Combined Effective Commercial Jet Fuel Tax Rates and Fees by State

June 25, 2014

For this week's tax map, we take a look at combined tax rates on commercial jet fuel in each state. When fuel for airplanes is bought at airports, much as when fuel for cars is bought at gas stations, there are taxes owed on that fuel. The airline industry estimates that, for every penny increase per gallon in fuel costs, industry-wide fuel expenses rise $180 million, which means $180 million in extra costs for passengers because airlines do not presently have wide profit margins. Fuel expenses range from 20 to 40 percent of airlines’ operating costs, so these costs are a significant component driving ticket prices for consumers.

(Click on the map to enlarge it. Reposting policy)

Several types of taxes apply to jet fuel. First, there’s a federal jet fuel excise tax applied nationwide. This tax ranges from $0.219 for general aviation such as private jets to $0.044, for commercial aviation. Then there are state or local jet fuel taxes, which range widely as well, and which sometimes vary for private versus commercial aviation. Beyond that, some states include jet fuel in their sales tax base, and some states apply additional taxes (such as environmentally-related taxes) to fuel.

As with gas taxes, there is a legitimate argument to be made for some of these taxes. If they are to be levied, using fuel excise taxes to pay for airports makes sense, much as using gas taxes to pay for roads makes sense. Federal rules, in fact, require that jet fuel taxes finance airports, though some states and localities have attempted to divert fuel tax collections.

It’s also reasonable to include general jet fuel consumption in the sales tax base. However, it does not make sense for commercial jet fuel to be in the sales tax base, as commercial jet fuel is a business input. Applying the sales tax to commercial jet fuel creates tax pyramiding, especially in an industry like aviation which has large excise taxes at multiple points along the production chain.

There are 19 states that don’t include any jet fuel in their sales tax base, 16 that tax private jet fuel purchases but exempt commercial airlines, and 15 states that apply the sales tax to commercial jet fuel (though sometimes at a reduced rate). Furthermore, 28 states apply fuel excise taxes, and many states also apply various other taxes such as environmental taxes. In 13 states, tax rates can vary significantly by airport due to local add-on taxes. For those states, our data reflects the highest-traffic airport in each state. Finally, three states (New Jersey, New York, and Washington) only tax fuel estimated to be burned within their state borders, significantly reducing the burden of fuel taxes.

The highest total tax rates for commercial jet fuel are in Illinois ($0.3275 per gallon), California ($0.27), and Connecticut ($2643). The lowest rates are in Delaware, Ohio, and Texas, none of whom tax jet fuel, as well as Maryland, with only a $0.0007 per gallon effective rate due to small environmental taxes.

 

State Effective Rate Varies by Airport? Rate is for which airport? Jet fuel included in sales tax base? Business inputs exempted? Is there an excise tax? Is there a burn-rate adjustment?
Alabama $0.0453 No N/A Yes Yes Yes No
Alaska $0.032 No N/A No N/A Yes No
Arizona $0.0165 Yes PHX Yes No Yes No
Arkansas $0.213 No N/A Yes No No No
California $0.27 Yes LAX Yes No No No
Colorado $0.127 Yes DEN Yes No No No
Connecticut $0.2643 No N/A Yes Yes No No
Delaware $0 No N/A N/A N/A No No
Florida $0.0897 No N/A Yes Yes Yes No
Georgia $0.15 Yes ATL Yes No No No
Hawaii $0.161 Yes HNL No N/A Yes No
Idaho $0.07 No N/A Yes Yes Yes No
Illinois $0.3275 Yes ORD Yes No Yes No
Indiana $0.01 No N/A Yes Yes No No
Iowa $0.04 No N/A Yes Yes Yes No
Kansas $0.2145 Yes ICT Yes No No No
Kentucky $0.034 No N/A Yes No No No
Louisiana $0.1213 No N/A Yes No No No
Maine $0.0416 No N/A No N/A Yes No
Maryland $0.0007 No N/A No N/A No No
Massachusetts $0.1659 No N/A No N/A Yes No
Michigan $0.2188 No N/A Yes No Yes No
Minnesota $0.027 No N/A Yes Yes Yes No
Mississippi $0.0525 No N/A No N/A Yes No
Missouri $0.033 No N/A Yes N/A No No
Montana $0.0475 No N/A N/A N/A Yes No
Nebraska $0.033 No N/A Yes Yes Yes No
Nevada $0.04 Yes LAS No N/A Yes No
New Hampshire $0.0063 No N/A N/A N/A Yes No
New Jersey $0.0035 No N/A Yes Yes Yes Yes
New Mexico $0.0945 Yes ABQ Yes No No No
New York $0.005 No N/A Yes Yes Yes Yes
North Carolina $0.0525 Yes CTL Yes No No No
North Dakota $0.08 No N/A No N/A Yes No
Ohio $0 No N/A No N/A No No
Oklahoma $0.0108 No N/A No N/A Yes No
Oregon $0.01 No N/A N/A N/A Yes No
Pennsylvania $0.03 No N/A No N/A Yes No
Rhode Island $0.0012 No N/A Yes Yes No No
South Carolina $0.0075 No N/A Yes Yes No No
South Dakota $0.06 No N/A Yes Yes Yes No
Tennessee $0.15 No N/A Yes N/A No No
Texas $0 No N/A No N/A No No
Utah $0.03 Yes SLC Yes Yes Yes No
Vermont $0.21 Yes BTV Yes No No No
Virginia $0.011 No N/A No N/A Yes No
Washington $0.04 Yes SEA No N/A No Yes
West Virginia $0.152 No N/A No N/A Yes No
Wisconsin $0.02 No N/A Yes Yes No No
Wyoming $0.05 No N/A Yes Yes Yes No

Read more on fuel taxes here.

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