Indiana Sales Tax on Gas: Excise Rate, Exemptions, and Uses

Indiana does not charge its 7% sales tax on gasoline at the register. Instead, the Indiana sales tax on gas is built into the posted pump price through a separate monthly gasoline use tax, which stands in for the sales tax and sits alongside a flat state excise tax, a small oil inspection fee, and the federal excise tax. For June 2026, those four charges together come to roughly 82 cents per gallon of regular gasoline.

Here is what makes up that figure:

Only the use tax moves month to month. The other three hold steady, so when the total shifts between roughly 70 and 85 cents a gallon over the course of a year, the use tax is doing the moving.

Why There Is No Sales Tax Line at the Pump

The gasoline use tax exists specifically to replace what would otherwise be the 7% sales tax on fuel.5Indiana Department of Revenue. Sales Tax Rather than ringing up 7% at the register the way a store would on a shirt, Indiana converts that 7% into a flat per-gallon figure once a month and bakes it into the pump price.

The Department of Revenue calculates it by taking the statewide average retail price of gasoline, stripping out all existing state and federal taxes from that average, and multiplying what remains by 7%. The result is rounded to the nearest tenth of a cent.2Indiana Department of Revenue. Departmental Notice 2 – Gasoline Use Tax Rate The new rate is published in a Departmental Notice before the 22nd of each month and takes effect on the first of the following month.6Indiana General Assembly. Indiana Code 6-2.5-3.5-15 – Monthly Notice of the Gasoline Use Tax Rate

Because the formula tracks last month’s prices, the rate always runs a few weeks behind the market. Over a year, it can swing by 10 cents a gallon or more between its high and low months. When crude prices spike, the use tax climbs with them. When prices fall, it drops.

The Flat Excise Tax

The 36-cent gasoline excise tax is a separate charge under Indiana Code 6-6-1.1 and does not move with the oil market. It resets once a year, on July 1, under a formula tied to broader economic indicators, and state law caps how much the rate can rise in a single year. That is why year-to-year changes are small.

The practical point for drivers: this piece of the pump price is predictable. The use tax is what makes your fuel bill feel different in July than in February.

Why You Never See the Tax on Your Receipt

You do not pay these taxes directly to the state. Refiners, terminal operators, and qualified distributors prepay the gasoline use tax before fuel ever reaches a retail station, so by the time your local gas station buys from a distributor, the tax is already in the wholesale cost. The station then builds that cost into the posted price per gallon.

That is why Indiana receipts show a single price per gallon with no sales tax line. The tax is there; it just was collected further up the supply chain.

Who Can Buy Gas Without the Use Tax

A few buyers are exempt. Federal agencies qualify under intergovernmental tax immunity. Indiana state agencies and local governments qualify when the fuel is for official use. Certain nonprofits that meet the state’s charitable or educational criteria can qualify as well.

Being exempt on paper is not enough at the register. The buyer has to hand the retailer a fully completed Form ST-105, Indiana’s General Sales Tax Exemption Certificate. If any section is blank, the exemption is invalid and the seller has to collect the tax.7Indiana Department of Revenue. General Sales Tax Exemption Certificate A buyer who forgets the form can still pay the tax and file for a refund afterward using Form GA-110L.

How Indiana Stacks Up Against Other States

Indiana consistently ranks among the top ten states for total gas tax burden. State-level charges alone (excise, use tax, and oil inspection fee) run about 55 to 65 cents per gallon depending on the month, well above the national average of roughly 33 cents in state-level gas taxes. Add the federal 18.4 cents and Indiana drivers clear 70 cents in every month and pass 80 cents when gas prices are high.

The reason Indiana runs high is its dual structure. Most states charge either a flat excise or a percentage-based tax, not both. Indiana effectively does both: a flat 36-cent excise plus a 7% use tax. The percentage piece is what drives the monthly swings that drivers in flat-rate states never see.

Diesel Is a Different Tax

If you drive a diesel vehicle, none of the gasoline rates apply to you. Diesel, biodiesel, and other non-gasoline motor fuels fall under Indiana’s special fuel license tax, which is set at 61 cents per gallon for July 2025 through June 2026. Annual increases on that rate are capped at 2 cents. The federal excise tax on diesel is also higher than on gasoline, at 24.4 cents per gallon.8Indiana Department of Revenue. Departmental Notice 43 – Rates for the Gasoline License Tax and Special Fuel License Tax

Where Your Gas Tax Money Goes

Gasoline use tax revenue flows entirely into transportation under Indiana Code 6-2.5-10-1, split three ways:9Indiana General Assembly. Indiana Code 6-2.5-10-1 – Collected Revenue Distribution and Use

  • 64.285% to the State Highway Fund for state highway construction and maintenance.
  • 21.429% to the Local Road and Bridge Matching Grant Fund for county and municipal road projects.
  • 14.286% to the Motor Vehicle Highway Account for broader local infrastructure needs.

As of fiscal year 2024, none of the gasoline use tax revenue goes to the state general fund. The full 100% is directed to road and bridge work. The flat gasoline excise tax follows a separate statutory distribution formula but also feeds transportation accounts rather than general spending.