September 12, 2013


If you own a trucking company diesel is one of your biggest expenses so you need to make sure you are getting the lowest priced fuel available.  The problem is, you can’t compare diesel prices like four-wheelers do.  Diesel at a Nevada truck stop that is $4.00 per gallon is not cheaper than diesel at a California truck stop that is $4.05 per gallon.  Let me explain.
The price of diesel is made up of three components:

  • Federal fuel tax, $.184 per gallon
  • State fuel tax, amount varies by state
  • The actual product cost of the diesel

Because the state fuel tax varies from state to state you have to subtract it from the posted price of fuel to get to the actual fuel cost so you can compare apples to apples.  The reason you have to subtract the state fuel tax from the posted price is because any commercial vehicle that crosses state lines is subject to IFTA (International Fuel Tax Agreement) rules which means you are filing a quarterly report that reconciles how much diesel you purchased in each state and how many miles you traveled in each state.  The bottom line is, you are going to pay each state’s portion of fuel tax based on your fleet’s MPG and the miles you travel in each state, not by the fuel tax you pay at the pump.
To better understand how to make the comparison lets go back to our example of California and Nevada.  The tax on diesel in CA is $.397 and in Nevada it is $.27.  To accurately compare the diesel price between the two states, you need to subtract the price of each state’s tax to get the true cost of the diesel as I have done below.

  • CA $4.05 – .397= $3.653
  • NV $4.00 – .27=  $3.73

In our example, even though the posted price of diesel is higher in California, the California diesel is cheaper than in Nevada because of the difference in the state fuel tax.  You are better off  purchasing the California diesel in the long run because the actual product cost of the diesel is lower and you will receive a higher credit on your fuel tax report for taxes paid, which will mean you will owe less on your IFTA report or even possibly be entitled to a refund.

To find the current fuel tax for each state click here.


  1. I appreciate you helping me learn more about diesel fuel pricing per state. I like how you said you have to subtract the state fuel tax to get the actual fuel cost. My truck drive husband will be interested to know this.

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