Hundreds of millions of dollars in fuel taxes paid by American drivers aren&#8217;t going to the government, but instead into the pockets of gas and diesel retailers.</p><p>It&#8217;s legal, the IRS acknowledges. It&#8217;s widespread, according to industry experts. And it&#8217;s the latest twist in a controversy involving how the oil industry sells fuel based on temperature fluctuations across the country.</p><p>The practice, dubbed &#8220;hot fuel,&#8221; was exposed by The Kansas City Star in August. The newspaper reported that fuel was often sold at temperatures much hotter than the standard 60 degrees &#8212; a standard agreed to nearly a century ago by the industry and regulators, but virtually unknown to the average consumer.</p><p>As a liquid, gasoline expands and contracts depending on temperature. At 60 degrees, the 231-cubic-inch U.S. gallon puts out a certain amount of energy. But fuel is often sold at much hotter temperatures, causing the gas to expand and the amount of energy, by volume, to decrease. Yet consumers still get only 231 cubic inches per gallon.</p><p>Put simply, selling the hotter, expanded fuel to consumers forces drivers to consume more, making the industry more money. The Star reported that consumers were being overcharged an estimated $2.3 billion annually at then-current prices for gasoline and diesel because of the hot fuel phenomenon. Even with the recent drop in gas prices, hot fuel still amounts to $1.7 billion a year at today&#8217;s prices.</p><p>But that windfall for the oil industry isn&#8217;t just from the fuel. It also includes the handling of some of the taxes paid on that fuel that are supposed to go to build and maintain the nation&#8217;s roads and highways.</p><p>So how do retailers get to keep some of the taxes that you pay on gas? In part, because the Internal Revenue Service allows station owners to play the hot fuel game with taxes.</p><p>Because of an IRS loophole, retailers can switch back and forth on how they measure for federal tax purposes the wholesale fuel they purchase, depending on fuel temperature. Because diesel and gasoline is measured and taxed at wholesale, any amount of taxes a retailer subsequently collects from drivers above that total can be pocketed by the gas station, truck stop or oil company that owns the station.</p><p>&#8220;It&#8217;s a widespread practice and commonplace for fuel taxes to be gamed,&#8221; said David Breidenbach, former tax counsel for Marathon Petroleum Co., which owns the third-largest chain of company-owned gas stations in the country.</p><p>Breidenbach, who defends the practice, said, &#8220;It&#8217;s been going on for decades.&#8221;</p><p>Such tactics affect state fuel tax collections differently depending on differing state policies. But the federal fuel tax, which is 18.4 cents per gallon, is especially vulnerable because of the free hand the IRS gives the industry in how the fuel is measured.</p><p>The IRS sought to plug the loophole in 2000, approving a rule that restricted retailers from switching back and forth on how they measured fuel. But the regulation came under industry pressure, and was quietly withdrawn in the early days of the Bush administration.</p><p>As a result, the industry continues to use the physics of temperature, mechanics of dispensing and quirks in tax law to curb its fuel taxes while collecting more taxes from consumers.</p><p>Even though it&#8217;s all legal, it&#8217;s still not right, said John Siebert, foundation project manager for the Grain Valley-based Owner-Operator Independent Drivers Association, which has 145,000 members. He said every fuel-tax dollar collected from drivers needed to be used to improve the country&#8217;s roads, which truckers find are crumbling.