The California fuel tax is actually a stack of taxes and fees that together push the per-gallon cost well above what drivers in any other state pay. As of July 1, 2025, the state excise tax on gasoline is 61.2 cents per gallon, and once you add the federal excise tax, the prepaid sales tax, the underground storage tank fee, and the pass-through costs of two state environmental programs, the total tax load on a gallon of regular gasoline approaches 90 cents before local sales tax rates enter the picture.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes
What You Pay Per Gallon of Gasoline
The largest single piece is the state excise tax authorized by the Motor Vehicle Fuel Tax Law in Revenue and Taxation Code Section 7301.2California Legislative Information. California Code Revenue and Taxation Code – Motor Vehicle Fuel Tax Law For the period from July 1, 2025 through June 30, 2026, that excise tax is 61.2 cents per gallon, up from 59.6 cents the year before.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes The rate rises automatically each July based on changes in the California Consumer Price Index, a mechanism built into the Road Repair and Accountability Act of 2017 (SB 1).
On top of that, a prepaid sales tax is collected at the wholesale level. For July 2025 through June 2026, the prepayment rate is 7.5 cents per gallon for gasoline.3California Department of Tax and Fee Administration. Sales Tax Rates for Fuels This is an advance on the sales tax you’d owe at the pump. Because the actual retail sales tax rate depends on where you buy, the prepayment is set as a flat per-gallon figure to simplify wholesale collection, and any remaining sales tax is settled at the register based on the posted price.
Then comes the federal excise tax. Under 26 U.S.C. § 4081, the federal rate on gasoline is 18.3 cents per gallon, plus an additional 0.1 cent earmarked for the Leaking Underground Storage Tank Trust Fund, for an effective 18.4 cents.4Office of the Law Revision Counsel. 26 U.S. Code 4081 – Imposition of Tax The federal rate has not changed since 1993 and is not indexed to inflation.
California also charges an Underground Storage Tank Maintenance Fee on a per-gallon basis to fund cleanup of contamination from leaking tanks. The fee is collected from tank owners based on the volume of petroleum stored.5California Department of Tax and Fee Administration. Underground Storage Tank Maintenance Fee
Added together, the CDTFA reports fixed taxes of 79.6 cents per gallon on gasoline before any variable sales tax or environmental program costs are counted.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes
Diesel Rates Work Differently
Diesel is governed by a separate statute, the Diesel Fuel Tax Law in Revenue and Taxation Code Section 60001.6California Legislative Information. California Code RTC 60001 – Diesel Fuel Tax Law For July 2025 through June 2026, the state excise tax on diesel is 46.6 cents per gallon.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes That’s lower than gasoline, but diesel more than makes up the difference through a heavier sales tax.
The state applies an elevated sales tax rate to diesel that significantly exceeds the standard statewide rate. For July 2024 through June 2025, that rate was 13 percent, compared with the general statewide base of 7.25 percent. As with gasoline, a prepayment collects much of this at the wholesale level; the diesel prepayment rate for July 2025 through June 2026 is 38.5 cents per gallon.3California Department of Tax and Fee Administration. Sales Tax Rates for Fuels The federal diesel excise tax runs 24.3 cents plus the 0.1 cent LUST fund charge, for an effective 24.4 cents per gallon.4Office of the Law Revision Counsel. 26 U.S. Code 4081 – Imposition of Tax Together, the state and federal excise portions alone come to 71.0 cents per gallon.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes Diesel is also subject to the UST fee.
Environmental Program Costs Built Into the Price
Two state environmental programs add to what you pay at the pump without appearing on your receipt. The Cap-and-Trade program and the Low Carbon Fuel Standard, both run by the California Air Resources Board, require fuel suppliers to either reduce the carbon intensity of their products or buy credits to offset the difference. Suppliers pass those compliance costs through to retail prices.
The California Energy Commission tracks these costs separately from excise and sales taxes in its gasoline price breakdown.7California Energy Commission. Estimated Gasoline Price Breakdown and Margins Unlike the excise tax, which is a fixed per-gallon amount, these costs move with the credit markets. When compliance credits become scarce, the per-gallon cost rises.
Who Pays and When
California collects fuel taxes upstream, not at the gas station. The tax is owed by the licensed supplier when fuel leaves a terminal rack or is imported into the state. State regulations assign liability across several supplier categories, including terminal operators, position holders, refiners, enterers, and blenders.8Legal Information Institute. California Code of Regulations Title 18 Section 1123 – Supplier
By the time fuel reaches the pump, both the excise tax and the prepaid sales tax are already baked into the wholesale price. The retail station collects any remaining sales tax from you at the register. The system keeps the administrative burden on a small number of large companies rather than tens of thousands of individual stations.
Where the Money Goes
California fuel tax revenue is constitutionally dedicated to transportation. Proposition 69, approved by voters in 2018, amended the state constitution to require that revenue from diesel sales taxes and transportation improvement fees be spent exclusively on transportation purposes. It also bars the legislature from loaning out these funds, except for short-term cash flow, or using transportation fee revenue to repay state bonds without voter approval.9Legislative Analyst’s Office. Proposition 69 Prop 69 was a companion to SB 1, which raised fuel tax rates sharply starting in 2017 to address a deferred maintenance backlog.
Gasoline excise tax revenue flows into the Highway Users Tax Account, a trust fund in the state treasury. From there, money is split between the State Highway Account and allocations to cities and counties for local road repair, based on formulas that account for registered vehicles and miles of maintained roads.10Justia. California Streets and Highways Code Chapter 3 – Highway Users Tax Fund
When You Can Get an Exemption or Refund
Not every gallon sold in California carries the full tax. The Revenue and Taxation Code exempts, or allows refunds for, several categories of use:
- Fuel used in vehicles operated entirely off public roads.
- Fuel used in farm implements, trucks, or tractors used in agricultural operations off the highway, where any road travel is only incidental movement between nearby farms and the equipment is not required to be DMV-registered.
- Fuel used in construction equipment operating within a job site, where highway use is incidental and the equipment is exempt from vehicle registration.
- Fuel used for a purpose other than powering a motor vehicle on California roads, such as running a stationary generator.
- Fuel used by transit districts, transit authorities, and private companies providing public transit services under contract with a public agency.
These exemptions are set out in the Revenue and Taxation Code, and the user has to demonstrate the qualifying use to the CDTFA.11California Legislative Information. California Revenue and Taxation Code Part 3, Chapter 2 – Exemptions
Federal Credit for Off-Highway Business Use
If you use gasoline or diesel for an off-highway business purpose, you can also claim a credit against the federal excise tax. The IRS handles this through Form 4136, filed with your income tax return. Businesses that want faster reimbursement can file Form 8849 for periodic refunds or claim a credit on Form 720, the quarterly federal excise tax return.12Internal Revenue Service. Instructions for Form 4136
The credit applies only to fuel used in a business activity. Personal use doesn’t qualify, and that includes commuting, ride-sharing driving, and running personal lawn equipment or recreational vehicles. The IRS requires you to keep records supporting your claim for at least three years from the date the return is due or filed, whichever comes later.12Internal Revenue Service. Instructions for Form 4136
Dyed Diesel Is Off-Limits for Highway Use
Diesel sold for off-road use is dyed red to distinguish it from taxable highway diesel. Dyed diesel is exempt from both state and federal highway excise taxes, which makes it noticeably cheaper. Using dyed diesel in a vehicle driven on public roads is illegal. Under federal law, the penalty is $1,000 or $10 per gallon of dyed fuel in the tank, whichever is greater.13Office of the Law Revision Counsel. 26 U.S. Code 6715 – Dyed Fuel Sold for Use or Used in Taxable Use Federal inspectors can stop and test highway vehicles for dyed fuel at any time.
Extra Obligations for Heavy Trucks and Interstate Carriers
Owners of heavy trucks owe an additional federal tax beyond the per-gallon excise. The Heavy Highway Vehicle Use Tax, reported on IRS Form 2290, applies to highway vehicles with a taxable gross weight of 55,000 pounds or more. It’s an annual tax based on weight category, not on fuel burned. Vehicles expected to travel 5,000 miles or less during the tax period (7,500 miles for agricultural vehicles) can claim a suspension; if the mileage is later exceeded, Form 2290 must be filed and the full amount paid. California generally requires a stamped Schedule 1 from Form 2290 when you register or transfer a heavy vehicle.14Internal Revenue Service. About Form 2290, Heavy Highway Vehicle Use Tax Return
Interstate carriers also deal with fuel taxes through the International Fuel Tax Agreement (IFTA). California-based carriers file a single quarterly return with the CDTFA reporting miles traveled and fuel purchased in every member jurisdiction, and the CDTFA handles redistribution to other states. IFTA applies to vehicles with two axles and a gross weight over 26,000 pounds, three or more axles on the power unit regardless of weight, or combination vehicles over 26,000 pounds combined. Recreational vehicles used exclusively for personal travel are excluded.15California Department of Tax and Fee Administration. International Fuel Tax Agreement – IFTA Returns are due by the last day of the month after each quarter (April 30, July 31, October 31, and January 31), even if the fleet did not operate. The combined California diesel rate used for IFTA purposes is currently 97.1 cents per gallon.1California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes Late filings carry a penalty of $50 or 10 percent of the tax due, whichever is greater, plus interest.
What Electric Vehicle Drivers Owe
Electric vehicles use the same roads but buy no gasoline or diesel, so they contribute nothing through the per-gallon system. California recently completed a pilot program testing a per-mile road charge for EV owners at rates between 2 and 4 cents per mile driven. Whether that becomes a permanent program is still under active consideration. For now, California does not impose a flat annual EV registration surcharge of the kind adopted in many other states.