California Gas Tax: What You Pay, Where It Goes, and Refunds

The California gas tax — the state excise tax on gasoline — is $0.612 per gallon as of July 1, 2025, the highest of any state in the country.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes That’s just the excise piece. Add the federal excise tax, state and local sales taxes, an underground storage tank fee, and the cost California’s climate programs push onto refiners, and government-related charges on a single gallon easily exceed $1.00.

What You Pay Per Gallon

Several charges are baked into every gallon you buy. Some are fixed per gallon; others move with the pump price.

The sales tax math catches some people off guard. The 2.25% state rate applies to the total price after excise taxes are already in it, so you’re paying a tax on a tax.6California Department of Tax and Fee Administration. Tax Guide for Gas Station Operators – Industry Topics On a $4.50 gallon, the state sales tax alone adds about 10 cents, and local district taxes can add another 10 to 20 cents depending on where you fill up.

For context, state gasoline taxes across all 50 states averaged roughly 33 cents per gallon as of January 2026.7U.S. Energy Information Administration. Many States Slightly Increased Their Taxes and Fees on Gasoline in the Past Year California’s excise rate is nearly double that, and the gap widens once climate program costs are counted.

Why the Rate Goes Up Every July

The excise tax isn’t a single fixed number. Revenue and Taxation Code Section 7360 stacks three separate per-gallon rates: a base of $0.18, an additional $0.173 that replaced revenue lost from a 2010 sales tax swap, and a $0.12 surcharge added by SB 1 in 2017.8California Department of Tax and Fee Administration. Motor Vehicle Fuel Tax Law – Section 7360 Each July 1, the California Department of Tax and Fee Administration adjusts all three components based on the California Consumer Price Index change calculated by the Department of Finance.9California Department of Infrastructure and Economic Development. SB 1 FAQ – Answers About California’s Infrastructure Funding

The July 1, 2025 adjustment raised the combined rate 1.6 cents, from $0.596 to $0.612.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes Annual increases since SB 1 took effect have typically fallen between 1 and 4 cents. Because the adjustment is tied to inflation, it happens automatically each year without a legislative vote.

Climate Program Costs at the Pump

Two programs run by the California Air Resources Board add costs to gasoline that don’t appear as taxes on your receipt but reach your wallet the same way.

Cap-and-Trade

Under the California Global Warming Solutions Act of 2006, fuel suppliers must buy carbon emission allowances at quarterly state auctions and pass that cost through to consumers. The California Energy Commission has estimated cap-and-trade adds roughly $0.24 per gallon, though the amount shifts with the market price of allowances. Auction proceeds go into the Greenhouse Gas Reduction Fund, which the Legislature allocates to programs like high-speed rail, affordable housing near transit, public transit operations, low-carbon transportation, and forest health projects.

Low Carbon Fuel Standard

The Low Carbon Fuel Standard requires fuel producers to gradually reduce the carbon intensity of transportation fuels sold in California. Producers that exceed carbon targets can sell credits to those that fall short, and the cost of buying those credits gets passed on at the pump. Refiners reported LCFS-related costs of about 10 to 11 cents per gallon through most of 2024, rising to roughly 19 cents by early 2025 as the market priced in tighter rules. Neither cap-and-trade nor LCFS revenue funds road repair; LCFS credit revenue earned by electric utilities is directed to electric vehicle customers through rebate programs.10California Air Resources Board. LCFS Utility Rebate Programs

Where the Excise Tax Money Goes

Excise tax revenue is constitutionally restricted to transportation. SB 1 in 2017 created a dedicated funding stream estimated at more than $5 billion annually, and voters approved Proposition 69 the following year to amend the state constitution and prohibit the Legislature from diverting SB 1 revenues to non-transportation spending or loaning them out for other purposes.11California Secretary of State. Proposition 69 Analysis

The money flows into specific programs, not a single fund. The largest shares go to the State Highway Operation and Protection Program for maintaining and repairing state-owned highways, and to direct allocations for local streets and roads managed by cities and counties. Smaller portions fund state transit assistance, intercity rail, trade corridor improvements, active transportation like bike lanes and pedestrian paths, and competitive grants for congestion relief. The split between state-level and local-level spending works out to roughly 50/50.12Governor of California. Fact Check – Claims Swirling on California Gas Prices

Diesel Is Taxed Differently

If you drive diesel, the numbers change. The state excise tax on diesel is $0.466 per gallon as of July 1, 2025.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes The federal excise tax on diesel is $0.244 per gallon, unchanged since 1993.2Congressional Budget Office. Increase Excise Taxes on Motor Fuels and Index Them for Inflation Diesel is also subject to state and local sales taxes at the standard rate rather than the reduced 2.25% that applies to gasoline, so diesel sales tax charges are typically higher. The diesel excise tax adjusts on the same July 1 CPI schedule as gasoline.

Getting the Tax Back for Off-Highway Use

Fuel used off-road for farming, construction, or stationary equipment can qualify for a refund of the excise tax, but the process depends on the fuel and the user.

For diesel, anyone who buys tax-paid diesel and uses it off-highway can register with the CDTFA for a diesel fuel exempt user account, submit a questionnaire and equipment list, and file refund claims. Farmers take a different route. Instead of filing for refunds, they submit a Certificate of Farming Use to their fuel vendor and purchase undyed diesel without excise tax at the point of sale. Farmers cannot file refund claims directly with the CDTFA.13California Department of Tax and Fee Administration. Diesel Fuel and Motor Vehicle Fuel Tax Refund Claims

Foreign diplomatic missions may qualify for gasoline tax exemptions, but only if the diplomat’s home country extends the same courtesy to U.S. personnel, and only through approved tax-exempt credit card accounts rather than cash purchases.14United States Department of State. Gasoline Tax Exemption