Fuel is taxed at the federal level and again by every state, which is why the price at the pump varies so much across short distances.
The layers are not the whole story. Transport distance, regional fuel requirements and local competition all move the price too, and tax is rarely the largest component even where it is the most discussed.
This covers what the federal element is and what it funds, how state charges stack on top, why prices differ between places, and the relief available to businesses using fuel for purposes that were never intended to fund highways.
The Federal Gasoline Tax: 18.4 Cents Per Gallon
The federal excise tax on gasoline is 18.4 cents per gallon. This rate has not changed since 1993, making it one of the least-changed tax rates in U.S. history. For comparison, inflation since 1993 means the real value of this tax has declined significantly.
Comparing the pump price between two places compares several things at once, and tax is rarely the largest of them. Where a business uses fuel for a purpose that was never intended to fund highways, the relief exists but it operates through a claim and it needs records.
Anu Gupta, CA, EA, B.Tech · LinkedInFederal Fuel Tax Rates
| Fuel Type | Federal Excise Tax Rate |
|---|---|
| Gasoline | 18.4 cents per gallon |
| Diesel | 24.4 cents per gallon |
| Aviation gasoline (Avgas) | 19.4 cents per gallon |
| Jet fuel (kerosene) | 21.9 cents per gallon (commercial) |
| Compressed natural gas (CNG) | 18.3 cents per energy equivalent gallon |
| Propane (LPG) | 18.3 cents per energy equivalent gallon |
| Liquefied natural gas (LNG) | 24.3 cents per energy equivalent gallon |
Where the Money Goes: Highway Trust Fund
Federal gas tax revenues flow into the Highway Trust Fund (HTF), which finances:
- Federal highway construction and maintenance programs
- Mass transit programs (a portion of the HTF)
- Bridge repair and construction
- Safety programs
The HTF has faced recurring shortfalls because gas tax revenues have not kept pace with infrastructure spending needs, the flat per-gallon rate is not indexed to inflation or construction costs, and fuel efficiency improvements reduce consumption per mile driven.
State Gas Taxes: Vary Widely
In addition to the federal tax, every state levies its own gas tax. Total per-gallon taxes (federal + state) vary dramatically:
| State | Approximate Total Gas Tax (Federal + State) |
|---|---|
| California | ~68 cents/gallon (one of highest) |
| Illinois | ~57 cents/gallon |
| Pennsylvania | ~57 cents/gallon |
| Washington | ~53 cents/gallon |
| Florida | ~36 cents/gallon |
| Texas | ~38 cents/gallon |
| Alaska | ~26 cents/gallon (one of lowest) |
Gas Tax Credit for Non-Highway Use: Form 4136
If you use gasoline or diesel for purposes other than operating a vehicle on public highways, you may qualify for a federal fuel tax credit or refund:
- Off-highway business use: operating farm equipment, construction machinery, industrial equipment
- Farming: all farm uses qualify
- Commercial fishing vessels
- Non-commercial aircraft (general aviation, partial credit)
- School buses and certain transit vehicles
- Claim on: Form 4136 (Credit for Federal Tax Paid on Fuels), filed with your income tax return. Alternative: Form 8849 for a refund without filing a tax return (for larger amounts).
- Pro Tip: Farmers and contractors who use significant fuel off-highway often miss this credit. Keep records of gallons used for non-highway business purposes throughout the year.
Gas Tax and Electric Vehicles: Policy Debate
EVs pay no gas tax, contributing nothing to the Highway Trust Fund despite using roads. Several states have responded by imposing annual EV registration fees. At the federal level, there have been proposals for:
- Per-mile charge (vehicle miles traveled / VMT tax)
- Increased EV registration fees
- Expanding the fuel tax to include electricity used for vehicle charging
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Frequently Asked Questions
Has the federal gas tax ever changed?
The federal gas tax was last changed in 1993, when it was raised to the current 18.4 cents/gallon. Multiple proposals to raise it (or index it to inflation) have been discussed but not enacted.
Do states tax gas on top of the federal tax?
Yes. Every state levies its own gasoline tax on top of the 18.4 cent federal tax. Total pump taxes vary from about 26 cents/gallon in Alaska to nearly 68 cents/gallon in California.
Who pays federal gas tax?
The tax is collected at the point of production or importation (refiners and importers), but the economic burden is ultimately passed through to consumers at the pump as part of the price per gallon.
Why does the price at the pump vary so much between places?
Because several layers stack. There is a federal element, a state element that differs widely, and in some places a local one, alongside costs that have nothing to do with tax at all: transport distance, regional fuel specifications, and local competition. Comparing the pump price between two states therefore compares several things at once, and the tax element is rarely the largest of them.
Who can reclaim any of this?
Businesses using fuel for purposes that were never intended to fund highways, such as certain off-road, agricultural and marine uses. The relief operates through a claim rather than automatically, and it requires records showing the quantity used and the qualifying purpose. Because the qualifying uses and the procedure are specific, take them from the current instructions for the relevant form rather than from a general description.
Written by
Anu Gupta, CA, EA, B.Tech
Anu works with US businesses on tax and entity questions at Profitjets, from choosing a structure to the filings that follow it. She writes about the decisions owners make once and then live with for years. Connect on LinkedIn
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