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Variable-Rate State Motor Fuel Taxes
This page contains the latest information on variable-rate state motor fuel taxes. A map is available as well as a chart with information on each state’s gas tax and fees.
Variable-Rate State Gas Taxes Report (updated Aug. 2017)
This document provides general information on some of the variable rate strategies states are using to fund transportation investments.
A variable-rate gasoline tax is a tax which adjusts the cents-per-gallon charge at the pump based off of the wholesale price of gasoline, general economic inflation, or a combination of the two. A variable rate is an alternative to a flat excise tax on gasoline, which charges a fixed cents-per-gallon amount on fuel purchases. As a fixed-rate tax, a flat excise tax on gasoline does not respond to external economic factors, such as the rising cost of construction due to inflation.
A variable-rate state gas tax can be implemented in several ways. Some states determine the state gas tax by charging a percentage of the gasoline price at the wholesale level. Several states charge a combination of this percentage-based tax in addition to a flat excise tax on gasoline. Other states consult direct measures of inflation to determine the gas tax, such as the Consumer Price Index (CPI). All of these states recalculate the amount charged by the tax on a regular basis to accommodate any economic changes.
To ensure that transportation infrastructure supported by the state gas tax is adequately funded, 20 states and the District of Columbia have instituted a variable component to their gas tax.
Five of those states—Connecticut, New York, Utah, Vermont and West Virginia—have a flat excise tax on motor fuel and an additional percentage-based tax on the wholesale price of gasoline. Three states—Kentucky, Pennsylvania, and Virginia—determine their gasoline prices solely by a percentage of the wholesale price of gas. Five states—California (beginning Jan. 2019), Florida, Indiana (ending 2024), Michigan (beginning Jan. 2022), and Rhode Island—determine gas prices by consulting the CPI for economic changes. Four states— Georgia, Maryland, Nebraska, and North Carolina— use multiple factors to calculate their gas tax.
Several other states consider additional components when determining the state gas tax, such as:
- In addition to a tax on the price of gasoline, Nebraska’s legislature also has the power to recalculate the state motor fuel tax in order to sufficiently make payments on the state’s highway improvement bonds.
- Hawaii and Illinois charge a general state sales and use tax, in addition to a flat excise tax on gasoline. Indiana and Michigan also levy the state sales tax on fuel purchases, in addition to another variable-rate component. State sales taxes may not be utilized for transportation purposes, but can impact the price of gasoline at the pump.
- Some states also have a petroleum gross receipts tax, imposed on either the sale of petroleum products or the gross receipts of the petroleum company. New Jersey charges a 12.85 percent tax, on the first sale of gasoline, liquified petroleum and diesel within the state. The tax is charged as 22.6 cents-per-gallon, but can be adjusted by the state
Read the report for in-depth information on how each state determines it’s variable-rate state gas tax.