Gas tax holiday: impact of changes in motor fuel tax rates

Written by: Bob Donnellan

gas tax holiday

In response to record-high gas prices, several states have suspended fuel taxes and many others are considering similar actions.

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    Which states have suspended fuel taxes?

    So far, five states have instituted or plan to initiate gas tax holidays, including Maryland, Georgia, Connecticut, Florida, and New York.

    See details on each state below:

    Connecticut

    Connecticut suspended the state's 25 cents per gallon gas tax for retail customers effective on April 1, 2022. The suspension will expire on November 30.

    Florida

    Florida plans to suspend gas tax starting October 1, 2022, which will lower the price of gas by 25.3 cents per gallon. The suspension will expire on October 31.

    Georgia

    On March 18, 2022, Georgia suspended the state's motor fuel taxes, including gasoline, diesel, and some other forms of fuel. Georgia taxes gasoline at 29.1 cents per gallon and diesel at 32.6 cents per gallon. The suspension expires on July 14th.

    Maryland

    On March 18, 2022, Maryland suspended the excise, sales, and use gasoline tax for 30 days. The gas tax holiday expired on April 16. Maryland taxes gasoline at 27 cents per gallon as excise and 9 cents per gallon as sales and use.

    New York

    Starting June 1, 2022, New York suspended an 8 cents per gallon motor fuel tax and an 8 cents per gallon sales tax. The suspension will expire on December 31.

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    Federal gas tax suspension and potential impacts

    There is currently no federal gas tax suspension though some lawmakers are pushing for a freeze to relieve the impact of high gas prices on consumers.

    At this time, the federal motor fuel tax rates are:

    Gasoline tax: $0.184 / gallon

    Diesel tax: $0.244 / gallon

     

    A federal gas tax holiday would likely drastically impact the Federal Transportation Fund as revenues from federal motor fuel taxes make up one of the sources of that fund.

    Businesses and states would also be affected by a federal gas tax suspension as there are provisions that require states to increase the state tax rates when the federal rates are suspended. These states include Arkansas, California, Nevada, Oklahoma, and Tennessee.

    How do fuel tax suspensions affect fuel businesses?

    These tax suspensions cause complexities for businesses that must adjust their tax calculation and collection systems. Tax, finance, and accounting teams in the fuel space must react quickly to change invoicing processes, tax return filings, account reconciliations, and other internal processes.

    Sometimes, the legislation does not provide enough time for companies to react to the suspension and make the necessary changes.

    If proper adjustments are not made promptly, the business may end up with late filings, billing errors, and incorrect payments to account for the adjustments.

    This analysis is intended for informational purposes only and is not tax advice.  For tax advice, consult your tax adviser. See the full disclaimer here.