Fuel Taxes Are Falling—Will Truckers Actually See the Savings?

Fuel-tax relief measures could reduce diesel costs for some truckers, but the savings may vary significantly by state and may not follow vehicles across state lines. A federal order allowing temporary highway use of tax-free dyed diesel also leaves questions about state taxes, enforcement and interstate fuel-tax reporting.

Federal order targets diesel costs

President Donald Trump signed an executive order on Oct. 5 temporarily allowing dyed diesel to be used on highways and deferring the federal tax on that fuel through the end of the year. The federal on-road diesel excise tax is 24.4 cents per gallon.

The order is intended to provide immediate relief to truckers, farmers, ranchers, loggers and other diesel users. At the federal tax rate, a truck taking on 250 gallons could avoid approximately $61 in federal taxes, assuming the fuel qualifies under the order.

Some estimates have placed potential savings at $100 or more per fill-up when federal and state taxes are considered. The actual amount will depend on the state, fuel price, tank size and whether the applicable state taxes are also suspended.

State rules could limit savings

States set their own fuel-tax policies, and those rules may not match the federal action. Some states have reduced or considered suspending fuel taxes, while others have limited relief to gasoline or excluded diesel entirely.

That creates additional complexity for interstate truckers. A tax reduction available in one state may not apply after a vehicle crosses the state line. State taxes also remain separate from the federal tax deferred under the executive order.

Federal and state diesel taxes combined can represent a substantial portion of a truck’s fuel bill. State highway diesel taxes average about 35.5 cents per gallon, according to the information provided. For a 250-gallon purchase, avoiding both the federal and average state taxes could reduce the bill by roughly $150, although the actual savings will vary.

Industry questions the overall impact

Fuel analysts and trucking industry observers have questioned whether the measure will significantly reduce operating costs. Patrick De Haan, head of petroleum analysis at GasBuddy, said the federal action was unlikely to be a major market-moving development.

The impact may also be limited for large fleets that operate across multiple jurisdictions. Companies will need to account for state requirements, fuel documentation and the treatment of dyed diesel when vehicles travel through states that have not adopted comparable relief.

IFTA and compliance considerations

Interstate carriers will continue to face fuel-tax reporting requirements under the International Fuel Tax Agreement. The temporary federal action does not eliminate state fuel-tax obligations or automatically change how miles and fuel purchases are reported.

Dyed diesel is generally associated with tax-exempt off-road use. The temporary highway authorization changes the federal treatment described in the order, but state rules and enforcement procedures may differ. Trucking companies and independent operators will need to verify the requirements that apply in each jurisdiction where they operate.

For now, the measure offers the greatest potential benefit to operators who can use qualifying dyed diesel and operate in states that provide matching tax relief. For many interstate truckers, the savings may be smaller than the headline estimates.