The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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State Gasoline and Motor Fuel Tax

Reference Number: MTAS-1879
Tennessee Code Annotated
Reviewed Date: November 17, 2017
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Revenue Class: Intergovernmental Revenue

Fund: State Street Aid

Account No.: 33551

Description: Local share of state gasoline and other motor fuel taxes comprising the Gasoline Tax, the Diesel Tax, the Liquified Gas Tax on vehicles, the Compressed Natural Gas Tax, and the Prepaid User Diesel Tax. Distribution to municipalities is based upon population.

Authorization: T.C.A. § 67-3-201; T.C.A. § 67-3-202; T.C.A. § 67-3-901; T.C.A. § 67-3-905; T.C.A. § 67-3-908; T.C.A. § 67-3-1102; T.C.A. § 67-3-1113; T.C.A. § 67-3-1309.

Requirements or Restrictions: Special census counts are limited to four in addition to the decennial census.

Current Rate:

  • Gasoline Tax – Of the 20 cent tax per gallon, municipalities receive 99 percent (one percent is retained by the state for administration) of 14.3 percent of the first 11 cents (minus 0.1074 percent designated for boating safety); 33.33 percent of an additional two cents from increases in 1985 and 1986 (minus 0.1074 percent designated for boating safety); and 33.33 percent of an additional one cent increase in 1989. Public Chapter 181, known as the "IMPROVE Act" was passed in April of 2017. It adds 1 cent for fiscal year 2017-18, 1 cent for fiscal year 2018-19 and 1 cent for fiscal year 2019-2020. Beginning with fiscal year 2020-21 the tax will be 26 cents
  • Diesel Tax – The IMPROVE Act increases the tax to 21 cents in fiscal year 2017-18; an additional 3 cents in 2018-19,and an additional 3 cents in fiscal year 2019-20. Beginning with fiscal year 2020-21 the tax will be 27 cents. Of the oiginal 17 cents tax per gallon, municipalities receive 12.38 percent of 12 cents.
  • Liquified Gas – Of the 14 cents tax per gallon, municipalities receive 14.14 percent of the first 11 cents and 99 percent of 33.33 percent of an additional one-cent increase in 1986.
  • Liquified Gas Tax on Vehicles – Municipalities receive 14.14 percent of a flat rate that varies depending on the classification of the vehicle (by gross vehicle weight). The rate varies from $70 to $114.
  • Compressed Natural Gas – Of the 13 cents tax per gallon, municipalities receive 12.38 percent.
  • Prepaid User Diesel Tax – Municipalities receive 12.38 percent of a flat rate ($56 – $159) for farmers whose use of diesel fuel is mostly for agricultural purposes yet who own diesel powered passenger cars or trucks.

Frequency of Payment: Monthly.

Late Pay Penalty: N/A

Exemptions: As noted in T.C.A.

Collection: Revenue is distributed monthly by the state.

Use Restrictions: Outlined in T.C.A. § 54-4-204. Funds can be spent on street improvements; principal and interest payments for street improvement project loans; the costs of acquiring rights-of-way for approaches to bridges and tunnels; the city’s share of grade eliminations; one-third of the total costs of rights-of-way for state or federal highways; paying another municipality, county or TDOT for doing road improvements; and up to 22.22 percent can be spent on funding mass transit.

Responsible: