Mercedes Mullins
The tax on diesel fuel varies depending on the state and local taxes and fees. As of July 1, 2024, the federal excise tax on diesel fuel is 24.3 cents per gallon (or 24.4 cents, according to another source), which includes a Leaking Underground Storage Tank fee of 0.1 cents per gallon. State taxes can include excise taxes, environmental taxes, special taxes, and inspection fees, and some states collect full or partial sales tax in addition to the excise tax. The highest tax rate on diesel fuel is in Pennsylvania, at 74.1 cents per gallon, while Alaska has the lowest rate, at 8.95 cents per gallon.
Diesel Fuel Tax in the United States
| Characteristics | Values |
|---|---|
| Federal Excise Tax | 24.3 cents per gallon (as of July 1, 2024) or 24.4 cents per gallon (as of July 29, 2025) |
| Leaking Underground Storage Tank Fee | 0.1 cents per gallon |
| State Taxes | Vary by state, with the highest being Pennsylvania at $0.741/gallon and the lowest being Alaska at $0.0895/gallon |
| Local Taxes | May apply in addition to state taxes |
| Sales Tax | Varies by state; for example, Dyed Diesel is taxed at the combined statewide sales tax rate plus applicable district taxes when used off-road in California |
| Partial Exemption | Dyed Diesel (unless used on a highway) and aviation gasoline (when used to propel aircraft) |
| Surcharge | Aircraft Jet Fuel when used in a fractional ownership program |
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What You'll Learn
Federal tax on diesel fuel
The United States federal excise tax on diesel fuel is 24.4 cents per gallon. The federal tax was last raised on October 1, 1993, and has remained unchanged since then. Notably, it is not indexed to inflation, which increased by 111% from October 1993 to December 2023. This lack of adjustment for inflation has resulted in a significant decline in the purchasing power of the fixed-rate diesel tax.
In addition to the federal excise tax, state and local taxes and fees further impact the overall tax burden on diesel fuel. As of April 2019, these additional taxes and fees added an average of 35.89 cents per gallon to diesel fuel. Combining the federal and state taxes, the total US volume-weighted average fuel tax for diesel was 60.29 cents per gallon as of April 2019.
It is worth noting that the tax rates can vary across different states. The American Petroleum Institute calculates a weighted average of local taxes by considering the municipality population, resulting in an average tax for each state. However, states with higher populations tend to have higher taxes, influencing the national average.
The revenue generated from the federal diesel tax is allocated towards transportation infrastructure and related programs. According to a statement by then-Secretary of Transportation Mary Peters in 2007, approximately 60% of federal gas taxes are directed towards highway and bridge construction. The remaining 40% is allocated to earmarked programs, with a portion dedicated to mass transit projects.
While some critics argue that increases in diesel taxes may be necessary to fund transportation infrastructure adequately, others oppose such hikes, suggesting that the revenue is often diverted to unrelated government programs and debt servicing. Nonetheless, proponents of higher diesel taxes assert that increased fuel costs could lead to reduced consumption and a positive impact on the environment by decreasing America's dependence on foreign oil.
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State tax on diesel fuel
The state tax on diesel fuel in the United States varies across states and is subject to frequent revisions. As of July 1, 2024, the federal excise tax on diesel fuel is 24.3 cents per gallon, while state taxes include rates of general application such as excise taxes, environmental taxes, special taxes, and inspection fees. State taxes do not include county and local taxes.
The first state to tax fuel was Oregon, on February 25, 1919, with a 1 cent/gal tax. By 1939, the average state fuel tax was 3.8 cents/gal. Today, the state tax on diesel fuel varies across the country. For example, for the period between October 1, 2022, and September 30, 2023, Dyed Diesel in California was exempt from excise taxes unless used on a highway.
The American Petroleum Institute calculates a weighted average of local taxes by municipality population to determine an average tax for the entire state. This means that less populated states tend to have below-average taxes. While most states exempt gasoline from general sales taxes, some states collect full or partial sales tax in addition to the excise tax.
The proceeds from the federal excise tax on diesel fuel partly support the Highway Trust Fund, with about 60% of the funds going towards highway and bridge construction. Critics of gas tax increases argue that much of the revenue is diverted to other government programs. However, researchers have noted that these diversions occur in both directions, and the current gas taxes and "user fees" are insufficient to cover the full cost of road-related spending.
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Aviation fuel tax rates
As of July 1, 2024, the federal excise tax on diesel fuel in the United States is 24.3 cents per gallon, which includes a Leaking Underground Storage Tank fee of 0.1 cents per gallon. State taxes may also apply, and these vary but can include excise, environmental, special, and inspection fees.
Aviation gasoline (Avgas) is generally taxed at 19.4 cents per gallon, which includes the leaking underground storage fund tax (LUST). When used in a fractional ownership program aircraft, aviation gasoline is also subject to a surtax of 14.1 cents per gallon. However, when this surtax applies, the 7.5% tax and other Section 4261 taxes do not apply.
Kerosene used for jet fuel is generally taxed at 24.4 cents per gallon, but there is a reduced rate of 21.9 cents per gallon for non-commercial aviation and 4.4 cents per gallon for commercial aviation. These rates also include LUST.
Certain flights are not subject to federal fuel excise taxes, and some are only subject to the LUST at 0.1 cents per gallon.
At the state level, North Carolina, for example, imposes a 7% combined general rate of sales and use tax on the sale of aviation gasoline and jet fuel.
Additionally, as of October 1, 2022, through September 30, 2023, dyed diesel, which is typically used for non-highway purposes, is not subject to excise taxes unless used on highways.
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Jet fuel tax rates
In the United States, the federal excise tax on diesel fuel is 24.4 cents per gallon. This has not changed since 1 October 1993 and is not indexed to inflation. State and local taxes and fees add an average of 35.89 cents per gallon, bringing the total US volume-weighted average fuel tax to 60.29 cents per gallon for diesel.
The tax on aviation gasoline is $0.194 per gallon. When used in a fractional ownership program aircraft, gasoline is subject to a surtax of $0.141 per gallon. Kerosene for use in aviation (jet fuel) is generally taxed at $0.244 per gallon unless a reduced rate applies. For instance, kerosene placed directly into the fuel tank of an aircraft for non-commercial aviation is taxed at $0.219 per gallon.
The state with the highest tax rate on jet fuel is Washington, DC, at $0.235 per gallon. In contrast, Oklahoma has the lowest tax rate on jet fuel at $0.0008 per gallon. Gross receipts from the sale of jet fuel are subject to a 7% combined general rate of sales and use tax.
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Tax on Dyed Diesel
The tax on dyed diesel depends on the state and its usage. In California, for instance, dyed diesel is not subject to excise taxes unless used on a highway. When used off-road, it is taxed at the combined statewide sales tax rate, plus applicable district taxes. A partial exemption certificate provided in Regulation 1598, Motor Vehicle and Aircraft Fuels, should be provided for this rate to apply. Dyed diesel purchased by qualified farming businesses is partially exempt and is taxed at 2.25%, plus applicable district taxes.
In Texas, a tax of twenty cents ($0.20) per gallon is levied on diesel fuel removed from a terminal, imported, blended, sold to an unauthorized person, or for any other taxable use not exempted by law. Suppliers and importers are eligible for a 2% discount if the tax is paid by the due date, while distributors and importers can claim a 1.75% discount.
According to the Diesel Fuel Tax Law, sellers of dyed diesel fuel must inform buyers that it is for non-taxable use only. The notice must be posted on any retail pump where dyed diesel is dispensed and included on all shipping papers, bills of lading, and invoices. Failure to provide the required notice may result in a penalty of $10 for every gallon sold without proper notice or $1,000 multiplied by the total number of violations, whichever amount is greater.
The federal excise tax on diesel fuel in the United States is generally 24.4 cents per gallon, with state and local taxes adding an average of 35.89 cents per gallon, resulting in a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel as of April 2019. However, it's important to note that these rates may have changed since then and can vary by state.
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Frequently asked questions
As of July 1, 2024, the federal excise tax on diesel fuel is 24.3 or 24.4 cents per gallon. State and local taxes vary, with the highest being Pennsylvania at $0.741/gallon.
The proceeds from diesel fuel taxes partly support the Highway Trust Fund and transportation-related programs, such as improving infrastructure.
Yes, Dyed Diesel is not subject to excise taxes unless it is used on a highway. Additionally, sales tax does not apply to aviation gasoline used to propel aircraft, except for Aircraft Jet Fuel.
Diesel fuel taxes are typically higher than gasoline taxes. For example, as of July 1, 2024, the federal excise tax on gasoline was 18.3 or 18.4 cents per gallon, compared to 24.3 or 24.4 cents per gallon for diesel fuel.
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