Business
Fact-checked

At WiseGEEK, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.

Learn more...

What is a Gas Tax?

Mary McMahon
Mary McMahon
Mary McMahon
Mary McMahon

A gas tax is a sales tax which is charged on fuel. Typically gas taxes are levied on fuels used for transportation, with fuels designated for heating and agricultural use being taxed differently, and at a much lower rate. There are a number of reasons for nations to have gas taxes in place, and it is not uncommon for multiple jurisdictions to apply gas taxes. For example, in the United States, people pay a federal fuel tax in addition to a state fuel tax, with the total amount of the tax varying by state; California, New York, and Hawaii have the highest gas taxes.

Gas taxes are levied per gallon or liter, depending on the measuring system used to sell fuels in a nation. Sometimes, the price for a fuel will be listed with the taxes included, and in other cases, the price excludes the additional taxes. This can be a nasty surprise for unwary consumers who may be perplexed about a high bill at the pump; it pays to look at the pricing information carefully before pumping to confirm that one understands how much will actually be paid per unit, including the base price and the gas tax.

Gas prices at service stations usually include taxes.
Gas prices at service stations usually include taxes.

Gas tax funds collected are used for a variety of things. Often, they go directly to infrastructure maintenance and improvement, paying for things like paving the roads, keeping bridges in good condition, and paying for extensions of roads. Gas taxes may also go into clean air enforcement funds and other funds related to fuel use, including funds which promote public transportation, vehicle safety, and so forth.

In some countries high gas taxes are used to discourage fuel consumption.
In some countries high gas taxes are used to discourage fuel consumption.

Some nations specifically use high gas tax levies to discourage fuel consumption. The goal is to push consumers into buying more fuel efficient vehicles, or into pursuing alternative fuel vehicles, by making gas expensive. Consumer demand also drives companies to design vehicles which are fuel efficient or which use alternative fuels. Controlling demand can also secure the fuel supply, by keeping demand static.

A gas tax is a sales tax charged on fuel.
A gas tax is a sales tax charged on fuel.

When people purchase fuel which is subject to taxes beyond the standard sales tax, there should be a disclosure about the amount of the tax, and how it is levied. Many nations have regulations which require fuel retailers to break down the gas tax for their customers, as well. In other words, instead of saying that the fuel tax is X amount, the retailer needs to say that the fuel taxes include Y amount in local taxes, Z amount in regional taxes, and so forth.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Learn more...
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Learn more...

Discuss this Article

Post your comments
Login:
Forgot password?
Register:
    • Gas prices at service stations usually include taxes.
      By: Jim Mills
      Gas prices at service stations usually include taxes.
    • In some countries high gas taxes are used to discourage fuel consumption.
      By: nexusseven
      In some countries high gas taxes are used to discourage fuel consumption.
    • A gas tax is a sales tax charged on fuel.
      By: locoleal
      A gas tax is a sales tax charged on fuel.
    • Gas taxes are often used to maintain roads and bridges.
      By: Aania
      Gas taxes are often used to maintain roads and bridges.