The Texas motor fuel tax is 20 cents per gallon on gasoline and diesel and 15 cents per gasoline gallon equivalent on compressed natural gas (CNG) and liquefied natural gas (LNG), collected under Chapter 162 of the Tax Code.1State of Texas. Texas Tax Code 162.102 – Tax Rate2State of Texas. Texas Tax Code 162.202 – Tax Rate3Texas Comptroller of Public Accounts. Revenue Object 3011 – Liquefied and Compressed Natural Gas Tax The tax is collected high in the supply chain, usually from the supplier at the terminal rack, and passed down to drivers in the pump price. Three-quarters of the money goes to the State Highway Fund and the remaining quarter to public education.
Rates by Fuel
Gasoline and diesel each carry a flat 20 cents per net gallon. CNG and LNG are taxed at 15 cents per gasoline gallon equivalent or diesel gallon equivalent. These rates are set by statute and have held steady for years.
Federal excise tax sits on top of the state rate: 18.4 cents per gallon on gasoline and 24.4 cents per gallon on highway diesel. For gasoline, that comes to roughly 38.4 cents per gallon in combined state and federal tax before any local charges.
One fuel that falls outside Chapter 162 is “liquefied gas,” meaning propane, butane, and similar gases that exist as gas at 60°F. Those are treated as special fuel under a different section of the Tax Code.
Who Actually Pays the Tax
For gasoline and diesel, the tax is imposed the moment fuel leaves a terminal through the terminal rack. The supplier or permissive supplier at the rack is responsible for collecting it from whoever ordered the withdrawal.4State of Texas. Texas Tax Code 162.101 – Tax Imposed Bulk transfers between licensed terminals move tax-free, since the tax will be collected when the fuel finally leaves the second terminal.
Fuel imported into Texas triggers the tax at the point of entry. If the seller is a licensed supplier, the supplier collects it; if not, the importer owes the tax directly. Interstate truckers who bring fuel into Texas in their own supply tanks owe tax on those gallons. Blenders who create gasoline blended fuel outside the terminal system owe tax on the new gallons they produce, minus credit for any previously taxed gasoline used in the blend.
Because the tax is collected so far upstream, retail customers almost never remit it themselves. By the time you pay at the pump, the 20 cents is already baked in.
Exemptions
Sections 162.104 and 162.204 list the transactions where no tax applies. Both gasoline and diesel are exempt when sold to:
- The U.S. government for its exclusive use. Fuel sold to a private contractor working under a federal contract does not qualify.5State of Texas. Texas Tax Code 162.104 – Exemptions
- Texas public school districts for their exclusive use.6State of Texas. Texas Tax Code 162.204 – Exemptions
- Commercial transportation companies providing public school transportation under contract with a district.
- Licensed aviation fuel dealers who deliver the fuel exclusively into aircraft or aircraft servicing equipment.
Fuel exported out of state or to a foreign country is exempt if the shipping documents show the destination and the supplier collects the destination state’s tax when it applies. Gasoline carries a few extra exemptions not available for diesel, including sales to volunteer fire departments, nonprofit emergency medical services organizations, and qualifying nonprofit food banks operating heavy vehicles rated at 25,000 pounds or more. Counties purchasing diesel for their exclusive use qualify for a diesel-specific exemption.
Dyed Diesel Rules
Texas uses a dye marker to flag diesel sold tax-free for off-road use. Dyed diesel moves freely between suppliers, distributors, and bonded users, and can be delivered into railway engines, motorboats, refrigeration units, and other stationary equipment powered by a separate motor.
What you cannot do is put dyed diesel into a vehicle driven on public highways. Selling dyed diesel for highway use and using it for highway use are both criminal offenses under Section 162.403.7State of Texas. Texas Tax Code 162.403 – Criminal Offenses The Comptroller, the attorney general, and Texas Commission on Environmental Quality employees all have authority to inspect fuel storage and pull samples to check for dye.
Licenses You May Need
Anyone operating in the fuel supply chain must hold the right license from the Comptroller before doing business. Diesel alone has nine license categories: supplier, distributor, terminal operator, exporter, blender, motor fuel transporter, aviation fuel dealer, dyed diesel fuel bonded user, and interstate trucker.8Texas Comptroller of Public Accounts. Revenue Object 3008 – Diesel Fuel Tax
Gasoline licensing works a little differently. A distributor license authorizes tax-free sales to other distributors and aviation fuel dealers, plus importing, exporting, refining, and blending. A gasoline jobber license covers buying tax-paid fuel for bulk resale and does not require filing reports. Aviation fuel dealer licenses restrict holders to delivering tax-free aviation gasoline into aircraft fuel tanks or off-highway servicing equipment.9Texas Comptroller of Public Accounts. Motor Fuels Tax Audit Procedures Manual
Interstate truckers who only occasionally enter Texas can use a trip permit, capped at five trips per calendar year. Truckers based in Texas or regularly crossing between Texas and other U.S. states generally operate under an International Fuel Tax Agreement (IFTA) license, which handles fuel tax reporting across member jurisdictions. Truckers moving solely between Texas and Mexico need a standalone interstate trucker license because Mexico is not an IFTA member.
Filing Deadlines and Payment
Suppliers, permissive suppliers, distributors, importers, exporters, and blenders file monthly, with returns due on the 25th of the month after the reporting period.10Texas Comptroller of Public Accounts. Revenue Object 3007 – Gasoline Tax Interstate truckers without IFTA licenses file quarterly on the same 25th-day deadline, or annually on January 25 if they qualify. IFTA licensees file quarterly by the last day of the month following the quarter.
CNG and LNG dealers file quarterly on April 25, July 25, October 25, and January 25. Qualified dealers can switch to annual filing with a January 25 due date.11Texas Comptroller of Public Accounts. Compressed Natural Gas and Liquefied Natural Gas
If you paid $500,000 or more in a single tax category during the prior state fiscal year, you must pay electronically through TEXNET.12Texas Comptroller of Public Accounts. TEXNET and Electronic Payment of Taxes and Fees Everyone else uses the Comptroller’s standard filing process.
Filing on time pays. Suppliers who remit gasoline or diesel tax by the due date keep 2% of the tax owed as a collection allowance. Distributors and importers earn 1.75%. The allowance disappears entirely if the return is late.
Penalties
A return filed after the due date draws a flat $50 penalty. Tax paid 1 to 30 days late adds a 5% penalty on the amount owed; more than 30 days late doubles it to 10%. Interest starts accruing 61 days after the due date.
Some violations carry heavier civil penalties. Failing to pay tax on fuel that was redirected from an export to a Texas destination triggers a penalty equal to the greater of $2,000 or five times the tax due. Failing to report subsequent sales of motor fuel originally purchased tax-free for export brings a $200 penalty per sale.
Subchapter E lists criminal offenses under Chapter 162. The main categories:
- Selling or using dyed diesel to operate a motor vehicle on a public highway.
- Refusing to stop for a peace officer or the Comptroller to inspect a vehicle transporting motor fuel.
- Operating a qualified commercial motor vehicle in Texas without a valid trip permit or interstate trucker’s license.
- Transporting gasoline or diesel in a cargo tank connected by pipe or valve to the vehicle’s own fuel system.
- Operating a vehicle required to keep mileage records without a working odometer.
- Refusing to let the Comptroller or attorney general inspect books, records, equipment, or premises tied to motor fuel operations.
- Buying motor fuel tax-free for export and redirecting it to a Texas destination without obtaining a diversion number.
The Comptroller can also impound vehicles and fuel when violations surface. If the owner or operator cannot show within three working days that the applicable taxes have been paid, the state can pursue seizure.
Refund Claims
If you paid motor fuel tax on fuel used off-highway, exported from Texas, lost to fire or theft, or otherwise qualifying for a refund, you can file a claim with the Comptroller. Unlicensed claimants use Form 06-106 for gasoline and diesel or Form 06-189 for CNG and LNG.13Texas Comptroller of Public Accounts. Motor Fuels Tax Refunds
Most claims must be filed within one year from the first day of the calendar month after the purchase, use, export, or loss. Licensed suppliers, distributors, importers, and similar entities that discover an overpayment due to an error have four years from the due date of the return in question, claimed by filing an amended return.14Legal Information Institute. 34 Texas Administrative Code 3.432 – Refunds on Gasoline, Diesel Fuel, Compressed Natural Gas, and Liquefied Natural Gas
Refund claims are not assignable, so you cannot transfer your right to a refund to someone else. Keep supporting documentation for four years, but do not send original receipts with the claim form. A Comptroller representative will contact you about what copies to submit and where to send them.
Where the Money Goes
Article VIII, Section 7-a of the Texas Constitution controls the allocation. Of every 20 cents collected on a gallon of gasoline or diesel, 15 cents (75%) goes to the State Highway Fund for road construction and maintenance, and 5 cents (25%) goes to the Available School Fund for public education.