States collect taxes and fees from motor vehicle users and use the revenues to support a variety of transportation (and non-transportation) expenditures. States generally have more flexibility in the varieties of taxes they collect, as well as in how they dispose of those taxes. Taxes imposed by states and localities are collected and administered by various agencies, departments, and offices, depending on how a particular tax or fee is structured or designated in state and local law.
Other significant sources of state revenue include tolls, general fund appropriations, and bond proceeds.
State Motor Fuel Taxes and Fees
Among state surface transportation revenue, motor fuel taxes provide a significant contribution, although considerably less than motor fuel taxes’ share of Federal revenue. Each state sets its own motor fuel tax rates. As of December 2017, tax rates ranged from approximately 14 to 61 cents per gallon for gasoline and 15 to 86 cents per gallon for diesel fuel. For the purpose of quoting state motor fuels tax rates, other taxes are often included with the excise tax, including sales taxes, environmental fees, fees for underground storage tank and other funds, and local taxes and fees. State sales taxes on motor fuels may be included in a state’s motor fuel excise tax and can represent a notable portion of state motor fuel tax revenue. Several states have either all or a portion of their motor fuel tax indexed to a local consumer price index or the wholesale price of fuel.
With respect to interstate motor carriers, taxation of fuel is regulated by the International Fuel Tax Agreement, except in Alaska and Hawaii. IFTA also applies to the 10 Canadian provinces but not the three territories. The agreement simplifies the reporting of fuel used by motor carriers that operate in more than one jurisdiction. The International Fuel Tax Association (IFTA), a non-profit corporation manages and administers the International Fuel Tax Agreement.
The disposition of state-imposed fuel taxes varies by state. A state may direct motor fuel tax revenue to numerous sources, including its department of transportation, special road or bridge funds, county governments, or even state general funds. FHWA’s Highway Statistics Table MF-3 summarizes the disposition of state motor fuel taxes.
American Petroleum Institute Motor Fuel Tax Data (updated quarterly)
The American Petroleum Institute provides summaries of state motor fuel taxes in report, table, and map formats.
IFTA Fuel Tax Rates (updated quarterly)
IFTA maintains a table of fuel tax rates for interstate motor carriers under the International Fuel Tax Agreement.
Highway Statistics (published annually)
These publications are prepared by the FHWA Office of Highway Policy Information presenting and analyzing statistics of general interest on motor fuel, motor vehicles, driver licensing, highway-user taxation, state highway finance, highway mileage, and Federal aid for highways. They also include highway finance data for municipalities, counties, townships, and other units of local government.
State Motor Vehicle Registration Fees
All states levy motor vehicle registration fees for passenger and commercial vehicles, assessed by various vehicle characteristics or combinations thereof, including a flat fee, by weight, by age, and by value. In some states, county and/or local registration fees are collected either with the state fee or separately.
Summary of State Motor Vehicle Registration Fee Schedules
(National Conference of State Legislatures)
Summary of State Motor Vehicle Registration Fee Schedules – Truck Tractors and Semi-trailers
(FHWA Table MV-103 Part 2; last updated in 2008)
State Motor Vehicle Sales Taxes
State sales taxes imposed on motor vehicle sales typically are not considered transportation-specific revenues, because they are directed to general funds with sales taxes collected on other transactions. However in some states, the sales tax on motor vehicles is dedicated to transportation purposes.
One notable example is in Minnesota (pdf) where the dedication of the Motor Vehicle Sales Tax (MVST) to transportation is a key funding source.
Road Usage Charges
Road Usage Charges (RUCs) – also known as vehicle-miles traveled (VMT) fees and mileage-based user fees (MBUFs) – are distance-based fees levied on a vehicle user for use of a roadway system. As opposed to tolls, which are facility specific and not necessarily levied strictly on a per-mile basis, these fees are based on the distance driven on a defined network of roadways. The RUC strategy links transportation user fees more closely to actual roadway usage compared to traditional fuel-based charges.
RUCs have the potential to provide a growing share of State DOT revenues by charging drivers on a per-mile driven basis. Proponents see this as a way to increase transportation revenues as vehicle-miles traveled increases while fuel utilization decreases due to increased vehicle efficiency and alternative fuels. At least 10 states have passed legislation to study RUCs since 2013, and others have explored the concept without enacting legislation.
A three-part video series prepared by AASHTO Transportation TV titled “Another Way to Pay” explores RUC as an alternative to the traditional motor fuel tax.
The BATIC Institute hosted a webinar to provide an accessible introduction to RUC as a user-based alternative revenue mechanism for surface transportation and highlight successful examples of collaboration, leadership, and public education from states working to build internal capacity and external support around this issue.
The Fixing America’s Surface Transportation (FAST) Act of 2015 established a new program – Surface Transportation System Funding Alternatives (STSFA) – to explore alternative revenue mechanisms including RUCs to maintain the long-term solvency of the Highway Trust Fund. The FAST Act provides up to $15 million to states in 2016 and up to $20 million per year thereafter through 2020.
Projects qualifying for grants include:
- Full new demonstration projects.
- Extensions or enhancements of existing demonstration projects.
- Necessary pre-demonstration activities leading directly to a planned future demonstration project in the near term (less than 18 months from award).
In August 2016, FHWA awarded a total of $14.2 million in STSFA grants to eight states. These grant-funded pilots explore onboard vehicle technologies to charge drivers based on miles traveled, and multistate or regional approaches to road user charges. The pilots explore challenges including public acceptance, privacy protection, equity and geographic diversity. The projects also evaluate the reliability and security of the technologies available to implement mileage-based fees.
View the FHWA press release announcing the award of the 2016 STSFA grant recipients.
In October 2017, FHWA awarded $15.5 million in STSFA grants to seven projects in six states. View the FHWA press release announcing the 2017 STSFA grant recipients.
In February 2019 (for FY 2018), FHWA awarded $10.2 million in STSFA grants to seven states to explore RUC methods, including for trucks and automated vehicles, and the implementation and operation of the technologies at a regional level.
- View the FHWA press release announcing the FY 2016 STSFA grant recipients.
- View the FHWA press release announcing the FY 2017 STSFA grant recipients.
- View the FHWA press release announcing the FY 2018 STSFA grant recipients.
State RUC Pilots Involvement
Several states have conducted pilot tests of different RUC concepts. Some of the most advanced pilots have been located in Oregon, California, Colorado, and Washington State.
Launched in July 2015, the OReGO Program is the first statewide program to collect revenue from light vehicles based solely on the distance they travel. OReGO volunteers pay based on the actual number of miles they drive, and receive credits on their bill for the state fuel tax they paid on the gallons used to drive taxable miles. OReGO initially used a rate of 1.5 cents per mile, which was equivalent to the state’s 30-cent-per-gallon fuel tax at the time for vehicles with a fuel efficiency of 20 miles per gallon. The 2017 legislature passed a funding bill (HB 2017) that increases the motor fuel tax in several increments between 2018 and 2024, and comparable RUC rate increases are expected. As of January 1, 2020 the RUC rate is 1.8 cents per mile. HB 2017 also includes a provision that exempts electric vehicles that are enrolled in OReGO from payment of higher registration fees designed to account for the fact that they pay little to no fuel tax.
OReGO is the state’s third iteration of RUC, with the first originally having launched in 2007 and the second one in 2012. Oregon DOT published in 2017 a Final Report on the OReGO Program that provides background and rationale for the program, what the state has learned, what the public thinks, and next steps for the future.
OReGO uses two mileage-reporting options and three different account management vendors:
- A plug-in Mileage Reporting Device (MRD) with GPS that reports on all miles driven, fuel consumed, and delineates between miles driven within and outside of Oregon. Any miles driven outside of Oregon with this option are not charged the per mile fee.
- A plug-in MRD without GPS that reports on all miles driven and fuel consumed but does not delineate between miles driven across state lines. Because the miles are not differentiated, all miles are presumed to be taxable miles driven within the state.
Oregon used its 2016 STSFA grant to expand the market, increase public awareness (ongoing through December 2020), evaluate compliance, and explore interoperability. It also developed a manual mileage reporting component but has not deployed it into the existing program, instead waiting until the program is mandated or has significantly more vehicles. The OReGO Program completed an interoperability pilot with Washington State in January 2019, and will be undertaking one with California as a part of RUC West, a coalition of 14 member states collaborating on RUC research, concepts, and implementation.
Oregon also received a 2017 STSFA grant, which it is using to improve OReGO’s scalability and demonstrate how it could be implemented for local jurisdictions. If the legislature passed a local option RUC bill, it would require that the OReGO RUC system be flexible enough to accommodate a variety of tax rates and jurisdictional types. As such, funding from the grant will be used to demonstrate that OReGO’s interoperable platform can scale to include local governments and municipalities, thus decreasing overall administrative costs. The goal is to demonstrate that the OReGO RUC system can provide transportation funding levels to local governments equivalent to that which the fuels tax system already provides.
California conducted a voluntary road charge pilot program that relied heavily on Oregon’s experience. The California Road Charge Pilot included more than 5,000 participant vehicles, but unlike in Oregon, the state did not collect actual revenues. The California Road Charge Pilot concluded in March 2017 and the California State Transportation Agency submitted a Final Report to the State Legislature and California Transportation Commission in December 2017.
Colorado completed the Colorado Road Usage Charge Pilot Program (RUCPP), a four-month statewide pilot for 100 motorists. These participants consisted of transportation officials, legislators, members of the general public and the media. The Colorado RUCPP used three mileage reporting options (GPS, non-GPS, and manual self-reporting) to assess a simulated 1.2-cents per mile charge. The Colorado RUCPP ended in April 2017 and a Final Report presents results and findings. An independent evaluation was also performed.
The Washington Road Usage Charge Pilot is a one-year study conducted by the state transportation commission to assess options for charging vehicle owners a tax based on the number of miles driven within the state, rather than on the amount of gas purchased. The pilot, funded by a FY2016 STSFA program grant concluded in January 2019 with 2,000 motorists having tested one of four mileage reporting options: mileage permit, electronic or in-person odometer readings, plug and play automated mileage meter with or without GPS, or smartphone app. The Washington State Transportation Commission submitted a final report to USDOT the Governor, and State Legislature in January 2020.
EARLIER STATE PILOTS
FHWA’s Center for Innovative Finance Support website includes information on several earlier state RUC pilots.
MORE ON CURRENT STATE PILOTS
Tolls are a direct user fee charged for use of facility capacity and services. Historically, toll roads played a prominent role in the provision of road transportation in the eighteenth and nineteenth centuries. In the first half of the nineteenth century, it is thought that private toll roads outnumbered public roads in the United States. Private investors formed tollway companies that improved, constructed, and maintained roads and, in turn, charged the public for their use.
In the late nineteenth century, toll road development tapered as toll evasion as well as rail travel increased. However, by the 1930s, some states began developing public toll road programs to respond to growth in automobile ownership, the rising needs of commerce, and the absence of significant Federal-aid for highways. While private tollway companies dominated the “turnpike” industry in the earlier centuries, the toll facilities of the twentieth century have largely been authorized, constructed, and managed by quasi-public authorities established by state and local governments. The pursuit of toll roads declined again after 1956, when the Federal-aid Highway Act established a Federal motor fuel tax to support the interstate highway system and prohibited tolling on new, Federally-funded highways.
Today, public funding constraints have fueled new interest in tolls as a revenue source to support transportation investment. Interest in toll roads today is largely an outgrowth of more supportive regulations beginning in 1991 with ISTEA that have liberalized and incentivized the use of Federal-aid in conjunction with private resources for road development purposes. Public-private partnership development of toll roads has been the focus of most state DOT activities in privatization.
Federal tolling programs first launched by ISTEA have also expanded through subsequent Federal-aid authorization acts, including the 2012 Moving Ahead for Progress in the 21st Century (MAP-21) Act’s mainstream and pilot toll programs, now continued under the 2015 Fixing America’s Surface Transportation (FAST) Act. The FHWA Center for Innovative Finance Support manages these toll programs.
Toll organizations use a variety of funding sources, although the two most common are toll charges and revenue bonds. These funding sources are closely linked, in that future toll revenues are typically pledged as the security for bonds issued to construct, maintain, expand, or operate the associated toll facility(ies) and are used to make bond principal and interest payments.
Potential Advantages of Tolling
Today, many state transportation agencies see toll facilities as a way to close funding gaps for transportation projects in a time of constrained public resources. Specifically, tolling can promote the following benefits in transportation spending:
- Fostering public-private partnerships by attracting private capital
- Drawing on the public’s willingness to pay direct user charges
- Leveraging new sources of capital, such as additional debt
- Freeing up traditional public resources for non-revenue-generating projects
- Allowing additional transportation facilities to be developed more quickly than would be possible under conventional public procurement, funding, and ownership
- Facilitating road pricing as a demand management tool (congestion pricing)
Potential Disadvantages of Tolling
Toll facilities were traditionally associated with long queues and high emissions at collection points, but these disadvantages are disappearing with electronic toll collection at toll booths or in overhead gantries and/or the pavement. Still, toll roads and bridges face other challenges, including:
- Costs of borrowing capital
- Restricted availability because of the distance between access points
- Disproportionate impacts of tolls on low-income motorists and associated equity issues
- Negative public opinion that views tolls, on top of fuel taxes, as double taxation
Federal Tolling Programs – FHWA Center for Innovative Finance Support
Information on mainstream Federal tolling programs and pilot programs, tolling program administration, and questions and answers on tolling and pricing covering changes made by MAP-21.
FAST Act Tolling Fact Sheet
Information on FAST Act provisions that modify Federal requirements related to highway tolling.
Congestion Pricing – FHWA Office of Operations
Information on Federal tools and programs that support congestion pricing, including HOT lanes and express toll lanes.
Tolling Facilities in the United States – FHWA Office of Highway Policy Information
Report containing selected information on toll facilities in the U.S. including inventories and toll receipts.
IBTTA: International Bridge, Tunnel and Turnpike Association
The IBTTA is the industry organization representing tolling entities and the engineering, construction, and financial corporations that support them. It has an international membership and maintains a member address directory and serves as an information clearinghouse and research center. It also conducts surveys and studies and publishes a variety of reports, statistics, and analyses.
Subscription-based news and briefs on toll roads, turnpikes, toll bridges, toll tunnels, and road pricing.
Other Sources of State Revenue
Other sources of state transportation revenue include general fund appropriations, bond proceeds, inspection fees, driver license fees, advertising, rental car taxes, state lottery/gaming proceeds, oil company taxes, vehicle excise taxes, vehicle weight fees, investment income, and other licenses, permits, and fees.
AASHTO’s 50-State Review of State Legislatures and Departments of Transportation report provides this information in great detail, and the BATIC Institute maintains an interactive map that illustrates a number of these other revenue sources by state using information from this report.