The fuel excise tax is a levy placed on the sale of specific fuels, including petrol, diesel, gasoline, and others.
The purpose of imposing fuel taxes is to generate funds for transportation-related projects and programs, such as the construction and maintenance of highways, bridges, and other infrastructure. Additionally, fuel taxes encourage fuel conservation by making consumers more aware of its importance.
Higher fuel prices at the pump incentivize people to drive less, opt for more fuel-efficient vehicles, or choose alternatives like electric or hybrid cars. Fuel taxes are administered by the Internal Revenue Service.
How much is the Fuel Excise Tax:
Tax rates for different types of fuels vary by country. Fuels used in agricultural vehicles and home heating oil, which is similar to diesel, are often taxed at a lower rate. Aviation fuels, such as jet fuel and avgas, are typically taxed at different rates, and in many regions like the United States and the European Union, commercial aviation fuel is tax-exempt.
Other fuels, including gases and solid fuels like coal, also have specific tax rates. In the United States, the taxes and fees on retail gasoline and diesel fuel for 2024 are as follows:
Diesel fuel: 24.4 cents per gallon
Gasoline: 18.4 cents per gallon
Both of these fuels also include a Leaking Underground Storage Tank fee of 0.1 cents per gallon. Source: Wikipedia
Who Pays Fuel Excise Tax?
Fuel excise taxes are paid by manufacturers, importers, and retailers to the IRS. However, these taxes are embedded in the price of petrol, diesel, and other fuels, ultimately passing the cost onto consumers. As a result, end users effectively pay the tax through the fuel they purchase.
Read our Fuel Excise Tax exemptions blog to learn the eligibility criteria for exemptions.
How To Pay Fuel Excise Tax?
Fuel excise taxes must be filed using Form 720. There are two filing methods available:
Manual Filing: Complete Form 720 by hand and mail it to the IRS.
Online Filing: Submit the form through any IRS-approved online portal.
Although both methods are accepted, the online filing option is recommended as it is faster, more straightforward, and more efficient than manual filing. IRS recommends and encourages online filing these days.
File your Fuel Excise Tax now with our IRS-Approved online portal Simple 720. Read our blog on step by step guide for online fuel excise tax filing to get guidance.
WRAP:
By reading this blog, you will gain a clear understanding of what fuel tax is and why it is imposed, who is responsible for paying it, and how to pay it efficiently.