Is Gas Taxed? Federal, State, and Local Fuel Taxes

Yes, gasoline is taxed — and it’s taxed several times over. Every gallon sold in the United States carries a federal excise tax of 18.3 cents plus a 0.1-cent environmental fee, for a combined 18.4 cents that has stayed flat since 1993. State excise taxes add anywhere from under 10 cents to more than 60 cents per gallon on top of that, and some counties, cities, and states pile on further surcharges, sales taxes, and inspection fees. What you pay at the pump is a bundle of federal, state, and often local taxes baked into a single price.

The Federal Gasoline Tax

Under 26 U.S.C. § 4081, the federal excise on gasoline is 18.3 cents per gallon. Diesel and kerosene are taxed at 24.3 cents. A separate 0.1-cent-per-gallon Leaking Underground Storage Tank (LUST) fee applies to all three, bringing the effective federal charge to 18.4 cents for gasoline and 24.4 cents for diesel.¹

This is a flat per-gallon charge. It does not rise or fall with the pump price, and you won’t see it as a separate line on your receipt. The tax is collected further up the supply chain — when fuel leaves a refinery or terminal — and then rolled into the retail price by the time the tanker reaches a station.²

Congress last set the 18.3-cent rate in 1993 and has not adjusted it since. Because it isn’t indexed to inflation, its real value has dropped over three decades. The money flows into the Highway Trust Fund, which pays for interstate highway construction, bridge work, and other federal transportation projects.³

State Excise Taxes on Fuel

Every state adds its own excise tax on top of the federal charge. Rates run from under 10 cents per gallon in the lowest-tax states to over 60 cents in the highest.⁴ Most state fuel taxes, like the federal one, are a flat per-gallon amount that stays the same regardless of the pump price. Revenue typically goes to state highways, bridges, and transportation projects.

A growing number of states use variable-rate mechanisms that adjust the tax automatically each year. Some tie the rate to the Consumer Price Index, others to construction cost indexes or population changes. A few states recalculate twice a year. Several cap the annual increase so the rate can’t spike in a single cycle. These automatic adjustments preserve the tax’s purchasing power without a fresh legislative vote every session.

Because rates differ so widely, prices can jump noticeably the moment you cross a state line, even when the underlying cost of crude is identical on both sides.

Local and County Fuel Surcharges

In some parts of the country, counties and cities layer their own per-gallon fuel taxes on top of the state charge. These fund things state revenue doesn’t cover — city street repairs, bus systems, light-rail expansions. That’s often why gas costs several cents more per gallon in a major metro area than in a nearby rural town.

Not every local government has this power. A county or city can only impose a fuel tax if its state legislature has granted the authority.⁴ Where it exists, the tax may be approved by voter referendum or a council vote. The result is a patchwork where total rates can shift between adjacent zip codes.

Sales Tax and Environmental Fees

A handful of states apply their general sales tax to gasoline in addition to the excise tax. Unlike the flat per-gallon charges, a percentage-based sales tax rises and falls with the pump price, so drivers in those states feel price spikes more sharply.

The 0.1-cent federal LUST fee mentioned earlier is built into every gallon of gasoline, diesel, and kerosene. It funds cleanup of contamination from leaking fuel storage tanks and is authorized through September 30, 2028.¹ Many states add their own environmental or petroleum inspection fees on top — small per-gallon charges that pay for tank monitoring, pump calibration, and fuel-quality testing. Individually they’re fractions of a cent, but they contribute to the total load on every gallon.

Can You Get Any of the Tax Back?

For most drivers, no. The federal fuel tax is collected at the refinery or terminal, so it applies to essentially all gasoline at first. Relief comes as a refund or credit after the fact, and only for qualifying uses.

The main category is off-highway business use: fuel burned in equipment that isn’t registered for road driving, such as farm tractors, construction machinery, commercial fishing boats, or stationary engines. State and local governments buying gasoline for official operations can also claim a refund.⁵

Personal driving doesn’t qualify. Gas used for commuting, errands, or ride-share work like Uber or Lyft is not eligible, even if you treat it as a business expense. Fuel for snowmobiles, lawn mowers, and chain saws is also excluded unless it’s used in a trade or business.⁶

Those who do qualify usually claim the credit annually by filing Form 4136 with their income tax return, reporting qualifying gallons and the type of use. Periodic refunds are available on Form 8849, and businesses that file excise returns can take a quarterly credit on Form 720. Records supporting the claim have to be kept for at least three years from the date the return is due or filed, whichever is later.⁶

What Electric Vehicle Drivers Pay Instead

Electric vehicles don’t buy gasoline, so their owners contribute nothing to the fuel-tax system that pays for road maintenance. States have started closing that gap directly. At least 41 states now charge a supplemental annual registration fee for fully electric vehicles, and roughly 34 charge one for plug-in hybrids as well.

Annual EV fees currently run from $50 to about $275 depending on the state, with scheduled increases pushing higher in some places. At least a dozen states index the fee to inflation. A few base part of the charge on vehicle weight, since heavier vehicles cause more road wear. Others let EV owners opt into a road-usage charge program that bills by the mile instead, with a cap on total annual cost. A small number of states have also begun taxing electricity delivered at public charging stations on a per-kilowatt-hour basis, mirroring the traditional per-gallon approach.

1
Office of the Law Revision Counsel. 26 USC 4081 – Imposition of Tax – Section: Leaking Underground Storage Tank Trust Fund Tax
2
Office of the Law Revision Counsel. 26 USC 4081 – Imposition of Tax
3
Office of the Law Revision Counsel. 26 USC 9503 – Highway Trust Fund
4
U.S. Energy Information Administration (EIA). How Much Tax Do We Pay on a Gallon of Gasoline and on a Gallon of Diesel Fuel?
5
Office of the Law Revision Counsel. 26 USC 6421 – Gasoline Used for Certain Nonhighway Purposes, Used by Local Transit Systems, or Sold for Certain Exempt Purposes
6
Internal Revenue Service. 2025 Instructions for Form 4136 and Schedule A