Katerina Swanson
Excise tax is an indirect tax imposed by the government on the sale of specific goods or services, such as fuel, tobacco, and alcohol. In the context of fuel, excise taxes are commonly applied to motor fuels, with the rate varying across different countries and even within different regions of the same country. For instance, in the United States, the federal excise tax on gasoline has been stable at 18.4 cents per gallon since 1993, while diesel fuel is taxed at a slightly higher rate of 24.3 cents per gallon. On the other hand, Australia's fuel excise tax has undergone adjustments over the years, with the rate as of February 1, 2022, being $0.442 per litre for both unleaded petrol and diesel fuel. Understanding excise taxes on fuel is essential for comprehending the overall cost of fuel and the distribution of tax revenues.
Excise Tax on Fuel
| Characteristics | Values |
|---|---|
| Type of Tax | Indirect tax |
| Who Pays | Businesses, which pass the cost to consumers |
| Taxed Goods | Motor fuel, tobacco, airline tickets, alcohol, health-related goods and services |
| How it's Charged | Ad valorem (percentage basis) or specific (cost charged by unit) |
| Federal Excise Tax on Gasoline | 18.3-18.4 cents per gallon |
| Federal Excise Tax on Diesel Fuel | 24.3 cents per gallon |
| Leaking Underground Storage Fee | 0.1 cents per gallon |
| Fuel Excise Tax in Australia | 38.6 cents per litre as of 2014 |
| Fuel Excise Tax in Australia (April 1 - October 1, 2022) | 22.1 cents per litre for all road fuels |
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What You'll Learn
Excise tax on gasoline
An excise tax is an indirect tax imposed by the government on the sale of a particular good or service. Excise taxes are usually imposed at the federal level, but they can also be applied by state and local governments. Excise taxes are typically paid by businesses, but they are passed on to consumers in the form of higher prices.
In the United States, motor fuel is one of the most common goods subject to excise taxes. The federal excise tax on gasoline has been stable at 18.4 cents per gallon since 1993. It is important to note that this tax is not indexed to inflation, which has increased significantly since 1993. The federal excise tax on diesel fuel is higher, at 24.3 or 24.4 cents per gallon.
In addition to federal excise taxes, state and local taxes and fees are also applied to gasoline and diesel fuel. As of April 2019, the average state and local taxes and fees added 34.24 cents to gasoline and 35.89 cents to diesel, resulting in a total US volume-weighted average fuel tax of 52.64 cents per gallon for gasoline and 60.29 cents per gallon for diesel. However, it is worth noting that some states exempt gasoline from general sales taxes.
The proceeds from excise taxes on gasoline and diesel fuel are used to fund infrastructure and transportation projects, such as highway and bridge construction. While the tax rates differ, they reflect factors like demand, production costs, and environmental regulations. Understanding these taxes is essential for businesses to make informed decisions.
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Excise tax on diesel fuel
Excise taxes are indirect taxes imposed by the government on the sale of specific goods or services. Excise taxes are usually imposed at the federal level, but they can also be applied by state and local governments. In the United States, excise taxes are commonly levied on goods such as motor fuel, tobacco, and airline tickets. These taxes are typically paid by businesses, but the cost is often passed on to consumers in the form of higher prices.
Federal excise taxes on motor fuels, including diesel fuel, are used to fund transportation-related projects and programs, such as the construction and maintenance of highways, bridges, and other infrastructure. The federal excise tax on diesel fuel is currently set at 24.3 or 24.4 cents per gallon, higher than the tax on gasoline, which is set at 18.3 or 18.4 cents per gallon. This difference in taxation reflects factors such as demand, production costs, and environmental regulations.
In addition to the federal excise tax, state excise taxes may also be imposed on diesel fuel. For example, in California, the state diesel fuel excise tax was 44.1 cents per gallon from July 1, 2023, to June 30, 2024. The total state and federal excise taxes on diesel fuel can vary from state to state and are relatively low compared to other industrialized countries.
It is important to note that there are exemptions and credits available for certain industries and uses. For instance, the off-road use exemption waives the excise tax if the fuel is used exclusively for off-road purposes, such as in construction and landscaping equipment. Additionally, the alternative fuel credit supports taxpayers who use alternative fuels, such as electricity, natural gas, or propane, although this credit is subject to certain conditions and may be temporary.
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Excise tax on aviation fuel
Excise taxes are indirect taxes imposed by governments on the sale of specific goods or services. Excise taxes are usually imposed at the federal level but can also be applied by state and local governments. In the United States, excise taxes are commonly levied on goods such as motor fuel, tobacco, and airline tickets.
Aviation fuel is subject to excise taxes in the United States. There are two main types of aviation fuel taxed under state laws: Aviation Gasoline (Avgas) and Jet Fuel. Avgas is used in smaller, propeller-driven aircraft, while Jet Fuel is used in turbo-propeller or jet engine aircraft. The excise tax rates for aviation fuel vary depending on the type of fuel and the intended use.
Aviation Gasoline (Avgas) is typically taxed at 19.4 cents per gallon, which includes the Leaking Underground Storage Tank (LUST) fund tax. This rate may include a 0.1 cent per gallon LUST tax. Certain exemptions apply, such as for foreign trade operations, commercial airlines, nonprofit educational organizations, aircraft museums, and U.S. military operations.
Jet Fuel is taxed at different rates depending on whether it is for commercial or noncommercial aviation. For noncommercial aviation, Jet Fuel is taxed at 21.9 cents per gallon, while for commercial aviation, it is taxed at 4.4 cents per gallon. These rates also include the LUST tax. Additionally, fuel used in qualifying fractional aircraft ownership programs may be subject to a fuel surtax of 14.1 cents per gallon, exempting them from the 7.5% tax and other Section 4261 taxes.
The aviation fuel excise tax serves several purposes. Firstly, it aims to reduce air travel by making it more expensive, which can help decrease air traffic and associated emissions. Secondly, the tax encourages the aviation industry to adopt cleaner technologies and invest in more sustainable practices to reduce their environmental impact.
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Excise tax on jet fuel
An excise tax is an indirect tax imposed by the government on the sale of specific goods or services. Excise taxes are usually imposed at the federal level but can also be applied by state and local governments. In the United States, excise taxes are commonly levied on goods such as motor fuel, tobacco, and airline tickets. These taxes are typically paid by businesses, which are then passed on to consumers in the form of higher prices.
When it comes to jet fuel, excise taxes are indeed applicable. The U.S. Energy Information Administration provides details on fuel taxes, including those for aviation gasoline and jet fuel. As of July 1, 2024, the federal excise tax rate for kerosene, which is commonly used as jet fuel, is $0.244 per gallon. This rate applies to kerosene removals when it is placed directly into the fuel tank of an aircraft.
It's important to note that there are different tax rates for kerosene used in aviation. For example, if a registered commercial aviation operator meets certain conditions, they may be liable for a tax rate of $0.044 per gallon. Additionally, there is a Leaking Underground Storage Tank (LUST) tax of $0.001 per gallon for kerosene used for nontaxable aviation purposes.
While the federal excise tax on jet fuel is significant, it is essential to consider that the total tax burden on jet fuel can vary. This is due to state and local tax regulations, which may impose additional excise taxes or other types of taxes related to jet fuel.
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Excise tax on fuel in Australia
In Australia, the main fuel tax is an excise tax, which is levied by the federal government. On top of this, a 10% goods and services tax (GST) is applied. As of 1 February 2022, the excise tax rates for commonly used fuels in Australia were as follows: $0.442 per litre on unleaded petrol fuel (including standard, blended (E10), and premium grades) and $0.442 per litre on diesel fuel. Petrol for use as fuel in aircraft is taxed at $0.03556 per litre.
The excise duty rates for fuel are indexed twice a year, on 1 February and 1 August, based on the upward movement of the consumer price index (CPI). The Australian Bureau of Statistics (ABS) is responsible for determining and publishing the CPI. The excise duty rates may also change due to other law changes.
In 2001, the Howard government adjusted the excise rates due to the introduction of the GST and stopped the automatic indexation of the fuel excise tax. However, indexation was reintroduced in 2014. The excise tax is not applied to aviation fuels and certain petroleum-based products.
The fuel excise tax contributes to general revenue, with a portion of it being allocated to road and transport projects. In the 2020-21 financial year, 69.9% of fuel excise revenue was reinvested in roads, the largest percentage in the last decade. There are also various grants and incentive schemes involving tax credits and rebates for businesses or industries that rely heavily on the use of fuels. During the COVID pandemic in 2022, the excise tax was briefly halved to help Australians deal with rising living costs.
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Frequently asked questions
An excise tax is an indirect tax charged by the government on the sale of a particular good or service.
The Federal Excise Tax for Gasoline has been 18.4 cents per gallon since 1993. Diesel fuel is taxed higher at 24.3 cents per gallon.
The excise tax on fuel in Australia was 38.6 cents per litre as of 2014. From April 1 to October 1, 2022, the federal budget lowered the excise tax on all road fuels to 22.1c per litre.
Fuel companies are sometimes transparent about the excise taxes they charge. Next time you fill up your tank, check the pump or your receipt to see if the cost of fuel is broken down into fuel cost and tax cost.
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