Regan Brown
The fuel tax in Illinois is a combination of motor fuel taxes and local and state sales tax. The sales tax on motor fuels is prepaid by fuel retailers and is calculated by multiplying the average selling price per gallon of fuel sold in the state over the previous six months by 6.25%. The Illinois Motor Fuel Use Tax is comprised of two parts, Part A and Part B. Part A imposes a tax per gallon on all motor fuel used in motor vehicles operating on Illinois public highways and in recreational watercraft. The Part B rate is established by the Department on January 1 of each year and is calculated using the average selling price per gallon of motor fuel sold in Illinois during the previous 12 months, multiplied by 6.25%.
| Characteristics | Values |
|---|---|
| Motor Fuel Use Tax | Comprised of Part A and Part B |
| Part A | Imposed per gallon on all motor fuel used in motor vehicles operating on Illinois public highways and in recreational watercraft operating on Illinois waters |
| Part B | Calculated using the average selling price per gallon of motor fuel sold in Illinois during the previous 12 months, then multiplying it by 6.25% to determine the cents per gallon rate |
| Sales Tax on Motor Fuels | Paid by each motor fuel retailer when purchasing fuel; the rate is established by the Illinois Department of Revenue on January 1 and July 1 of each year |
| Total Sales Tax | 6.25% |
| Chicago Residents' Sales Tax Rate | 10.25% |
| Use of Motor Fuel Tax Revenue | Transferred to state construction funds, municipalities, town and road districts, and counties for local road construction projects |
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What You'll Learn
Illinois' Motor Fuel Use Tax
The Illinois Motor Fuel Use Tax is comprised of two parts, Part A and Part B. This tax is reported and paid by licensees under the International Fuel Tax Agreement (IFTA). The Part A rate is established by Section 2 of the Motor Fuel Tax Law, which imposes the tax per gallon on all motor fuel used in motor vehicles operating on Illinois public highways and in recreational watercraft operating on Illinois waters. The Illinois Department of Revenue is required to establish the Part B rate, which is set on January 1 of each year. It is calculated by taking the average selling price per gallon of motor fuel sold in Illinois during the previous 12 months and multiplying it by 6.25% to determine the cents per gallon rate.
The Motor Fuel Use Tax is a significant source of revenue for the state, with the funds deposited into the Motor Fuel Tax Fund being transferred to various transportation-related funds, such as the Motor Fuel Tax - Municipalities Fund, the Motor Fuel Tax Fund - Town and Road Districts, and the Motor Fuel Tax Fund - Counties. These funds are then used for local road construction projects. In recent years, there have been efforts to safeguard the Road Fund from diversions to the General Revenue Fund, with an amendment to the state constitution passed by Illinois voters in 2016 prohibiting revenues from the Motor Fuel Tax from being used for non-transportation purposes.
In addition to the Motor Fuel Use Tax, residents of Illinois also pay a combination of local and state sales taxes when purchasing gasoline. These sales taxes are based on the purchase price, so as gas prices fluctuate, the sales tax revenues also vary. For example, Chicago residents pay sales taxes to the city, county, Regional Transportation Authority (RTA), and the state, resulting in a combined sales tax rate of 10.25%.
The total tax on gasoline in Illinois includes state and federal taxes, associated fees, and sales taxes. As of 2022, the state tax on motor fuels was 19 cents per gallon, while the federal tax was 18.4 cents per gallon. These taxes, along with the sales taxes, contribute to funding the state's infrastructure needs, particularly for maintaining and improving roads and bridges.
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Part A and Part B rates
The Illinois Motor Fuel Use Tax is comprised of two parts: Part A and Part B. This tax is reported and paid by licensees under the International Fuel Tax Agreement (IFTA). The Part A rate is established by Section 2 of the Motor Fuel Tax Law, which imposes a tax per gallon on all motor fuel used in motor vehicles operating on Illinois public highways and in recreational watercraft operating on Illinois waters. The Part B rate is determined by the Illinois Department of Revenue (IDOR) and is applied to diesel fuel, gasoline, gasohol, liquefied petroleum gas (LPG), compressed natural gas (CNG), and liquefied natural gas (LNG).
From January 1, 2024, to June 30, 2024, the Part B rates for these fuels were specified and available on the tax.illinois.gov website. The rates were provided in cents per gallon, DGE1, or GGE2. DGE stands for diesel gallon equivalent, and GGE stands for gasoline gallon equivalent.
Effective July 1, 2024, through December 31, 2024, the Part A rates for motor fuel used in motor vehicles and recreational watercraft in Illinois were updated. These rates were specified in cents per gallon, DGE1, or GGE2. The Part B rates for this period were also updated and available on the official Illinois tax website.
Looking ahead, the Illinois Department of Revenue (IDOR) will establish the Part B rate for the period of July 1, 2025, through December 31, 2025. This rate will be determined using the average selling price per gallon of motor fuel sold in Illinois during the previous 12 months, multiplied by 6.25%. The resulting Part B rate will be provided in cents per gallon, DGE1, or GGE2.
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Sales tax on motor fuels
In Illinois, the Motor Fuel Use Tax is made up of two parts: Part A and Part B. Part A of the Motor Fuel Tax Law imposes a tax per gallon on all motor fuel used in motor vehicles operating on Illinois public highways and in recreational watercraft operating on Illinois waters. The Illinois Department of Revenue determines the Part B rate of the Motor Fuel Use Tax for diesel fuel, gasoline, gasohol, liquefied petroleum gas, compressed natural gas, and liquefied natural gas. This rate is established on January 1 of each year and is calculated by multiplying the average selling price per gallon of motor fuel sold in Illinois during the previous 12 months by 6.25%.
The sales tax on motor fuels is prepaid by each motor fuel retailer and is calculated as a cents-per-gallon rate. This rate is set by the Illinois Department of Revenue on January 1 and July 1 of each year. The rate is determined by multiplying the average selling price per gallon of motor fuel sold in the state during the previous six months by 6.25%.
In addition to motor fuel taxes, Illinois residents also pay a combination of local and state sales taxes when purchasing gasoline. These sales taxes are based on the purchase price, so as gas prices fluctuate, so do sales tax revenues. For example, Chicago residents pay sales taxes to the city, county, Regional Transportation Authority (RTA), and state, resulting in a combined sales tax rate of 10.25%.
Revenues from the 6.25% sales tax on motor fuels will gradually shift towards funding transportation over a five-year period starting in July 2021. This redistribution will occur in 1% increments up to 5%, ensuring that funds collected from the gas tax are used to maintain and improve the state's transportation infrastructure.
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Chicago's combined sales tax rate
The Motor Fuel Use Tax in Illinois is comprised of two parts: Part A and Part B. The Part A rate is established by Section 2 of the Motor Fuel Tax Law, which imposes a tax per gallon on all motor fuel used in motor vehicles operating on Illinois public highways and in recreational watercraft operating on Illinois waters. The Part B rate is determined by the average selling price per gallon of motor fuel sold in Illinois during the previous 12 months, multiplied by 6.25%.
Now, onto Chicago's sales tax rate:
The minimum combined sales tax rate for Chicago, Illinois, is 10.25%. This is the total of state, county, and city sales tax rates. The Illinois sales tax rate is 6.25%, the Cook County sales tax rate is 1.75%, and the Chicago sales tax rate is 1.25%. The city of Chicago also levies a special local sales tax to fund its public transportation system. As a result, Chicago's sales tax rate is higher than most other regions in Illinois.
Chicago is the only place in Illinois that taxes SaaS and cloud-based services, imposing a 9% Personal Property Lease Transaction Tax on these products. This local tax is often overlooked because it is not technically a sales tax. Additionally, the Chicago tax rate for online streaming content is 10.25%.
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Transportation funding
In addition to the Motor Fuel Tax, Illinois residents also pay a combination of local and state sales taxes when purchasing fuel. These sales taxes are based on the purchase price, so they fluctuate with changes in fuel prices. For instance, Chicago residents pay a combined sales tax rate of 10.25% to various levels of government, contributing to transportation funding.
The Illinois Economic Policy Institute estimates that $6.8 billion in transportation funds were diverted by the state legislature between FY02 and FY15 to cover budget deficits in non-transportation areas. To address this issue, Illinois voters passed a Constitutional Amendment in 2016 to safeguard the Road Fund from such diversions. This amendment ensures that revenues from the Motor Fuel Tax are exclusively dedicated to transportation costs, including local road construction projects.
Despite these measures, challenges remain in adequately funding Illinois' transportation network. The Illinois Road and Transportation Builders Association highlights the need for new or increased revenue sources to maintain and improve roads and bridges. The association's report estimates that all levels of government would need to spend $105 billion annually to effectively address these infrastructure needs. With the gas tax intended to function as a user tax, where revenues are reinvested into the road network, finding sustainable funding solutions is crucial for the state's transportation future.
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Frequently asked questions
The fuel tax rate in Illinois is calculated by the Illinois Department of Revenue on January 1 and July 1 of each year. The rate is determined by multiplying the average selling price per gallon of fuel sold in the state over the previous 6 or 12 months by 6.25%.
The fuel tax revenues are deposited into the Motor Fuel Tax Fund and then transferred to various transportation-related funds, including state construction funds, municipalities, town and road districts, and counties. An amendment passed in 2016 prohibits these revenues from being used for anything other than transportation costs.
In addition to the fuel tax, residents pay a combination of local and state sales taxes when purchasing fuel. The total tax on fuel in Illinois is thus a combination of the fuel tax rate and the sales tax rate.
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