Extras on Excise: States are Smitten for Fuel Tax Revenue


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Valentine’s Day is an occasion where many people spend on cards, gifts, candy, and maybe an evening out with someone special. We are aware of the price tag cost to indulge in these treats, but taxpayers may be surprised by how much they’re spending in fuel to go out and acquire said items. Fuel taxes have increased in several states this year, and states love the extra revenue they generate. But higher fuel taxes mean higher gas prices, so taxpayers may not be feeling the love when fueling up at the pumps.

We’ve summarized some of the notable changes that are impacting fuel taxes in 2018.

California

California taxpayers have had time to get used to increased rates that became effective Nov. 1, 2017. Legislative changes earlier in 2017 added $0.12 to the gasoline tax, bringing the total excise tax to $0.417 from $0.297 per gallon; $0.20 was added to the diesel fuel tax, raising it to $0.36 from $0.16 per gallon. 

Florida

Florida’s annual adjustment of the fuel sales tax applies to gasoline and diesel fuels. Effective Jan. 1, 2018, $0.003 was added to increase the tax rate from $0.174 to $0.177 per gallon.    

Georgia

Georgia also adjusts its motor fuel taxes annually. Effective Jan. 1, 2018, the gasoline tax added $0.005, increasing the tax from $0.263 to $0.268 per gallon; the diesel tax added $0.006, increasing the tax from $0.294 to $0.300 per gallon.

Montana

Montana’s taxes on gasoline and diesel fuel will see fluctuations through taxable year 2023. Effective Jan. 1, 2018, the gasoline tax increased $0.045 from $0.27 to $0.315 per gallon, and the diesel tax increased $0.015 from $0.2775 to $0.2925 per gallon.

Nebraska

Nebraska motor fuel taxes are adjusted semi-annually on Jan. 1 and July 1 each year. From Jan. 1, 2018, through June 30, 2018, the motor fuel excise tax rate for gasoline and diesel is $0.284 per gallon—a $0.014 increase from the previous rate of $0.270 per gallon. 

North Carolina

North Carolina’s motor fuel tax rate is determined annually. Effective Jan. 1, 2018, $0.008 was added to increase the tax on gasoline and diesel from $0.343 to $0.351 per gallon.

Pennsylvania

Straying from the pack, Pennsylvania decreased its oil company franchise tax rate for liquid fuel for taxable year 2018. The taxes on gasoline and diesel fuels had a $0.006 reduction that lowered the tax rates from $0.582 to $0.576 per gallon for gasoline, and from $0.747 to $0.741 per gallon for diesel fuel.  

South Carolina

While South Carolina’s motor fuel tax change has yet to take effect this year, taxpayers can prepare for an upcoming $0.02 increase, which is part of a series of increases taking place through 2022. The tax rate will change from $0.18 to $0.20 per gallon on July 1, 2018.

Tennessee

Tennessee fuel tax rates will also be gradually increasing over a three-year period, with new rates becoming effective July 1 of each year through 2019. On July 1, 2018, $0.01 will be added to the gasoline tax, increasing it from $0.24 to $0.25 per gallon, and $0.03 will be added to the diesel tax, increasing it from $0.21 to $0.24 per gallon. 

Fuel taxes are a consistent generator of state revenue, and states depend on the revenue for infrastructure funding. But with the introduction of electric vehicles and ongoing improvements to fuel efficiency for traditional vehicles, states may also be considering other methods of funding infrastructure projects that won’t rely so heavily on gas tax revenues. Proposals for increasing the federal gas tax have also been discussed in relation to funding infrastructure projects, as discussed in a recent Tax Foundation article. And the release of the White House’s infrastructure plan may bring gas taxes even more into the national spotlight.            

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Are higher motor fuel taxes the best way to raise state revenue and fund infrastructure?

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