Diesel Tax
Description. The diesel tax replaces the former motor vehicle fuel use tax. This tax is a privilege tax imposed on the users of diesel fuel (as defined in T.C.A. § 67-3-103) within this state, with certain exceptions such as fuel dyed in accordance with Internal Revenue Service regulations. T.C.A. § 67-3-202. The tax is administered by the Tennessee Department of Revenue.
Rate: Twenty-one cents (21 ¢) per gallon, effective July 1, 2017, twenty-four cents (24 ¢) per gallon, effective July 1, 2018 and twenty-seven cents (27 ¢) per gallon, effective July 1, 2019. T.C.A. § 67-3-202.
Distribution. Seventeen cents (17¢) of the tax is distributed as follows:
- 1.62 percent to the state general fund.
- 24.75 percent to the counties to become a part of the county highway fund in the following manner:
a. 50 percent equally among all counties;
b. 25 percent on the basis of population; and
c. 25 percent on the basis of area. - 12.38 percent to the municipalities on the basis of population, with minor exceptions.
- 61.25 percent to the state highway fund. T.C.A. § 67-3-905.
Revenues from the increases in the tax passed in 2017 as part of the IMPROVE Act are distributed as follows:
1. 17.5 percent to counties per T.C.A. § 54-4-103;
2. 8.8 percent to cities per T.C.A. § 54-4-103; and
3. 73.7 percent to the state highway fund.