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Transportation Funding & Financing

State Motor Fuel Taxes and Fees

Among state surface transportation revenue, motor fuel taxes provide the largest contribution of about 37 percent, considerably less motor fuel taxes' 82 percent share of Federal revenue. Each state sets its own motor fuel tax rates. As of January 2009, tax rates ranged from a low of zero cents per gallon for both gasoline and diesel fuel in Alaska, to a high of 41.3 cents per gallon for gasoline in New York and 46.2 cents per gallon for diesel fuel in Hawaii. For the purpose of quoting state motor fuels tax rates, other taxes are often included with the excise tax, including sales taxes, environmental fees, fees for underground storage tank and other funds, and local taxes and fees. A small number of states, including Florida, Kentucky, Maine, and North Carolina have either all or a portion of their motor fuel tax indexed to a local consumer price index or the wholesale price of fuel.

The American Petroleum Institute provides frequently updated summaries of state motor fuel taxes in report, table, and map formats.

State sales taxes on motor fuels are often included in a state's motor fuel excise tax and can represent a significant portion of state motor fuel tax revenue. In California since 2002, for example, Proposition 42 guarantees the sales tax on motor fuels to transportation purposes. However, the proceeds from this tax vary with the price of fuel. When gasoline costs $4 per gallon, approximately 30 cents per gallon is collected in sales tax; for $2-per-gallon gasoline, half as much sales tax is collected. Eight other states in addition to California apply a sales tax to a portion or the entire sale price of motor fuel, including to federal and state excise taxes.

The taxation of fuel used by interstate motor carriers is regulated by the International Fuel Tax Agreement (IFTA), except in Alaska and Hawaii. IFTA also applies to all but three Canadian provinces. The agreement simplifies the reporting of fuel used by motor carriers that operate in more than one jurisdiction.

The IFTA maintains a current table of motor fuel use tax rates for motor carriers.

The disposition of state-imposed fuel taxes also varies by state. A state may direct motor fuel tax revenue to numerous destinations, including its department of transportation, special road or bridge funds, county governments, or even state general funds.

Provisions Governing the Disposition of State Motor Fuel Tax Receipts
(FHWA Table MF-106)

States charge licensing fees to wholesalers and retailers - and in some cases certain users-of motor fuel, although for the most part, the revenue from these fees is used to defray the cost of regulating the distribution of motor fuel and allied products. Some states also levy an inspection fee on liquid fuels.

State Licenses and Fees Imposed on Wholesale Distributors of Motor Fuel
(FHWA Table MF-107)

State Licenses and Fees Imposed on Retail Dealers of Motor Fuel
(FHWA Table MF-108)

State Licenses and Fees Imposed on Users of Motor Fuel
(FHWA Table MF-109)

State Liquid-Fuels Inspection Fees
(FHWA Table MF-110)


Highway Taxes and Fees 2008: How They Are Collected and Distributed
This publication presents tabular information on state and Federal laws that provide for the taxation of motor fuels, motor vehicles, motor carriers, and licensed drivers, and the distribution of revenues from these highway taxes and fees. Also included are tables that show the use of other state taxes for highways and the involvement of Federal agencies and Federal funds in highway activities. The information presented is based on data obtained from state authorities and the laws of the various states.

Highway Statistics (published annually)
These publications are prepared by the FHWA Office of Highway Policy Information presenting and analyzing statistics of general interest on motor fuel, motor vehicles, driver licensing, highway-user taxation, state highway finance, highway mileage, and Federal aid for highways. They also include highway finance data for municipalities, counties, townships, and other units of local government.