Pa.’s gas tax ranks among highest in the country. What does it pay for?

The recent spike in gas prices due to the war in Iran has also brought state gas taxes into focus. Pennsylvania has the fourth highest gas tax in the country on regular fuel, and the commonwealth also has the second most expensive diesel gas tax.

At 58.7 cents per gallon on regular fuel, Pennsylvania ranks fourth in gas tax just behind California (70.9 cents), Illinois (66.4 cents) and Washington (59 cents), while Indiana (54.5 cents) is the fifth-highest tax.

For diesel, Pennsylvania has a gas tax of 74.1 cents per gallon and is behind only California (87.3 cents).

For neighboring states, Ohio is 15th in regular gas tax (38.5 cents) and ninth in diesel tax (47 cents). New York is 38th in gas tax (38.5 cents) and 41st in diesel (23 cents).

New Jersey is eighth in gas tax (44.9 cents) and sixth in diesel (51.9 cents). West Virginia is 16th in gas tax (35.7 cents) and 18th in diesel (35.7 cents).

Delaware is one of the cheaper states, ranking 43rd in gas tax (23 cents) and 44th in diesel (22 cents).

What is gas tax?

According to Legalclarity.org, the Pennsylvania gas tax is a key source of funding for the state used to aid in financing transportation projects.

The tax is collected on fuels used, sold or delivered by distributors within the commonwealth of Pennsylvania.

The revenue collected from the gas tax supports the state’s infrastructure, with the majority of collected revenue going to the Motor License Fund.

Pennsylvania gas tax is an excise tax

The gas tax in Pennsylvania is as an excise tax, which is a specialized consumption tax placed on certain goods instead of general retail sales or income.

Motor fuels by law are separated into two categories, fuels and liquid fuels. Liquid fuels include products such as gasoline. The fuels designation includes undyed diesel and undyed kerosene.

How is the gas tax determined in Pennsylvania?

The tax rate is set by Pennsylvania Department of Revenue via Oil Company Franchise Tax, which legalclarity.org states is set yearly on a cents-per-gallon basis.

These rates are imposed under state law and adjusted each January.

The adjustment is based on the average wholesale price of fuel over a 12-month period.

The law also prohibits the tax rate from dropping too low by setting a minimum average. That average is $2.99 per gallon.

Where does this gas tax go?

The money collected from gas tax is used mostly to maintain and build Pennsylvania’s transportation system.

Most of the money from the taxes is sent to the Motor License Fund. This fund covers costs towards the highways including construction and repairs.

The funds are used for road maintenance, highway and bridge capital projects, repair and replacement of bridges, grants to local municipalities for road and street projects and an annual deposit into the multimodal transportation fund.

Who pays the gas tax?

Fuel distributors, and not gas consumers, are legally responsible for collecting and paying the tax to the commonwealth.

The distributors are responsible for the tax once the fuel is used, sold or delivered.

Distributors can include the tax amount in the retail price of the fuel. By doing so they must show the tax rate on price displays or bills.

Distributors must also file a report and pay the collected taxes to the Department of Revenue by the 20th each month for all fuel activities from the previous month.