MWR needs to support quality of life programs. In Colorado Springs, AAFES performs daily surveys at five competitive locations, but will never be the lowest price in town all the time. Currently the on-base gas stations are again selling gas below cost and when the two percent credit card fees, pump repairs, cost of changing filters and other maintenance, delivery charges, and drive-offs are added in, pumping gas is only a service used to generate traffic in Shoppettes. Without the Shoppette or the Car Care business attached, AAFES would never break even just pumping gas. In addition AAFES gas stations in the United States do not get any deals on gas. They pay as much, and often more than, branded stations outside the gates. The reason the on-base gas stations pay more for gas is that branded companies and refineries will often offer gas at a lower price to their branded partners that pump it to gain market share. AAFES stations are unbranded. Q2: Why can't AAFES get a better cost on gas? A2: AAFES follows Government procurement rules and regulations competitively soliciting authorized suppliers resulting in the lowest cost price possible while operating within the law. Q3: Why do AAFES gas station customers pay taxes on gas? A3: As a U.S. Government instrumentality AAFES is immune from state and local taxes unless the immunity is waived by an act of Congress. The U.S. Congress waived this immunity, with respect to motor fuel sold by AAFES, by passing the Hayden Cartwright Act, 4 U.S.C. 104. Accordingly, AAFES is required to pay state and local motor fuel taxes, as well as underground storage fees, and other costs of running a gas station. In regard to Federal Taxes, 26 U.S.C. ยง 4081(a) is the US code that requires AAFES to pay Federal Tax on gasoline. The state and Federal motor fuel taxes and other applicable fees paid by AAFES are forwarded to the appropriate tax agency and included in the motor fuel price to the military customer.