Learn the State-specific Diesel Fuel Tax Changes in Effect July 2024

On July 1, 2024, several states made diesel tax adjustments. While states can make tax adjustments throughout the year, these changes typically occur annually or semi-annually, once at the beginning of the year on January 1 and again on July 1. At the beginning of the year, sixteen states made diesel tax rate changes, with most states making modest adjustments of around one cent or less. This month, several states made adjustments, with Connecticut, Kentucky, and Missouri all experiencing price movements of over two cents per gallon.

Diesel fuel tax upward rate adjustments

California, Colorado, Connecticut, Illinois, Indiana, Missouri, Nebraska, and Virginia all experienced an increase in their diesel fuel tax rate. Most of these changes resulted from an automatic adjustment based on the state's commitment to periodic changes according to predetermined criteria. This adjustment typically relates to the rate of inflation, current wholesale diesel prices, or a combination of fuel cost and excise tax rates. Notably, all states listed above saw an increase due to these factors, except for Colorado and Missouri.

Colorado saw a diesel fuel tax rate increase of 1.3¢ per gallon due to a 2021 state law aimed to bolster the state’s transportation funding system. The $5.4 billion transportation funding law, promoted by Governor Jared Polis, created a new set of road-user fees to benefit highways, transit, and electric vehicle infrastructure. New and existing fees were indexed to inflation or the national highway construction costs index.

Similarly, Missouri’s tax increase is the result of a law enacted in 2021, which instituted an incremental 2.5 cent increase to the state’s tax rate. The tax will increase by 12.5 cents to 29.5 cents by July 2025, with the most recent total tax rate being approximately 27.6 cents per gallon. Missouri motorists are permitted to file refund claims for the additional tax amounts. However, attempts to extend the refund to all Missouri vehicle owners, including truck drivers, have not passed in the statehouse.

Diesel fuel tax downward rate adjustments

Two states, Kentucky and Maryland, witnessed a decrease in their diesel fuel tax rates, representing reductions of 2.3 cents and 0.9 cents, respectively. Both decreases were due to automatic adjustments. Kentucky's downward adjustment brought the overall tax rate to 24.8 cents due to a statute linking state fuel taxes to the average wholesale price of fuel. This mechanism ensures the tax rate fluctuates in response to fuel prices. Maryland's downward adjustment brought the overall tax rate to 47.0 cents, driven by a decade-old inflation indexing law that includes two components: the consumer price index and the retail fuel price. Despite the decrease, Maryland's tax rate has increased by 10 cents over the past three years.

Understand the July 2024 diesel fuel tax adjustments by state

The July 2024 diesel fuel tax adjustments reflect a mix of automatic changes, unique state-specific approaches, and ongoing efforts to encourage energy consumption toward lower-emission alternatives. Diesel fuel taxes remain a critical component of a shipper’s market-based fuel reimbursement to a carrier. By considering state-specific variances and the way carriers pay fuel taxes, fuel reimbursements can be fair and accurate.

Navigating and managing diesel fuel taxes by state can be intricate, but there's a streamlined solution to gain control and ensure compliance. Fuel Recovery empowers you to monitor tax changes and calculate precise fuel reimbursements. Don’t let fuel tax adjustments catch you by surprise—partner with Breakthrough for comprehensive and efficient transportation fuel management.