Rajan Wilcox
The price of diesel fuel includes various taxes, such as federal excise tax, state and local taxes, and fees. In the United States, the federal excise tax on diesel fuel is 24.3 or 24.4 cents per gallon, while state and local taxes add, on average, an extra 35.89 cents, bringing the total US volume-weighted average diesel fuel tax to around 60 cents per gallon. However, diesel fuel tax rates can vary by state and are subject to various exemptions and surcharges based on usage and region. For example, biodiesel, waste vegetable oil, and straight vegetable oil are taxed at the same rate as diesel fuel, while dyed diesel, when used off-road, is taxed at the combined statewide sales tax rate plus applicable district taxes.
| Characteristics | Values |
|---|---|
| Federal excise tax on gasoline | 18.3 cents per gallon (some sources state 18.4 cents) |
| Federal excise tax on diesel fuel | 24.3 cents per gallon (some sources state 24.4 cents) |
| Leaking Underground Storage Tank fee | 0.1 cents per gallon for both gasoline and diesel |
| State and local taxes and fees for gasoline | 34.24 cents |
| State and local taxes and fees for diesel | 35.89 cents |
| Total US volume-weighted average fuel tax for gasoline | 52.64 cents per gallon |
| Total US volume-weighted average fuel tax for diesel | 60.29 cents per gallon |
| First US state to tax fuel | Oregon, on February 25, 1919 |
| First federal gasoline tax | June 6, 1932, with the enactment of the Revenue Act of 1932 |
| Aviation gasoline tax | $0.194 per gallon |
| Surtax on aviation gasoline used in a fractional ownership program aircraft | $0.141 per gallon |
| Kerosene tax for use in aviation | $0.244 per gallon unless a reduced rate applies |
| Kerosene tax for non-commercial aviation when removed directly from an on-airport terminal | $0.219 |
| Biodiesel, waste vegetable oil, and straight vegetable oil tax | Same rate as diesel fuel |
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What You'll Learn
- Diesel fuel tax rates vary across US states
- The US federal diesel tax is 24.3/24.4 cents per gallon
- State and local taxes add an average of 35.89 cents per gallon
- Diesel tax hasn't increased since 1993 and isn't indexed to inflation
- Biodiesel, waste vegetable oil, and straight vegetable oil are taxed the same
Diesel fuel tax rates vary across US states
The tax rate on diesel fuel varies across the United States. The federal excise tax on diesel fuel is 24.3 or 24.4 cents per gallon. However, the price advertised at pumps and stations includes all taxes, meaning state and local taxes are added to the federal rate. As of April 2019, state and local taxes added an average of 35.89 cents to the price of diesel fuel, bringing the total US volume-weighted average fuel tax to 60.29 cents per gallon.
The variance in state and local taxes means that diesel fuel tax rates differ across the US. The American Petroleum Institute calculates the average tax for each state by using a weighted average of local taxes by municipality population. This means that states with higher populations and higher taxes influence the national average more than less populated states with lower taxes. As a result, the national average tends to be higher than the tax rate in most states.
The first state to tax fuel was Oregon, which introduced a 1 cent per gallon tax in 1919. Over the following decade, all US states and the District of Columbia introduced a gasoline tax. By 1939, the average state fuel tax had increased to 3.8 cents per gallon. Since then, state fuel taxes have undergone numerous revisions, with some states collecting full or partial sales tax in addition to the excise tax.
The tax rate on diesel fuel is also influenced by the type of diesel fuel and its intended use. For example, biodiesel, waste vegetable oil, and straight vegetable oil are taxed at the same rate as diesel fuel. Dyed Diesel, which is used off-road, is taxed at the combined statewide sales tax rate plus applicable district taxes. However, it is exempt from excise taxes unless used on highways.
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The US federal diesel tax is 24.3/24.4 cents per gallon
The US federal diesel tax is currently 24.3/24.4 cents per gallon. This rate has not changed since 1993 and is not indexed to inflation, which increased by 111% from October 1993 to December 2023. The federal excise tax on gasoline is lower, at 18.3/18.4 cents per gallon.
In addition to the federal tax, state and local taxes also apply to diesel fuel. These vary by state and can include excise taxes, environmental taxes, special taxes, and inspection fees. On average, state and local taxes add about 35.89 cents to the price of diesel fuel, bringing the total US volume-weighted average fuel tax to around 60.29 cents per gallon for diesel.
The first US state to tax fuel was Oregon, which introduced a 1-cent per gallon tax in 1919. Over the following decade, all of the US states, along with the District of Columbia, implemented a gasoline tax. By 1939, the average state fuel tax had risen to 3.8 cents per gallon. The federal government created its first gasoline tax in 1932, taxing gasoline at 1 cent per gallon.
Today, the proceeds from diesel and gasoline taxes partly support the Highway Trust Fund, with about 60% of the funds going towards highway and bridge construction. The remaining 40% is allocated to earmarked programs, including a small portion for mass transit projects. While federal fuel taxes brought in $36.4 billion in Fiscal Year 2016, only $10.3 billion came from diesel and special motor fuel taxes.
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State and local taxes add an average of 35.89 cents per gallon
In the United States, state and local taxes add an average of 35.89 cents to the cost of a gallon of diesel fuel, as of April 2019. This is in addition to the federal excise tax of 24.4 cents per gallon (which was 24.3 cents as of August 2024). This brings the total US volume-weighted average fuel tax on diesel to 60.29 cents per gallon.
The first state to tax fuel was Oregon, which introduced a 1 cent per gallon tax in 1919. In the following decade, all of the US states (then 48 in number), along with the District of Columbia, introduced a gasoline tax. By 1939, many states levied an average fuel tax of 3.8 cents per gallon. Since then, state fuel taxes have undergone numerous revisions. The federal tax was last raised on October 1, 1993, and is not indexed to inflation, which had increased by 111% from October 1993 to December 2023.
The American Petroleum Institute calculates the national average by weighting it according to fuel volume sold in each state. This means that the national average is influenced by the fact that many states with the highest taxes also have higher populations. As a result, more states have below-average taxes than above-average taxes.
In addition to excise taxes, state taxes include rates of general application, such as environmental taxes, special taxes, and inspection fees. They may also include sales tax, as several states collect full or partial sales tax in addition to the excise tax. For example, in California, dyed diesel is taxed at the combined statewide sales tax rate when used off-road, plus applicable district taxes.
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Diesel tax hasn't increased since 1993 and isn't indexed to inflation
In the United States, the federal excise tax on diesel fuel is currently 24.4 cents per gallon. This tax was last raised in October 1993 and has remained unchanged since then. While the tax rate has been static for almost three decades, the cost of living has increased significantly during this period due to inflation. As a result, the purchasing power of the fixed-rate diesel tax has decreased over time.
The lack of adjustment to the diesel tax rate since 1993 means that the tax has not kept pace with inflation. From October 1993 to December 2023, inflation increased by 111%. This has resulted in a significant decline in the real value of the diesel tax. When the tax rate was set in 1993, it provided a certain amount of revenue for the government. However, due to inflation, the same tax rate today generates less real money than it did originally.
The impact of inflation on the diesel tax highlights the need for periodic reviews and adjustments to tax rates. Without indexing the tax to inflation, the government collects less revenue in real terms over time. This can create challenges for funding infrastructure projects and other initiatives supported by tax revenues. The National Surface Transportation Infrastructure Financing Commission recognized this issue and recommended an increase in the diesel tax to offset the loss of purchasing power.
However, despite the erosion of the diesel tax's value due to inflation, it continues to be a significant source of revenue for the government. In Fiscal Year 2016, federal fuel taxes raised $36.4 billion, with $10.3 billion coming from diesel and special motor fuel taxes. Additionally, the diesel tax plays a crucial role in funding highway construction and maintenance through the Highway Trust Fund. The user-pays principle justifies the allocation of tax revenues to highway infrastructure, as those who drive benefit directly from well-maintained roads.
While the diesel tax hasn't increased since 1993 and isn't indexed to inflation, there are ongoing discussions and proposals for potential adjustments. Policymakers and advisors recognize the need to adapt to changing economic conditions and consider the impact of inflation on the effectiveness of tax policies. The decision to adjust the diesel tax rate involves complex considerations, balancing the need for revenue, the impact on consumers, and the overall economic landscape.
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Biodiesel, waste vegetable oil, and straight vegetable oil are taxed the same
In California, biofuels are considered diesel fuel and are taxed at the same rate as diesel fuel. This includes biodiesel, waste vegetable oil (WVO), and straight vegetable oil (SVO). The taxation of biofuels is governed by the California Diesel Fuel Tax Law and is administered by the California Department of Tax and Fee Administration (CDTFA).
Biodiesel is a popular biofuel that is made from vegetable oils or animal fats. It can be blended with petroleum diesel fuel, but it can also be used on its own. Renewable diesel, which is made from similar sources as biodiesel, differs in its processing. It is produced similarly to petroleum diesel, making it chemically identical, and does not contain oxygen. Raw vegetable oil, on the other hand, is not the same as biodiesel. When sold for or used in powering a diesel-powered highway vehicle, raw vegetable oil must be reported to the CDTFA, and the diesel fuel tax must be paid.
In California, if you are producing, selling, or importing biofuels, you are required to register with the CDTFA. Additionally, if you are blending biofuels with petroleum diesel, you must also register. The tax on biofuels is imposed when they are imported into California, removed from a California biofuel production facility, or blended with tax-paid diesel fuel. If you are producing your own biofuels, the tax is imposed when you use the fuel in your vehicle or sell it to another person for use in a diesel-powered highway vehicle.
The tax rates for diesel fuel in California include state and local taxes and fees. As of April 2019, the average total tax for diesel fuel in the United States was 60.29 cents per gallon, including the federal excise tax of 24.4 cents per gallon. However, it is important to note that these rates may have changed since then as fuel taxes have undergone revisions over time.
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Frequently asked questions
The federal excise tax on diesel fuel in the US is 24.3 or 24.4 cents per gallon. State and local taxes add, on average, 35.89 cents to diesel, for a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel.
The amount of tax you pay depends on the state and locality. Some states collect full or partial sales tax in addition to the excise tax.
Yes, unlike most other goods in the US, the price advertised on pumps and stations' signs includes all taxes.
About 60% of federal gas taxes are used for highway and bridge construction. The remaining 40% goes to earmarked programs, including a minority for mass transit projects.
