Alabama Gas Tax Distribution: State, Local, and Rebuild Act Shares

Alabama’s gas tax distribution sends 45 percent of base gasoline excise revenue to the state and 55 percent to counties and cities, while a separate surcharge under the Rebuild Alabama Act splits roughly two-thirds to the state, one-quarter to counties, and one-twelfth to municipalities. Both streams are governed by Title 40, Chapter 17 of the Alabama Code, and each carries its own formula, spending rules, and reporting requirements.¹

What Alabama’s Gas Tax Is Made Of

As of July 2025, Alabama collects $0.30 per gallon on gasoline.² That total is stacked from separate excise taxes enacted at different times. Section 40-17-325 sets an 18-cent base made up of a 7-cent excise tax, a 5-cent supplemental excise tax, and an additional 6-cent excise tax.³ On top of that sits the Rebuild Alabama Act (RAA) surcharge, originally 10 cents when fully phased in by October 2021.⁴

The RAA rate is indexed every two years to the National Highway Construction Cost Index, with each adjustment capped at one cent per gallon up or down.⁴ Two increases have taken effect so far: one cent on October 1, 2023, and another on July 1, 2025, bringing the RAA share to 12 cents.⁵ Each of these layers moves through its own distribution formula, which is why the split is more complicated than a single percentage.

The Base Tax Split: 45 Percent State, 55 Percent Local

The core distribution rule for gasoline excise revenue sends 45 percent to the state and 55 percent to local governments. The state’s share is credited to the Public Road and Bridge Fund, which the Alabama Department of Transportation (ALDOT) draws from for highway construction, maintenance, and bond debt service. The local share is earmarked for counties and, through them, incorporated municipalities.¹

That 45/55 rule applies cleanly to the 7-cent excise tax. The 5-cent supplemental tax is treated differently: three-fifths goes straight to the Public Road and Bridge Fund, and only the remaining two-fifths flows through the local formulas. The 6-cent additional tax splits again: two-thirds moves through the standard 45/55 formula, and the first third is allocated separately under other provisions of the statute.¹

Add it up and the state keeps a majority of the base gasoline tax before any local distribution happens. Local governments still receive a significant slice, but the headline “55 percent local” only describes part of the picture.

How Counties Get Their Share

The 55 percent that reaches counties is divided in two pieces. Twenty-five percent of total net tax proceeds is split equally among all 67 counties, so every county gets the same baseline regardless of size. The other 30 percent of total net proceeds is distributed by population, using each county’s share of the state population from the most recent federal decennial census.¹

Put another way, about 45 percent of the local pool is split evenly and about 55 percent is population-weighted. Small rural counties benefit disproportionately from the equal-share slice; large counties like Jefferson and Mobile draw more from the population-based slice. All money received by a county under this formula must be used for highway purposes.

How Cities Get Their Share

Municipalities don’t receive a separate allocation from the state. Instead, once a county’s share is calculated, 10 percent of that amount is redirected to the incorporated cities and towns within that county. The 10 percent is then divided among those municipalities based on each city’s population as a share of the total municipal population in the county, again using the latest federal decennial census.¹

Two consequences follow. A city’s base gas tax funding depends on both the county it sits in and its size relative to other cities in that county, neither of which the city controls. Unincorporated areas get nothing through this formula because only incorporated municipalities qualify, and the other 90 percent of the county allocation stays with county government for its own road and bridge work.

Rebuild Alabama Act: A Separate Stream

Revenue from the RAA surcharge is kept apart from the base tax and follows its own formula. Approximately two-thirds (66.67 percent) goes to ALDOT, one-quarter (25 percent) goes to counties, and one-twelfth (8.33 percent) goes to municipalities. That gives the state a much larger cut than it takes from the historical excise taxes, in line with the Legislature’s emphasis on state-level infrastructure when it passed the Act in 2019.

What Local Governments Can Spend RAA Money On

RAA dollars carry restrictions that the older gasoline tax distributions don’t. Counties and cities may spend the money only on road and bridge construction, reconstruction, maintenance, and repair, including matching funds for federal projects. The statute specifically bars three categories:

Employee salaries and benefits, unless they qualify as direct project costs subject to audit by the Department of Examiners of Public Accounts.
Purchasing or maintaining equipment, unless the equipment is permanently installed as part of a road or bridge project.
Constructing or maintaining public buildings, unless the structure is integral to the road or bridge system.

The restrictions were written to keep local governments from using gas tax revenue to pad general operating budgets. Using RAA money for dump trucks, office renovations, or unrelated staff raises violates the statute.⁶

Annual Transportation Plans

Every county commission and municipal governing body that receives RAA funds has to adopt an annual transportation plan no later than August 31 for the upcoming fiscal year. The plan lists projects and estimated revenue, must be approved by a majority vote, and has to be publicly posted at the county courthouse, commission office, and highway department (or the municipal equivalents), plus the government’s official website if it has one.⁶ Residents can look up these plans to see exactly which projects their local RAA dollars are funding.

Diesel and Alternative Fuels

The base diesel excise tax follows a different distribution path than gasoline. Diesel carries a combined rate of $0.31 per gallon as of July 2025, with a 6-cent base under Section 40-17-325, the same 12-cent RAA surcharge as gasoline, and additional older excise taxes and a 2-cent inspection fee under separate code sections.²³ Section 40-17-359 explicitly excludes diesel from its “Highway Gasoline Tax” definitions, so the base diesel tax doesn’t move through the 45/55 formula described above. The RAA portion of diesel revenue, though, follows the same state/county/municipality split as gasoline RAA revenue.¹

Compressed natural gas is taxed at $0.13 per gasoline gallon equivalent and liquefied natural gas at $0.13 per diesel gallon equivalent under Section 40-17-168.2, both well below the gasoline and diesel rates.²

1
Alabama Legislature. Alabama Code 40-17-359 – Distribution and Use of Proceeds
2
Alabama Department of Revenue. Motor Fuels Tax Rates
3
Alabama Legislature. Alabama Code 40-17-325 – Levy of Excise Tax; Rates
4
Alabama Legislature. Alabama Code 40-17-370 – Levy, Administration, and Collection of Additional Excise Tax
5
Alabama Department of Revenue. Rebuild Alabama Act Notice February 2025
6
Alabama Legislature. Alabama Code 23-8-8 – Deposit and Use of Funds; Audit