What is a State Gas Tax?

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  • Written By: Troy Holmes
  • Edited By: W. Everett
  • Last Modified Date: 06 January 2020
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An indirect tax is a tax charged on the sale of specific manufacturing goods by a state or federal government. The state gas tax is the indirect tax that is charged on gas throughout the United States. This tax rate varies per state. The tax is collected by the seller of the product, which is the local gas station, and paid to the local government within a state.

In the United States each state has the authority to assess taxes on the citizens of that state. Within each state there are several indirect taxes, primarily on tobacco, alcohol, and gas. These taxes are additional taxes that are imposed with federal taxes on these products.

The federal gas tax was first introduced during the presidency of Herbert Hoover in 1932. This tax was originally designed to assist in balancing the federal budget and later used to finance the federal interstate road system. The state gas tax was first introduced by the state of Oregon in 1919, with all other states charging some type of fuel tax by 1932.


Typically states charge a state gas tax to support roadway systems within the state. These are the state highways and local roads that do not receive funding from the federal highway system. This tax has also been used to generate money to assist with state budget shortfalls. In the modern age of fuel-efficient automobiles this system has not kept up with the demand put on roads by automobiles. Many states are looking into a new system in which a road user fee tax could be introduced.

A road user fee tax would be a tax based on the mileage placed on the roads. With this concept, a driver would be charged a fee based on the miles driven within the state. This design would mimic the tolls found throughout the United States. All drivers would be forced to pay a fee based on where they enter and exit specific roads within the state.

States also levy taxes on diesel fuel. This state gas tax is used as an additional revenue and is paid by drivers of the large trucks that use diesel fuel. The diesel fuel tax has been debated for many years as is typically higher than the standard fuel state gas tax.



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