What States Charge a High Excise Tax?

Is anyone jumping up and down and getting excited about paying taxes? These levies and tariffs are a part of life. In fact, they can positively contribute to your community by improving infrastructure and bettering schools. However, some items in your budget face different taxes than others. The highest markups come from the excise tax. What is this fee? What states have the highest? Here’s a guide telling you everything you need to know.

What Is an Excise Tax?

First, let’s discuss what it is. Federal and state governments impose excise taxes on goods. However, these goods aren’t your milk, butter and eggs from the grocery store. Excise taxes typically impact gasoline, alcohol, tobacco and related products. 

Some call it the sin tax because they associate this levy with sinful activities. Governments often implement excise taxes to curb your enthusiasm for particular products. For example, high taxes on alcohol may discourage people from buying it or at least lower their consumption. Excise taxes are also critical for funding state budgets and programs. For example, gas taxes nationwide fund highway and bridge projects. 

Alcohol and gasoline are the most popular forms of this tax. Still, some other goods and commodities fall under this category. According to the Internal Revenue Service (IRS), some of these services include indoor tanning, car tires and airline tickets. 

States With the Highest Excise Tax on Gas

The pain at the pump depends on what state you stop for fuel. The Tax Foundation says these five states are where you’ll find the highest excise tax on gas. 

1. California

Gas is already expensive in California due to high demand, but the state’s excise tax doesn’t help either. California residents and tourists can expect to pay a gas tax rate of 77.9 cents per gallon when they pull up to the pump. During the supply chain disruptions of 2022, gas prices soared to a $6.44 average in the Golden State, making it a pain to fill up the car. 

2. Illinois

Unsurprisingly, the Second City’s state is second on this list. Illinois’ gas tax is about 66.5 cents per gallon because it combines multiple tariffs into one. The Land of Lincoln makes drivers pay the motor fuel excise tax, sales tax and environmental fees. Altogether, the taxes add up to be the second-highest in the country.

3. Pennsylvania

Why do we have gas in the United States? We can partly thank the great state of Pennsylvania, where Edwin Drake struck oil and started the state’s oil rush. If you’re in the Keystone State, expect to pay a gas tax of about 62 cents per gallon. Pennsylvania’s gas tax last increased at the beginning of 2023 to fund state projects on roads and bridges. 

4. Indiana

Fourth place on the gas tax list is Indiana, clocking in with 54.4 cents for every gallon of gas you put in your car. Hoosiers have seen an increase in their gas tax each year since 2017. In 2022, some states decided to suspend their gas tax due to the Russian invasion of Ukraine. However, Indiana chose to keep their levy in place. Some southern Indiana natives benefit from driving to Kentucky for gas, considering the Bluegrass State has the 26th-highest gas tax. 

5. Washington

The fifth-highest gas tax in the United States belongs to the state of Washington. Residents and travelers in the Evergreen state pay about 49.4 cents in gas taxes per gallon. Despite having a high gas tax, some in Washington are ready to phase out this excise tax as fewer passenger cars hit the road. What’s the benefit of this policy? The rise of electric vehicles (EVs) will someday render gas taxes useless nationwide as EVs grow their market share. 

Avoiding the Excise Tax on Gas

Taxes aren’t something we necessarily enjoy paying, especially when the bills get tight. So, is there any way you can legally avoid paying an excise tax on gas? Yes! The best strategy is to buy a fully electric car. EVs avoid excise taxes because they don’t rely on gasoline for their power.

Some states indirectly charge EV owners by increasing their registration fees, ensuring the state still gets revenue. All in all, it’s almost like a car excise tax. Who wants to pay a car tax just to drive? For EVs, it may be worth it because you’ll save money. 

States With the Highest Excise Tax on Spirits

Do you like drinking mint juleps during the Kentucky Derby? The tax you’ll pay for the bourbon depends on your state. The Tax Foundation says these five states have the highest excise tax on spirits. 

1. Washington

While Washington may phase out the gas tax, its excise tax on alcohol is here to stay. Get ready because it’s a big one. States charge levies on a dollar-per-gallon basis for alcohol. The Evergreen State charges about $36.55 for every gallon of vodka, whiskey, tequila and other spirits you buy. Washington has no income tax, creating one of the reasons for a high tax on liquor. 

2. Oregon

Washington residents looking for a reprieve may try to cross the Oregon border for their liquor. However, it won’t do them much good. The Beaver State has the second-highest tax on distilled spirits, charging residents and tourists $22.86 for every gallon of alcohol. Pour one for your Oregon Duck fans watching football with their rum and Coca-Cola because it’s hurting their wallets. 

3. Virginia

Virginia is for lovers as long as these couples are okay with paying a high sin tax on alcohol. Virginians pay $22.06 per gallon of distilled spirits. This state (or commonwealth, as the locals may say) is famous for its Virginia Black bourbon whiskey. In fact, Virginia’s history with whiskey goes all the way back to the colonial days when pilgrims distilled this spirit on the James River. 

4. Alabama

The Yellowhammer State checks in fourth place with a spirit tax of $21.69 per gallon of liquor. This southern state typically boasts low taxes across the board. Still, it has a high spirit levy to fund the Department of Human Resources, the Department of Mental Health, the State General Fund and various localities.

5. North Carolina

Fifth place goes to North Carolina, the Tar Heel State. Residents here pay $16.40 per gallon for their distilled spirits, regardless of whether they attend North Carolina, Duke, North Carolina State or any other school in the Research Triangle. North Carolina says its high alcohol tax generates revenue to fund the state’s health care, education and public safety programs.

Paying the Price With Excise

Taxes are a necessity for keeping government offices and schools open. However, each state’s approach to funding itself significantly differs everywhere you look. Some states enforce high excise taxes on gas, spirits and even indoor tanning! These states top the list for the highest taxes on liquor and gasoline.