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Online Budget Guide

Motor Fuel Tax

Oklahoma has relatively low gas taxes. The motor fuel tax is a selective sales tax that tries to match payment for a service –transportation–with the benefit of the service. Only four states tax motor fuel at a lower rate than Oklahoma’s 17 cents per gallon. The Oklahoma tax on gasoline is eight cents per gallon below the national average reported by the Federation of Tax Administrators. This tax provides 3 percent of all tax revenue in the state. The tax is among the slowest-growing in Oklahoma, increasing just 1.3 percent per year.

motor-fuel-tax

Advantages of this tax include:

  • There is a clear connection between tax and benefit since much of the tax is used for road construction and maintenance;
  • The tax can encourage conservation, since it is on a per-gallon basis; and
  • Some of the tax is paid by non-residents who travel through or use goods transported through the state.

Disadvantages are:

  • Tax revenue falls when gas prices are increasing because people use less fuel; and
  • The tax has not proven adequate to fund the maintenance of safe roads and bridges.

Oklahoma first levied a gas tax in 1933; the last increase was in 1987. A ballot measure, SQ 723, that would have increased the motor fuel tax to provide more funding for road and bridge repairs was defeated overwhelmingly in 2005. Oklahoma levies excise taxes on gasoline at 16 cents per gallon and diesel at 13 cents, with an additional one-cent motor fuel assessment fee levied on both. Fuel used by governments and Indian tribes is exempt and farm users may have the tax refunded. The general sales tax does not apply to gasoline. Tribes may compact with the state to receive part of the fuel tax collections.

This tax is collected by wholesale fuel vendors and paid to the Oklahoma Tax Commission. The tax then is included in the price paid at the pump. Nearly two-thirds of the amount collected goes to the state transportation fund for appropriation to the Oklahoma Department of Transportation. About one-third goes to local governments for roads and bridges. Small amounts are restricted for other forms of transportation. Most of the one-cent motor fuel assessment fee is allocated to the Petroleum Storage Tank Indemnity Fund. None goes to the state’s General Revenue Fund. Unlike many states, local governments may not levy their own gas tax.

See OK Policy’s blog post, “Oklahoma’s gas tax needs a tune-up” (2014)

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