A Guide to Transportation Funding Options
Highway Funding – Taxes
Federal Taxes
Fuel Tax
The federal fuel tax represents almost 90% of the revenues deposited into the Highway Trust Fund of the federal government. The federal government collects a tax of 18.4¢ per gallon of fuel purchased in all 50 states. This amount has remained unchanged since 1993. However, inflation has eroded the purchasing power of that 18.4¢.
Other Taxes
In addition to these taxes on motor fuels, the Federal government also collects taxes on diesel fuel and taxes on truck and truck trailer sales, tires sales, and a heavy vehicle use tax.
State Taxes
Fuel Tax
In addition to the Federal tax on gasoline, each state also levies a tax on gas purchases. The amount collected ranges from a low of $0.04 per gallon in Florida to a high of $0.36 per gallon in Washington. However, many states levy other taxes as well. Some states such as Florida vary the tax rate according to the consumer price index.
| State | Excise Tax ¢/gallon | Additional Tax ¢/gallon | Total Tax ¢/gallon | Notes |
|---|---|---|---|---|
| Federal | 18.3 | 0.1 | 18.4 | Leaking underground storage tank (LUST) tax |
| Alabama 1 | 16.0 | 2.0 | 18.0 | Inspection fee |
| Alaska | 8.0 | 8.0 | ||
| Arizona | 18.0 | 18.0 | 2 | |
| Arkansas | 21.5 | 21.5 | ||
| California | 18.0 | 18.0 | Sales tax applicable | |
| Colorado | 22.0 | 22.0 | ||
| Connecticut | 25.0 | 25.0 | ||
| Delaware | 23.0 | 23.0 | Plus 0.5% Gross Receipts Tax 3 | |
| Dist. of Columbia | 20.0 | 20.0 | ||
| Florida 4 | 4.0 | 11.3 | 15.3 | Sales tax added to excise 4 |
| Georgia | 7.5 | 7.7 | 15.2 | Sales tax added to excise |
| Hawaii 1 | 16.0 | 16.0 | Sales tax applicable | |
| Idaho | 25.0 | 25.0 | 5 | |
| Illinois 1 | 19.0 | 1.1 | 20.1 | Sales tax add., env. & LUST fee 2 |
| Indiana | 18.0 | 18.0 | Sales tax applicable 2 | |
| Iowa | 21.0 | 21.0 | ||
| Kansas | 24.0 | 24.0 | ||
| Kentucky | 18.3 | 1.4 | 19.7 | Environmental fee 6, 2 |
| Louisiana | 20.0 | 20.0 | ||
| Maine | 26.8 | 26.8 | 3 | |
| Maryland | 23.5 | 23.5 | ||
| Massachusetts | 21.0 | 21.0 | ||
| Michigan | 19.0 | 19.0 | Sales tax applicable | |
| Minnesota | 20.0 | 20.0 | ||
| Mississippi | 18.0 | 0.4 | 18.4 | Environmental fee |
| Missouri | 17.0 | 0.55 | 17.55 | Inspection fee |
| Montana | 27.0 | 27.0 | ||
| Nebraska | 27.1 | 0.9 | 28.0 | Petroleum fee 3 |
| Nevada 1 | 24.0 | 0.805 | 24.805 | Inspection & cleanup fee |
| New Hampshire | 18.0 | 1.625 | 19.625 | Oil discharge cleanup fee |
| New Jersey | 10.5 | 4.0 | 14.50 | Petroleum fee |
| New Mexico | 17.0 | 1.875 | 18.875 | Petroleum loading fee |
| New York | 8.0 | 16.6 | 24.6 | Sales tax applicable, Petrol. Tax |
| North Carolina | 29.9 | 0.25 | 30.15 | 6 Inspection tax |
| North Dakota | 23.0 | 23.0 | ||
| Ohio | 28.0 | 28.0 | Plus 3 cents commercial | |
| Oklahoma | 16.0 | 1.0 | 17.0 | Environmental fee |
| Oregon 1 | 24.0 | 24.0 | ||
| Pennsylvania | 12.0 | 19.2 | 31.2 | Oil franchise tax |
| Rhode Island | 30.0 | 1 | 31.0 | LUST tax |
| South Carolina | 16.0 | 16.0 | ||
| South Dakota 1 | 22.0 | 22.0 | ||
| Tennessee 1 | 20.0 | 1.4 | 21.4 | Petroleum Tax & Envir. Fee |
| Texas | 20.0 | 20.0 | ||
| Utah | 24.5 | 24.5 | ||
| Vermont | 19.0 | 1.0 | 20.0 | Petroleum cleanup fee |
| Virginia 1 | 17.5 | 17.5 | 7 | |
| Washington 8 | 34.0 | 34.0 | 0.5% privilege tax | |
| West Virginia | 20.5 | 11.0 | 31.5 | Sales tax added to excise |
| Wisconsin | 29.9 | 3.0 | 32.9 | 3 Petroleum Inspection fee |
| Wyoming | 13.0 | 1 | 14.0 | License tax |
1 Tax rates do not include local option taxes. In AL, 1 to 3 cents; HI, 8.8 to 18.0 cents; IL, 5 cents in Chicago and 6 cents in Cook county (gasoline only); NV, 4.0 to 9.0 cents; OR, 1 to 3 cents; SD and TN, one cent; and VA 2%.
2 Carriers pay an additional surcharge equal to AZ-8 cents, IL-6.3 cents (g) 6.0 cents (d), IN-11 cents, KY-2% (g) 4.7% (d).
3 Portion of the rate is adjustable based on maintenance costs, sales volume, or inflation.
4 Local taxes for gasoline and gasohol vary from 10.2 cents to 18.2 cents. Plus a 2.07 cent per gallon pollution tax.
5 Tax rate is reduced by the percentage of ethanol used in blending (reported rate assumes the max. 10% ethanol).
6 Tax rate is based on the average wholesale price and is adjusted quarterly. The actual rates are: KY, 9%; and NC, 17.5 cents + 7%.
7 Large trucks pay an additional 3.5 cents.
8 Tax rate scheduled to increase to 36 cents on July , 2007.
Source: Compiled by Federation of Tax Administrators from various sources.
Motor Vehicle Tax
Most states tax the purchase price of a motor vehicle, whether new or used. In some states a portion of the revenue is distributed to local governments. In other states, this money is not directly deposited to the transportation fund.
Motor Vehicle Luxury Tax
Additional motor vehicle tax imposed on vehicles over a certain price.
Motor Vehicle Operator's License Tax
Fee imposed for transportation funding when applying for an operator's license.
Special Assessment Districts
Similar to Roadway Impact Frees, special assessment districts are created and a tax levied on the property owners in the district if a project is of substantial and primary benefit to this particular district.
State Sales Tax
Additional sales tax on consumer purchases. The tax is dedicated to a transportation fund, as noted in the table above.
State Sales Tax on Gasoline
Additional sales tax on gasoline purchases. The tax is dedicated to a transportation fund, as noted in the table above.
Tax Increment Financing (TIF)
In this approach, a special district is created and improvements are made within the district. Usually the improvements stimulate private sector development. Before development begins or improvements are made, the tax rate is frozen. The taxes continue to be paid but the difference between the original assessed tax and the tax on assessed value after the improvements (the increment) is deposited into a special account that is used to pay off the bonds that were sold to finance the improvements. This money can also be leveraged for more improvements in the district. Forty-six states authorize TIF.
Transportation Reinvestment Zones (TRZ)
TRZ Examples
Hidalgo County (Texas) Regional Mobility Authority - The Hidalgo Loop (First Texas TRZ) website
City of El Paso, TX - Resolution to authorize TRZ (11/4/08) [PDF, 3.6M]
Transportation Reinvestment Zones are similar to Development Impact Fees and Tax Increment Financing in that a zone is defined around a project that is expected to increase growth and development in an area. The growth, and the ad valorem tax that it will produce is projected. A percentage of this anticipated tax revenue increase, pre-determined by the implementing entity (such as a county, city or regional mobility authority), is dedicated to pay for the project. Bonds are then issued to finance the project and the dedicated tax revenue is used as the source of repayment for the bonds. Legislation authorizing Transportation Reinvestment Zones was enacted in Texas in 2007.
Underground Storage Tank Tax
Federal tax imposed on the privilege of being a receiver of certain petroleum products such as motor fuel, home heating oil, kerosene and aviation fuel. This tax is similar to State-imposed Environmental Impact Fees (EIFs).
Note: This tax is in addition to the 0.1¢ levied by the Federal government for the Leaking Underground Storage tank tax (LUST).
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