Company Gas Cards for Employees: What You Need to Know?

What is a Gas Card for Business?

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A company gas card is a type of card that allows fuel, maintenance, and fleet expenses for work-related travel. Depending on the program and the station, it may provide cost control measures,  cashback, rebates, and tax exemptions. 

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Employee cards can also simplify paperwork and assist in managing fuel expenditures and reporting. Some business gas cards are universal and can be used wherever MasterCard is accepted, while others cater to specific brands or locations. 

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The ideal gas card for your business may depend on the number of company vehicles, geographical region, and your company's unique needs.

How Do Company Fuel Cards Work for Employees? 

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Company gas cards for employees operate similarly to any regular payment card. They're connected to the company's bank account and allow employees to pay for gas and other business driving expenses at specific, approved locations. 

How Do Gas Cards Work?

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When an employee purchases gas or vignettes or pays tolls using a company gas card, these expenses are immediately charged to the card. This means you can control how much your employees spend on fuel purchases and other card expenses. 

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All this makes gas credit cards for business uses a good choice for companies whose employees regularly use vehicles for business purposes, such as home care agencies, construction companies, or general contractors. 

How Much Do Gas Cards Cost?

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Gas cards for employees come in different types and costs. For example, business owners can choose between fleet fuel cards and co-branded gas credit cards, which have different benefits and fees. Some providers may charge card fees, while others offer certain perks, rebates, rewards, or discounts.

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To find the best business gas card, you need to compare the features and fees of different cards and see which matches your business needs. Also, you will need to check your credit score to understand better which cards you will likely qualify for.‍

What Are the Benefits of a Gas Card for Employees? 

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There are several pros to implementing company gas cards for employees besides their obvious convenience. 

‍Discounts and Rewards 

Businesses that regularly use a dedicated fuel card can save with every fill-up since these company gas cards for employees usually offer so-called wholesale pricing. In other words, frequent users get a discount on large purchases. The amount you can save depends on the card company you use and the fuel type, but the cash back on gas can go up to 4%. Remember that these deals usually include cashback on travel categories such as hotel accommodation, restaurants, or car maintenance. 

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While gas cards are often gas station-specific, some of the best ones are accepted at 95% of US gas stations. Some of the most popular gas card issuers are Bank of America, Shell, Capital One, American Express, US Bank, Wex, etc.‍

Online Purchase Tracking ‍

Apart from online expense tracking, gas cards for employees come with an additional layer of control, as you can easily set spending limits. Depending on the card type, you can set limits for the amount of gas purchased per transaction or on a daily or weekly level, thus allowing you to manage employee spending and minimize fraud.

You can also restrict card usage to purchasing only gas and not permit using them in fuel station convenience stores. 

‍Ease of Use 

An employee gas card is easy to use, and that's one of the reasons why both employers and employees like this reimbursement option.

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How Do I Use the Gas Card? 

A business fuel card is used like a regular credit or debit card - employees simply swipe it at the gas station and enter the data provided, such as the trip or driver number.

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Fair Business Driving Expenses Compensation 

Gas prices have varied over the past years, but they still remain higher than they were before the pandemic. This means employees who drive for work still face higher costs than they did, while their compensation may not have changed accordingly.  

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For example, an employee who drives 1,000 miles per month for work and gets a $300 car allowance would have spent $215 on gas in October 2020, leaving them with $85 extra. But in October 2021, they would have spent $327 on gas, leaving them with $27 less!

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This problem may affect employees who get fixed car allowances or mileage reimbursements. As their driving expenses per mile increase, their allowance stays the same, eating into their personal income.

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Moreover, fuel prices vary widely across different regions and states, creating an uneven impact on employees and business expenses. According to AAA Gas Prices on May 12, 2023, California had the highest average fuel price of $4.638 per gallon. Mississippi had the lowest gas price of $2.993 per gallon.

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One way to solve this problem is to use business gas cards. But this solution is not simple, as it could create new challenges for the business.

What Are the Downsides of Company Gas Cards for Employees?

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Even though company gas cards for employees give you a certain level of control, it leaves much to be desired in this department. Here's why you should think twice before handing your employees a fuel card for business purposes. 

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Fuel Economy Heavily Affects the Costs of a Corporate Gas Card

It's much easier to control the costs of your gas cards for employees if you provide company vehicles. You can select cars for your company fleet by opting for the models with the best fuel economy. This way, you can manage costs and plan your budget accordingly. 

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However, it's an entirely different situation with personal cars. You don't have a say regarding your employees' choice of personal vehicles. So, the odds are that some drive gas-guzzling SUVs, significantly increasing fuel expenses. 

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Plus, you'll partially sponsor their extravagant drives instead of incentivizing fuel-efficient cars for work. 

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Lack of Transparency Over the Personal Use of Fuel 

When your employees drive their own cars for business purposes, you may not know if they are cheating on their expense claims. You have to trust that they are honest about their fuel consumption.

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But their reports could be wrong, on purpose, or by mistake. And that means you could end up paying more than they spend for business purposes. They could use gas cards for employees to pay for fuel for their personal activities, such as running errands, picking up their kids, or going shopping. Even a small difference in the mileage they report can make a big difference in the total amount you pay for car expenses over a year.

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It's Not Fair to All Employees  

Let's say one of your employees drives a Toyota Prius, a hybrid that can reach up to 50 mpg on highways, while another opted for a BMW SQ5, an SUV whose mpg score is 24.6. It's easy to calculate that the BMW driver's reimbursement will be twice as high as the Toyota owner's. 

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It's unfair, and the employee compensated less for the same mileage can be under the impression that they don't get the same treatment as their SUV-driving co-worker. 

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Not to mention that this raises the question of double standards regarding fuel efficiency. 

Are Gas Cards to Employees Taxable?

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 Company gas cards for employees are taxable unless your employees can prove that the gas purchased with the card was used for business driving only. 

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This can be challenging since we're talking about personal cars, and a certain amount of that gas can accidentally be used for private purposes. This will automatically make you ineligible to claim a mileage deduction. 

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Using the best mileage tracking software can help you gain more control over business mileage and ensure IRS compliance. 

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‍What Are the Company's Gas Card Best Practices? 

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Many employers switch to company gas cards for employees because the standard car allowance and mileage rate don't cover all driving expenses. 

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Here's a recap of these two expense reimbursement methods: 

• A standard car allowance is a flat-rate amount of money employees receive monthly for their business driving expenses. It's pretty convenient and doesn't require crunching numbers. But, since it's taxable, employees will have to give 30% to 40% of the sum they receive to the IRS.  

• Mileage reimbursement is a monthly payment that consists of mileage multiplied by the standard IRS rate. It requires accurate mileage tracking and evidence that employees are compensated for business miles only. The IRS increased its standard rates as of January 1, 2024, to compensate for increased gas prices. Now employers can offset 67 cents per mile driven for business purposes. This is up 1.5 cents compared to the rate set for the year 2023.

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Since all the methods we discussed above, including company gas cards for employees, have some downsides, let's explore your best options. Of course, we'll take both your and your employees' best interests into account. 

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Introduce a Fuel Use and Mileage Reimbursement Policy 

If you plan on using company gas cards for employees, it's crucial to have a fuel use policy in place. Strict rules will allow you to control your expenses better and hold your employees accountable. 

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For example, you can place a cap regarding how many times a week and even determine the exact days they can fill up. It's best to allow either Friday or Monday fill-ups to discourage your employees from using the company-paid gas over the weekend. 

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Another tactic is to compare your employees' mileage, fuel economy, and overall performance on the road. This way, you can establish whether they use more gas than they should. If you notice discrepancies, ask your employees to pay you back for the gas they used for personal driving. 

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If your employees use a private vehicle for work, you should consider establishing Mileage Reimbursement Policy to clarify to your employees which travels are considered business-related. There is a free template of the Mileage Reimbursement Policy that you can download and tailor to your company’s needs. 

Consider the FAVR Reimbursement Plan 

‍Fixed and variable rate reimbursement (FAVR) is another non-taxable method. Still, it's more complex than the standard allowance, mileage reimbursement, or gas cards for employees. That's why employers aren't very fond of it, although its benefits are worth every effort. 

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The FAVR method consists of

• The fixed monthly amount that is used for covering expenses such as insurance, registration, or deprecation 
• The variable part covers fuel costs, oil, tires, and regular maintenance. 

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Both payments are non-taxable if you can prove that the expenses are incurred during the business use of a vehicle. 

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Instead of reimbursing employees based on their fuel economy, FAVR starts by choosing a standard vehicle that will be used for calculating reimbursement rates. The vehicle is selected considering what employees need to perform their jobs and not what they actually drive.

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FAVR method also considers another factor when determining reimbursement rates -  your employees' ZIP codes.  Such an approach ensures that every employee is fairly reimbursed.

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‍We’ve covered the cars with the best gas mileage, so you can read our list to understand better what you should look for.

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Implement a Mileage Tracking App 

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Regardless of your reimbursement method, you should use an accurate mileage tracking app. An employee mileage tracker app is software that helps you track and record the distance and expenses of your business trips.

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Combining an employee mileage tracker app with a gas card for employees can bring numerous benefits for your business, such as:

• Saving time and money by automating the tracking and reporting process,
• Reducing errors and fraud by verifying the accuracy of the trips and expenses
• Increasing tax deductions by keeping detailed records of the business mileage
• Improving employee satisfaction and retention by offering a convenient and flexible reimbursement option.

How Can Timeero Help Me Cut Down My Gas Costs?

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Timeero comes with different features that make mileage tracking easy. First of all, it ensures IRS compliance since the agency requires all mileage logs to have the following elements: 

• Mileage
• Date of travel 
• Travel destination(s) 
• Purpose of your trip.

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You cannot claim a tax write-off if you can't substantiate any of these elements. 

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Also, the IRS wants insight into the total miles you drove for business, commuting, and personal purposes over the year. Since Timeero combines GPS, time, and mileage-tracking technologies, it will capture all the details so that you can substantiate your deduction claims. 

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Besides allowing you to check your employees' location anytime, you can also control their traveling speed in real-time. Thanks to the breadcrumb trail functionality, you can even replay the route they took and see where exactly they traveled or made stops.

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This means the app will show if they made a detour or took a longer route which will increase your expenses or reimbursement costs. Every log entry includes a timestamp so that all mileage reports are IRS-compliant and can be used as evidence in case of an audit. 

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So, if you decide to use company gas cards for employees, you can still claim a mileage deduction if you implement a mileage tracking app and prove that your employees used the gas for business purposes only. 

Besides, the entire process runs smoothly with Timeero as the app automatically starts tracking mileage for work when your employees are on the clock. The app recognizes driving speed, ensuring no business miles are lost, even without an internet connection. At the same time, your employees don’t need to worry about privacy, as the app captures location and mileage only during their working hours.

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Timeero also comes with additional great features helping you reduce your gas expenses. For instance, it can suggest to your employees the shortest route to a destination and let you deduct commuter mileage.

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You can get all these benefits without relying on paper mileage logs, spreadsheets, and odometer readings, which makes the process much more efficient and accurate.

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So, ‍Is a Company Fuel Card Worth It?

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Company gas cards for employees are user-friendly and don't require too much admin work. However, it's not you who control gas expenses but your employees, which makes a corporate gas card a less desirable option. 

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Implementing a reliable mileage tracker, such as Timeero, can fix this and add a layer of transparency and accuracy to this method, thus making it non-taxable.

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If you want to learn more about Timeero and its features and benefits, check out our Timeero Review. Or, just sign up for a free trial, and see how it works for yourself.

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