Gas Tax in Alabama: Rates, Refunds, and EV Fees

The gas tax in Alabama is 30 cents per gallon on gasoline and 31 cents per gallon on diesel, effective July 1, 2025. Add the federal excise tax of 18.4 cents on gasoline and 24.4 cents on diesel, and every gallon you pump carries roughly 48.4 cents of tax on regular gas and 55.4 cents on diesel. None of it shows up as a line item on your receipt; it’s built into the posted price.

Current State Rates

Alabama’s per-gallon tax is really two taxes stacked together. The base excise tax under Alabama Code Section 40-17-325 is 18 cents on gasoline and 19 cents on diesel.1Alabama Legislature. Alabama Code 40-17-325 – Levy of Excise Tax On top of that sits the Rebuild Alabama supplemental tax, currently 12 cents per gallon for both fuels after two inflation adjustments.2Alabama Department of Revenue. Rebuild Alabama Act Notice February 2025 Together:

  • Gasoline: 30 cents per gallon (18 cents base plus 12 cents Rebuild Alabama)
  • Diesel: 31 cents per gallon (19 cents base plus 12 cents Rebuild Alabama)

Collection happens upstream. The tax is charged at the terminal or wholesale level before fuel ever reaches a retail station, and the Alabama Department of Revenue audits wholesalers for compliance.3Alabama Department of Revenue. Terminal Excise Tax (Gasoline and Diesel Fuel Taxes) A separate two-cent-per-gallon inspection fee exists under Section 8-17-87, but it generally applies to dyed diesel and certain refund scenarios rather than to standard retail gasoline sales.4Alabama Legislature. Alabama Code 8-17-87 – Inspection Fee

For a rough national comparison, the average state-level gas tax runs about 33 cents per gallon, putting Alabama just below the middle of the pack.

Federal Tax Added at the Pump

Every gallon also carries a federal excise tax under 26 U.S.C. § 4081: 18.3 cents on gasoline and 24.3 cents on diesel, plus an additional 0.1 cent per gallon for the Leaking Underground Storage Tank Trust Fund.5Office of the Law Revision Counsel. 26 USC 4081 – Imposition of Tax That brings the federal totals to 18.4 cents on gasoline and 24.4 cents on diesel. Those rates have not moved in decades and are not indexed to inflation.

How the Rate Changes Over Time

The Rebuild Alabama Act of 2019 didn’t just raise the tax; it built in automatic future changes. Starting October 1, 2023, and every two years on July 1 after that, the Rebuild Alabama supplemental tax adjusts based on the National Highway Construction Cost Index published by the Federal Highway Administration. When road-building costs rise, the tax rises with them. Each adjustment is capped at one cent per gallon in either direction.6Alabama Legislature. Alabama Code 40-17-370 – Levy, Administration, and Collection of Additional Excise Tax

Both adjustments so far have moved up. The supplemental tax rose one cent on October 1, 2023, and another cent on July 1, 2025, taking it from 10 cents to 12 cents per gallon.2Alabama Department of Revenue. Rebuild Alabama Act Notice February 2025 The next scheduled adjustment date is July 1, 2027. The Department of Revenue must notify fuel suppliers of any rate change by March 1 of the adjustment year.

Where the Money Goes

Alabama’s Constitution limits how these dollars can be spent. Amendment 93 requires fuel tax revenue to go toward building, maintaining, and repairing public roads and bridges, enforcing traffic laws, and paying highway-related debt. Redirecting the money to general government spending is prohibited.7Justia. Alabama Constitution – Amendment 93 Ratified

Within that fence, the Rebuild Alabama Act spells out how the supplemental portion is divided after collection costs and any payments to the Alabama Highway Finance Corporation:

Refunds for Off-Road Use

If you burn diesel or gasoline in equipment that never touches a public road, most of the tax is refundable. Alabama allows a state refund under Section 40-17-329(h) for fuel used in qualifying off-road applications: agricultural tractors, maritime vessels, railroad locomotives, and wood-product treatment equipment among them.9Alabama Department of Revenue. Claim for Diesel Fuel Tax Refund You file the Department of Revenue’s refund form with fuel purchase invoices and a list of the off-road vehicles or equipment you own or rent. The same piece of equipment can’t be designated as both on-road and off-road.

A couple of catches trim the return. Alabama deducts 4% state sales tax from the refund, plus a small inspection fee. You need to keep supporting records for six years, and the Department can demand them at any time. A false or inflated claim carries a penalty of 100% of the amount claimed, plus interest.

The federal excise tax is separately refundable. Off-road users can claim a credit of 18.3 cents per gallon on gasoline and 24.3 cents per gallon on undyed diesel by filing IRS Form 4136 with their income tax return, covering fuel used for farming, construction, and other off-highway business purposes.10Internal Revenue Service. About Form 4136, Credit For Federal Tax Paid On Fuels Dyed diesel doesn’t qualify because federal tax was never paid on it to begin with.

Dyed Diesel Penalties

Dyed diesel exists so off-road users can skip highway fuel taxes upfront rather than claiming refunds after the fact. Pumps selling dyed diesel in Alabama must post a notice that the fuel is for non-highway use only. The red dye lets enforcement officers spot violations by drawing a sample from a vehicle’s fuel tank at a roadside inspection.

Federal penalties for using dyed diesel in a highway vehicle are steep. Under 26 U.S.C. § 6715, the fine is the greater of $1,000 or $10 for every gallon of dyed fuel involved. The base $1,000 multiplies by the number of prior violations, and anyone at a business who knowingly participated is personally on the hook alongside the company.11Office of the Law Revision Counsel. 26 USC 6715 – Dyed Fuel Sold for Use or Used in Taxable Use After a third violation, administrative appeals are limited to disputes over chemical analysis or math errors.

Fees for EVs and Plug-In Hybrids

Electric vehicle drivers don’t buy taxable fuel, and plug-in hybrid drivers buy less of it, so Alabama collects from them through an annual registration surcharge instead. As of July 1, 2023, the fees are:

These sit on top of standard registration costs, not in place of them. The Rebuild Alabama Act set the original fees at $200 and $100 with a built-in $3 increase every four years; the first bump landed July 1, 2023, and the next is scheduled for July 1, 2027.13Alabama Department of Revenue. MEMO 2023-002 Registration Fee Increase: Battery Electric and Plug-In Hybrid Vehicles

For each battery electric vehicle, the first $150 of the fee follows the same 66.67%/25%/8.33% split as regular fuel tax revenue, and the remainder funds the Electric Transportation Infrastructure Grant Program for public charging stations. Plug-in hybrids work the same way, with the first $75 flowing into the road-funding split and the excess going to charging infrastructure.14Alabama Legislature. Alabama Code 40-12-242 – License Taxes and Registration Fees