Regan Brown
In the United States, both the federal government and individual states levy excise taxes on fuel to maintain roads and highways. Indiana has a gasoline tax, a gasoline use tax, and a special fuel tax. But is diesel fuel taxed in the same way as gasoline in Indiana? And do interstate carriers pay the same fuel tax as intrastate carriers?
Is there sales tax on diesel fuel in Indiana?
| Characteristics | Values |
|---|---|
| Sales tax on diesel fuel in Indiana | Not explicitly mentioned |
| Special Fuel Tax rate in Indiana | $0.59 per gallon |
| Motor Carrier Fuel Tax (MCFT) rate for special fuel or alternative fuel | $0.57 per gallon |
| Motor Carrier Fuel Tax (MCFT) rate for gasoline | $0.34 per gallon |
| Gasoline Tax rate | $0.35 per gallon |
| Gasoline Use Tax rate | Equivalent to 7% sales tax |
| Motor Carrier Fuel Tax (MCFT) | Required for vehicles with a gross weight over 26,000 lbs operating within Indiana |
| Fuel Tax Account, MCFT license, and MCFT decals | Required for intrastate vehicles with three or more axles |
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What You'll Learn
Indiana's Special Fuel Tax rate
In the state of Indiana, there are various taxes levied on fuel. These include the Motor Carrier Fuel Tax (MCFT), Special Fuel Tax, and the Gasoline Tax. From July 1, 2024, to June 30, 2025, the Special Fuel Tax rate is $0.59 per gallon. This rate applies to alternative fuel, while the tax rate for gasoline is lower at $0.35 per gallon.
The Special Fuel Tax is a type of excise tax, which is levied by both the federal government and individual states like Indiana. Excise taxes are used to maintain roads and highways, and they can also be collected for various environmental purposes, which vary from state to state. Indiana also has a Motor Carrier Fuel Tax (MCFT) for carriers operating on highways within the state. From July 1, 2023, to June 30, 2024, the MCFT rate was $0.57 per gallon of special fuel or alternative fuel, and $0.34 per gallon of gasoline.
Additionally, Indiana has a Gasoline Tax, with a rate of $0.35 per gallon from July 1, 2024, to June 30, 2025. This rate is subject to change and is updated monthly. While Indiana does have various fuel taxes, it is unclear if diesel fuel is specifically taxed. However, it is worth noting that some states do charge sales tax on diesel fuel, calculated as a percentage of the fuel purchase, which varies based on the price of fuel.
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Diesel sales tax in other states
As of January 1, 2025, state taxes and fees on gasoline and diesel fuel averaged $0.33 per gallon for gasoline and $0.35 per gallon for diesel fuel. Since July 2024, these average taxes have remained mostly stable, increasing by less than half a cent each. While the national average tax rates have been flat, certain states have witnessed changes.
It is important to note that diesel fuel taxes have decreased in four states, with Michigan leading the way with a $0.036 reduction. Conversely, nine states have increased their diesel fuel taxes, with Connecticut at the forefront, raising its tax by $0.032 to $0.524 per gallon.
The three states with the lowest diesel fuel taxes are Alaska, Mississippi, and Hawaii, all imposing a tax of $0.1840-$0.1850 per gallon. In contrast, California, Pennsylvania, and Illinois impose the highest diesel taxes, with rates of $0.9212, $0.7410, and $0.7360 per gallon, respectively.
While the federal government and individual states levy excise taxes for road and highway maintenance, some states also collect sales tax on diesel fuel. Five states charge sales tax on diesel, and the amount is calculated as a percentage of the fuel purchase, varying based on the fuel's price.
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Indiana's Motor Carrier Fuel Tax
The MCFT rate for the previous period, from July 1, 2023, to June 30, 2024, was $0.57 per gallon of special or alternative fuel and $0.34 per gallon of gasoline. The Special Fuel Tax rate for the current period (July 1, 2024, to June 30, 2025) is $0.59 per gallon.
It's important to note that the Motor Carrier Fuel Tax is distinct from other fuel-related taxes in Indiana, such as the Gasoline Tax, Gasoline Use Tax, and Special Fuel Tax. The Gasoline Tax rate for the current period is $0.35 per gallon, while the Gasoline Use Tax rate is updated monthly.
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Indiana's Gasoline Use Tax
In the state of Indiana, a gasoline use tax is imposed on the purchase of gasoline and gasohol fuels. This tax is separate from the state gasoline excise tax and the federal gas tax. The gasoline use tax is considered equivalent to the 7% sales tax that would typically be collected by a retail merchant.
The gasoline use tax rate in Indiana is determined by calculating the monthly statewide average retail price per gallon of gasoline, excluding taxes. This average price is then multiplied by 7% to arrive at the gasoline use tax rate for the month. Due to fluctuations in gasoline prices, the gasoline use tax rate may change on a monthly basis. The Indiana Department of Revenue (DOR) is responsible for calculating and publishing the gasoline use tax rate, which is made available to the public through Departmental Notice #2 before the 22nd of each month.
The gasoline use tax is collected when a qualified distributor sells gasoline to a non-qualified distributor. In such transactions, the qualified distributor is responsible for collecting and remitting the tax to the DOR. Retail stations are required to include the gasoline use tax in the pump price of gasoline and are reimbursed for the tax in the same way they are for gasoline or special fuel taxes. Distributors, refiners, and terminal operators who wish to receive gasoline in Indiana without paying the gasoline use tax must obtain a valid permit from the DOR.
The gasoline use tax rate in Indiana has been increasing in recent months. In May 2024, Hoosiers experienced a gas use tax of 20.4 cents, contributing to a total of 72.8 cents in state and federal taxes for each gallon of gas. The gasoline use tax is utilized to fund road construction and improvement projects within the state.
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Indiana's International Fuel Tax Agreement
Indiana levies several taxes on fuel, including gasoline tax, gasoline use tax, motor carrier fuel tax, and special fuel tax. The state also participates in the International Fuel Tax Agreement (IFTA).
Prior to the implementation of IFTA, each state in the US had its own fuel tax system, requiring trucks to obtain tax permits for each state they operated in. This was a cumbersome process for both the trucking industry and the states. The International Fuel Tax Agreement simplifies this process by operating on a “pay now or pay later” system. Commercial motor vehicles that purchase fuel have the fuel taxes paid credited to the licensee's account. At the end of each fiscal quarter, the licensee completes a fuel tax report, listing all miles travelled and gallons of fuel purchased in all participating jurisdictions. The average fuel mileage is then applied to determine the tax liability for each jurisdiction.
Indiana's IFTA requirements state that vehicles subject to this tax must be registered with the Indiana Department of Revenue's (DOR) Motor Carrier Services. This includes yearly renewals, decals, and license cards, as well as quarterly tax returns. An IFTA license is required for vehicles with International Registration Plan Plates that travel outside of Indiana and Indiana base plates that travel within the state. IFTA decals are also mandatory for interstate vehicles. To obtain an IFTA license, an IFTA-1A Application must be submitted to the DOR, along with the information outlined in the IFTA New Account Checklist.
Indiana also offers an Interstate Motor Carrier Fuel Tax (MCFT) license for vehicles operating only within the state. The MCFT rate from July 1, 2023, to June 30, 2024, was $0.57 per gallon of special fuel or alternative fuel and $0.34 per gallon of gasoline. The Special Fuel Tax rate from July 1, 2024, to June 30, 2025, is $0.59 per gallon.
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Frequently asked questions
Yes, there is a Special Fuel Tax on diesel fuel in Indiana. From July 1, 2024, to June 30, 2025, the tax rate is $0.59 per gallon.
Fuel taxes are levied by both the federal government and the state of Indiana to maintain roads and highways. Other taxes are collected for various environmental purposes.
Any vehicle over 26,000 gross or registered vehicle weight that operates within Indiana must file a tax return based on fuel usage. Commercial vehicles with three or more axles or a combination of power and trailing units are also subject to fuel tax. Additionally, vehicles that operate interstate or intrastate may need to register for an IFTA or MCFT license and pay quarterly tax returns.
