Sales Tax On Motor Fuels

Beginning July 1, 2021, revenues from the sales tax on motor fuels will incrementally move over a 5-year period to the Road Fund. As summarized below, revenues from the 6.25% sales tax will gradually shift to funding transportation, in 1% increments up to 5%.

Distribution of Sales Tax between State Funds

The sales tax on motor fuels is prepaid by each motor fuel retailer when purchasing fuel. The sales tax comes in the form of a cents per gallon rate, which is established by the Illinois Department of Revenue on January 1 and July 1 of each year. The rate is calculated by using the average selling price per gallon of motor fuel sold in the state during the previous six months and multiplying that rate by 6.25% to determine the cents per gallon rate (35 ILCS 120/2d). The following table summarizes the sales tax rates on motor fuel for 2019.

Sales Tax Rate Imposed on Motor Fuels for 2021

Source: Illinois Department of Revenue, 2020

While these revenues are not included in the previous annual revenue estimates, the table below calculates estimated revenues from a sales tax on motor fuel in Illinois. In FY 2021, it is estimated that $657 million was generated from the sales tax on motor fuel. Assuming similar rates and gallons purchased for future years, it can be assumed that the Road Fund will receive approximately $105 million in FY 2022. This is 16% of the total annual sales tax on motor fuel, which represents the 1% going to the Road Fund out of the total 6.25% sales tax. This amount will increase each year until July 1, 2025.

Sales Tax on Motor Fuels Revenue in 2021 and Estimated Portion to Road Fund in 2021

Sources: IL Dept. of Revenue (Gallons and Sales Tax Rates)