The gas tax in Tennessee is 27.4 cents per gallon at the state level, made up of a 26-cent gasoline tax, a 1-cent special petroleum tax, and a 0.4-cent environmental assurance fee. Diesel is taxed slightly higher at 28.4 cents per gallon. These rates took effect on July 1, 2019, at the end of a three-year phase-in under the IMPROVE Act of 2017, and they have not changed since.
What Makes Up the 27.4 Cents
Three separate state levies combine into the per-gallon figure you pay:
- A 26-cent gasoline tax on gasoline, fuel alcohol, and gasoline substitutes. Diesel and biodiesel are taxed at 27 cents instead.1Justia Law. Tennessee Code 67-3-201 – Gasoline Tax2Justia Law. Tennessee Code 67-3-202 – Diesel Tax
- A 1-cent special petroleum tax on all petroleum products, layered on top of the gasoline or diesel tax.3Justia. Tennessee Code 67-3-203 – Special Privilege Tax
- A 0.4-cent environmental assurance fee that funds cleanup of leaking underground storage tanks.4TN.gov (Tennessee Department of Revenue). Motor Fuel Tax Manual
Added together, the state collects 27.4 cents on every gallon of gasoline and 28.4 cents on every gallon of diesel.5Federation of Tax Administrators. State Motor Fuel Tax Rates Counties and cities in Tennessee cannot add local fuel taxes, so the rate is the same everywhere in the state. Alternative fuels sit lower: 21 cents per gallon on compressed and liquefied natural gas, and 22 cents on propane.6TN.gov. Motor Carrier IMPROVE Act Summary
Add the Federal Tax for the Full Pump Price
The federal government collects its own per-gallon fuel tax on top of Tennessee’s. Gasoline carries an 18.4-cent federal tax (an 18.3-cent excise tax plus a 0.1-cent Leaking Underground Storage Tank fee), and diesel carries 24.4 cents.7U.S. Energy Information Administration (EIA). How Much Tax Do We Pay on a Gallon of Gasoline and Diesel Fuel
Combined, a Tennessee driver pays about 45.8 cents in taxes on every gallon of gasoline and about 52.8 cents on every gallon of diesel. These amounts are already built into the posted pump price; you do not pay them as a separate line item.
How Tennessee’s Rate Compares
Tennessee sits below the national average. As of January 2026, state gasoline taxes averaged 33.5 cents per gallon nationwide, ranging from 9 cents in Alaska to 70.9 cents in California.8U.S. Energy Information Administration (EIA). Many States Slightly Increased Their Taxes and Fees on Gasoline in the Past Year At 27.4 cents, Tennessee is roughly 6 cents under the national average.
Where the Money Goes
Fuel tax revenue is divided by statute among the state highway fund, counties, and cities. For revenue generated by the IMPROVE Act rate increases, 61.9% goes to the state highway fund, 25.4% to counties (distributed using a formula based on population, point of sale, and an equal share for each county), and 12.7% to municipalities.9Justia. Tennessee Code 67-3-901 – Gasoline Tax – Distribution of Receipts
The base gasoline tax collected before those increases splits differently, with 28.68% going to counties and 14.38% to municipalities and the rest to the highway fund.9Justia. Tennessee Code 67-3-901 – Gasoline Tax – Distribution of Receipts For the 2024–2025 fiscal year, Tennessee estimated roughly $950.5 million in combined gasoline tax and special petroleum fee collections.10TN.gov. Tennessee’s Gasoline Tax
If You Drive an Electric or Hybrid Vehicle
Because electric and hybrid drivers buy little or no gasoline, Tennessee charges them an annual registration fee to make up the lost fuel tax. The fee is added to the standard $26.50 vehicle registration.11TN.gov. VR-5 – Registration Fees for Hybrid or Electric Vehicles
- All-electric vehicles: $200 per year for registrations renewed before January 1, 2027. The fee rises to $274 for renewals on or after January 1, 2027, and will be adjusted annually for inflation starting January 1, 2028.12Justia. Tennessee Code 55-4-116 – Additional Registration Fee for Electric Vehicles
- Hybrid and plug-in hybrid vehicles: $100 per year through December 31, 2027, with the base amount adjusted annually for inflation starting January 1, 2028.12Justia. Tennessee Code 55-4-116 – Additional Registration Fee for Electric Vehicles
The fees apply to passenger and commercial motor vehicles. Low-speed and medium-speed vehicles are not covered. If the federal government ever adopts its own road-use fee on electric vehicles, Tennessee’s fee drops to account for it, but the all-electric fee cannot fall below $200 (adjusted for inflation) after January 1, 2028.12Justia. Tennessee Code 55-4-116 – Additional Registration Fee for Electric Vehicles
Who Doesn’t Pay the Full Tax
Several categories of fuel use qualify for exemptions or refunds of the state tax:
- Government agencies with an active exemption permit from the Tennessee Department of Revenue can buy petroleum products tax-free. The permit lasts four years and requires that the agency store the fuel in its own or leased facilities and use it only for government purposes.13Justia Law. Tennessee Code 67-3-401 – Governmental Agency Exemption
- Fuel used off public roads, including agricultural use on a farm, manufacturing processes, and stationary equipment, qualifies for a refund of the state fuel tax.14TN.gov. Exemptions/Refunds
- Exported fuel, kerosene not used in motor vehicles, aviation fuel, fuel lost to contamination or casualty, and auxiliary engine fuel are also eligible for exemptions or refunds.14TN.gov. Exemptions/Refunds
Licensed wholesalers who already paid tax on fuel later sold to exempt government agencies can file for a refund or take the credit on their monthly return. The claim must be filed by the last day of the second month after the exempt sale.4TN.gov (Tennessee Department of Revenue). Motor Fuel Tax Manual