Bill would lift ban on cash discount for gas

Brandi Taylor of Acton hands Dan Campbell IV cash for a gas purchase at Bursaw Gas and Oil in Acton. (Joanne Rathe/ Globe Staff)

Massachusetts lawmakers are pushing to expand the availability of cash discounts at service stations, targeting those affiliated with the large brand-name oil companies.

A bill filed by Representative Barbara L'Italien would require oil companies to allow the franchise owners of their gas stations to give discounts to cash-paying customers. This would free the station from paying fees on credit card purchases. Some of the major oil firms have conditions in their contracts with franchisees that prohibit the stations from charging less for cash purchases, L'Italien said.

Voiding those clauses, said L'Italien, an Andover Democrat, would reduce prices for cash purchases by about 7 cents a gallon, and allow franchisees to compete with independent gas stations that already offer such discounts.

"What I'm trying to do is offer a win-win for consumers and for the small business owners that run these gas stations," L'Italien said. "We're in a world where people are willing to look online for the cheapest gas price."

She filed the bill on Monday, and it has since garnered 28 cosponsors. The measure is based on legislation recently passed in Connecticut.

It is unclear how many oil companies prohibit their franchisees from using cash discount programs, said Paul O'Connell, executive director of New England Service Station and Auto Repair Association. The discount is not easy for stations to enact, he said. Owners must reprogram their payment systems and increase signage, while risking alienating credit card customers, he said.

"Obviously, we're in favor of cheaper prices because the consumer gets a deal and the gas station gets to make some money," O'Connell said. "In the end, it would be good to give the consumer a break because we're all suffering with these gas prices."

Discount cash programs are not new.

"Back in the late '80s, we had discounts for cash," said Tom Todisco, 61, owner of Todisco's Mobil in East Boston. "Then it worked. Now it would work even better because of the high cost of the fees to the dealers for the credit cards."

Todisco said he pays between 5.5 and 7.5 cents per gallon in fees on every credit card purchase. That's money that could go back to consumers in the form of lower prices for cash payments, he said.

"The dealers are all going broke," Todisco said. For example, if he sells gas at $3.99 a gallon and bought it at $3.90, he makes 9 cents a gallon. But for a credit card purchase, he has to pay 6 cents in credit card fees and his profit is down to 3 cents a gallon, he said.

Sunoco Inc. is testing a cash discount program at 24 locations in New Jersey in response to competitors' programs, said Thomas Golembeski, a company spokesman. Golembeski declined to comment on whether Sunoco franchisees were allowed to implement cash discount programs, citing the confidentiality of contracts the company has with dealers. He said he was not aware of any Sunoco stations with cash discounts outside of those in the test program and some stations in Connecticut.

L'Italien does not anticipate the legislation encountering legal problems because the Connecticut attorney general approved the bill on which the Massachusetts bill is modeled.

Elizabeth Campbell can be reached at ecampbell@globe.com.