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What is a State Fuel Tax?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 31 October 2017
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    Conjecture Corporation
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The state fuel tax is a sales tax that is applied by a state government to the purchase of gasoline and other types of fuels by private citizens. This term is most commonly utilized in the United States, where most of the states have some sort of fuel tax that is assessed by a state level agency. A tax of this type is different from a federal fuel tax, in which the sales tax is assessed and collected by a national or federal government.

For the most part, fuel taxes always apply to the purchase of gasoline or petrol. The tax is added to the actual purchase price for the unit of gasoline, and is paid by the consumer at the time the gasoline is purchased. In most countries where some sort of state fuel tax is assessed, the posted purchase price per gallon or liter includes both the actual price for the gasoline as well as any state and federal taxes that are assessed. This process of collecting gas tax revenue is the most common method used throughout the world.

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Gasoline for vehicles is not the only type of fuel that may be subject to a state fuel tax. Depending on the regulations put in place by the state, natural gas or other forms of heating fuel purchased from a propane dealer or other supplier may also carry some sort of taxation imposed by the state. However, the gas tax rate for these other types of fuel is often lower than the rates assessed and collected on the fuel used in cars and trucks.

Because a state level fuel tax is put in place by the lawmakers for that state, there is no set pattern or rate of tax that applies to every state within a country. This is different from a federal fuel tax, which is applied using the same criteria to all states that are part of a given country. In some states, the gas sales tax put in place by the state government may constitute a small fraction of the posted price, or represent a significant portion of the price charged for a unit of fuel.

In many cases, the proceeds collected from the state fuel tax are utilized to maintain and improve roadway systems within the jurisdiction. This can include projects such as building or repairing bridges, repaving existing roads, or researching and planning new roads to accommodate growing traffic in various locations around the state. From this perspective, the state fuel tax can be considered a user fee, since anyone who directly or indirectly uses the road system do benefit from its maintenance and improvement.

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