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The current system has its origins in 1983 when a portion of the state's unit-based excise (pennies per gallon) tax was replaced with a sales tax. A process which was originally designed as a sales tax indexed to somewhat reflect transportation costs has evolved into a unit-based tax with an automatic annual tax increase that is neither tied to road building costs nor the actual cost of gasoline. In essence, the taxpayers of Florida were offered one thing, and, now, they are getting something else a much higher, automatic, annually indexed gas tax that bears little relation to the cost of building and maintaining Florida's roads.
Since then, the automatic tax hikes, coupled with a new state tax in 1991 and expansion of local option gas taxes have substantially increased Floridians' tax burden for the gasoline they buy.
The Evolution of Motor Fuel Taxes in Florida
On April 1, 1983 motor fuel became subject to Florida's sales and use tax. As part of a $250 million transportation revenue package, four cents of the existing eight cents a gallon motor fuel tax were repealed and replaced with the sales tax, which at the time was 5%. But instead of being applied to the actual purchase price of gas, the sales tax was applied to a legislatively set "average retail" price per gallon. This legislated price soon became an inflated not even close to the actual measure of gas prices in Florida.
The legislated price was set at $1.148 per gallon, where it was to stay for the first 27 months-through June 1985. The 5% sales tax applied to this price resulted in a tax of 5.7 cents per gallon. This effectively raised the state tax on a gallon of motor fuel from 8 cents to 9.7 cents.
Beginning June 1, 1985 the Florida Department of Revenue was to adjust the price by the percent change in the gasoline component of the Consumer Price Index (CPI) for the most recent twelve month period ending March 31. The resultant tax (rounded to the nearest tenth of one cent) would be in effect for the next 12 months beginning June 1.
Although this did not create a true sales tax, this process established a unit-based tax that was to be adjusted to reflect changes in gas prices, thereby indexing revenue with transportation costs, but also reducing the tax when the price of gas falls at the pump. In the short term, prices were expected to increase, thereby increasing revenues. Gas prices had more than doubled during the preceding five years, reaching an all-time high in 1982. However, when Florida adopted this "sales tax," the forecasts of gas prices declined, rather than increased. In fact, gas prices began to fall sharply after June 1985 the date the first adjustment to the "average retail" price was to be adjusted.
The Legislature stepped in and set a floor or minimum tax of 5.7 cents per gallon. Gas prices remained below the $1.148 legislated price so the tax stayed at 5.7 cents and therefore carried an effective sales tax rate of as high as 6.8% -- which is obviously higher than the state sales tax rate of 5%. Then, as the state sales tax was increased to 6% on February 1, 1988, the motor fuel sales tax rate stayed at 5%. However, at that time the legislated price was 83.9 cents per gallon, meaning the effective sales tax rate was still higher than the state sales tax -- nearly 7%.
In 1990, the sales tax on motor fuel was changed again. This was part of a badly needed transportation revenue package that included over $600 million annually in new taxes and fees and $1.6 billion in bonding. Florida TaxWatch supported the additional revenue, but not the sales tax method, recommending an increase to the unit-based excise tax on motor fuel, phased-in and contingent on the Department of Transportation meeting annual performance and productivity standards that were honest and accountable.
This unparalleled accountability reform helped persuade the Florida taxpayers (April 1990 Florida TaxWatch poll) and the Governor and Legislature to raise the state gas tax and tie it to measurable DOT performance and productivity. This was nationally hailed by author David Osborne in his book, Reinventing Government.
However, instead of increasing the unit-based tax, the sales tax was increased to 6%, establishing a tax of 6.9 cents per gallon which was also set as the new floor. In addition, the index for the annual adjustment of the tax was changed from the gasoline component of the CPI to the CPI (general inflation) as a whole. This tied the gas tax to the broad measure of inflation, virtually assuring an annual increase even when the actual price of gasoline and petroleum-based products falls. The tax is now increased on January 1 of each year. Also, adding insult to the injury of taxpayers, the requirement that DOT meet performance standards to receive additional funding has been removed from law before it ever took effect. In retailing, this is called "bait and switch."
In addition, a new State Comprehensive Enhanced Transportation System (SCETS) tax was enacted. Effective January 1, 1991, the tax was levied in each county which levied local option gas taxes, at a rate equal to two-thirds of the local option taxes levied, not to exceed 4 cents. This tax is also adjusted annually by the overall change in the CPI.
Since 1990, the sales tax on motor fuel has risen to its current level (effective January 1, 1999) of 9.1 cents a gallon. The maximum SCETS tax rate is now 5.0 cents, up from 4.0 in 1991 (see table on next page.). These large 32% and 25% tax increases, respectively, have taken place with no vote and no accountability of the Florida Legislature.
| Excise Tax |
Sales Tax |
SCETS Tax* |
Total Tax |
Excise Tax |
Sales Tax |
SCETS Tax* |
Total Tax | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1983 | 8 | 8.0 | 1997 | 4 | 8.8 | 4.8 | 17.6 | ||||
| 1984 | 4 | 5.7 | 9.7 | 1998 | 4 | 9.0 | 5.0 | 18.0 | |||
| 1985 | 4 | 5.7 | 9.7 | 1999 | 4 | 9.1 | 5.0 | 18.1 | |||
| 1986 | 4 | 5.7 | 9.7 | 2000e | 4 | 9.3 | 5.1 | 18.4 | |||
| 1987 | 4 | 5.7 | 9.7 | 2001e | 4 | 9.5 | 5.3 | 18.8 | |||
| 1988 | 4 | 5.7 | 9.7 | 2002e | 4 | 9.8 | 5.4 | 19.2 | |||
| 1989 | 4 | 5.7 | 9.7 | 2003e | 4 | 10.0 | 5.5 | 19.5 | |||
| 1990 | 4 | 6.9 | 10.9 | 2004e | 4 | 10.3 | 5.7 | 20.0 | |||
| 1991 | 4 | 7.2 | 4.0 | 15.2 | 2005e | 4 | 10.6 | 5.8 | 20.4 | ||
| 1992 | 4 | 7.6 | 4.2 | 15.8 | 2006e | 4 | 10.9 | 6.0 | 20.9 | ||
| 1993 | 4 | 7.8 | 4.3 | 16.1 | 2007e | 4 | 11.2 | 6.2 | 21.4 | ||
| 1994 | 4 | 8.1 | 4.5 | 16.6 | 2008e | 4 | 11.5 | 6.3 | 21.8 | ||
| 1995 | 4 | 8.3 | 4.6 | 16.9 | 2009e | 4 | 11.8 | 6.5 | 22.3 | ||
| 1996 | 4 | 8.5 | 4.7 | 17.2 |
Source: Florida TaxWatch and Florida Legislature, Office of Economic and Demographic Research, September, 1999.
The State of Florida currently levies motor fuel taxes ranging from 15.6 cents to 18.1 cents per gallon, depending on the county. Less than 2% of the state's population live in counties that have state motor fuel taxes less than the maximum of 18.1 cents. The following taxes make up this levy:
a statewide 2 cent "constitutional fuel tax" which is used for county road debt and other uses;
a statewide 1 cent "county fuel tax" which is also returned to the counties;
a statewide 1 cent "municipal fuel tax which goes to cities;
a statewide 9.1 cent "fuel sales tax" which goes to the State Transportation Fund; and
a "SCETS Tax" -- ranging from 2.5 cents to 5.0 cents which goes to the State Transportation Fund. Sixty-one of Florida's counties representing 98% of the state's population are at the maximum rate of 5.0 cents per gallon.
Diesel fuel is taxed the same as motor fuel, except that the SCETS tax is 5.0 cents per gallon in all counties and local option taxes (see below) are equalized at 7 cents per gallon. Aviation fuel is taxed a 6.9 cents a gallon.
Local option taxes (taxes levied at the discretion of the county) can add up to 12 cents a gallon. These local option taxes are:
a "county local option fuel tax" of one to six cents per gallon, levied by a majority vote of the county commission or a referendum of the county voters. All counties have a tax of at least 3 cents and 59 counties are at the maximum of six cents per gallon.
a "ninth cent fuel tax" of one cent, levied by an extraordinary vote of the commission or by referendum of the county voters. Thirty-seven counties levy this tax.
a "county local option motor fuel tax" of one to five cents, levied by a majority plus one vote of the county commission or a referendum of the county voters. Only 11 counties levy this tax, four with the maximum rate of 5 cents. This tax does not apply to diesel fuel.
In total, state and local motor fuel taxes in Florida can be as high as 30.1 cents per gallon (see Table 2) Four counties (Collier, DeSoto, Lee and Palm Beach) are at the maximum. Hamilton County has the lowest tax 18.6 cents per gallon. Most counties are closer to the top. The population weighted average state and local motor fuel tax rate in the state is 26.1 cents per gallon. Florida also has a pollutant tax that adds approximately two cents of tax per gallon.
Add to this the federal gas tax of 18.3 cents per gallon and gasoline in Florida can be taxed as high as 50 cents per gallon, or 43% of the average retail purchase price of gasoline at the pump.
Comparing state and local gas tax rates among states is difficult. Such comparisons often only consider state excise taxes and dramatically understate the actual tax burden. That is only a small part of the story. States use a number of additional taxes on motor fuel and some states also levy local gas taxes.
Florida's total state tax of 18.1 cents per gallon ranks in the lower half of the 50 states. However, Florida has the highest potential local option tax in the nation. According to data from the Federation of Tax Administrators, Florida's top tax rate of 30.1 cents per gallon would be the fourth highest in the nation, behind Connecticut (32.0 cents), Pennsylvania (30.77 cents) and Hawaii (30.5 cents).
Besides Florida, nine other states have local option motor fuel taxes and eight other states subject gasoline to their state sales tax.
| Local Option |
SCETS Tax |
Other State Tax |
Total State & Local Taxes |
Local Option |
SCETS Tax |
Other State Tax |
Total Taxes | |||
|---|---|---|---|---|---|---|---|---|---|---|
| Alachua | 7 | 5 | 13.1 | 25.1 | Lake | 7 | 5 | 13.1 | 25.1 | |
| Baker | 7 | 5 | 13.1 | 25.1 | Lee | 12 | 5 | 13.1 | 30.1 | |
| Bay | 6 | 5 | 13.1 | 24.1 | Leon | 6 | 5 | 13.1 | 24.1 | |
| Bradford | 6 | 5 | 13.1 | 24.1 | Levy | 6 | 5 | 13.1 | 24.1 | |
| Brevard | 6 | 5 | 13.1 | 24.1 | Liberty | 7 | 5 | 13.1 | 25.1 | |
| Broward | 10 | 5 | 13.1 | 28.1 | Madison | 6 | 5 | 13.1 | 24.1 | |
| Calhoun | 6 | 5 | 13.1 | 24.1 | Manatee | 7 | 5 | 13.1 | 25.1 | |
| Charlotte | 9 | 5 | 13.1 | 27.1 | Marion | 7 | 5 | 13.1 | 25.1 | |
| Citrus | 6 | 5 | 13.1 | 24.1 | Martin | 8 | 5 | 13.1 | 26.1 | |
| Clay | 7 | 5 | 13.1 | 25.1 | Monroe | 6 | 5 | 13.1 | 24.1 | |
| Collier | 12 | 5 | 13.1 | 30.1 | Nassau | 7 | 5 | 13.1 | 25.1 | |
| Columbia | 7 | 5 | 13.1 | 25.1 | Okaloosa | 5 | 4.2 | 13.1 | 22.3 | |
| Dade | 10 | 5 | 13.1 | 28.1 | Okeechobee | 7 | 5 | 13.1 | 25.1 | |
| DeSoto | 12 | 5 | 13.1 | 30.1 | Orange | 6 | 5 | 13.1 | 24.1 | |
| Dixie | 6 | 5 | 13.1 | 24.1 | Osceola | 7 | 5 | 13.1 | 25.1 | |
| Duval | 6 | 5 | 13.1 | 24.1 | Palm Beach | 12 | 5 | 13.1 | 30.1 | |
| Escambia | 7 | 5 | 13.1 | 25.1 | Pasco | 6 | 5 | 13.1 | 24.1 | |
| Flagler | 7 | 5 | 13.1 | 25.1 | Pinellas | 6 | 5 | 13.1 | 24.1 | |
| Franklin | 5 | 4.2 | 13.1 | 22.3 | Polk | 7 | 5 | 13.1 | 25.1 | |
| Gadsden | 6 | 5 | 13.1 | 24.1 | Putnam | 6 | 5 | 13.1 | 24.1 | |
| Gilchrist | 7 | 5 | 13.1 | 25.1 | St. Johns | 6 | 5 | 13.1 | 24.1 | |
| Glades | 7 | 5 | 13.1 | 25.1 | St. Lucie | 9 | 5 | 13.1 | 27.1 | |
| Gulf | 6 | 5 | 13.1 | 24.1 | Santa Rosa | 6 | 5 | 13.1 | 24.1 | |
| Hamilton | 3 | 2.5 | 13.1 | 18.6 | Sarasota | 7 | 5 | 13.1 | 25.1 | |
| Hardee | 7 | 5 | 13.1 | 25.1 | Seminole | 7 | 5 | 13.1 | 25.1 | |
| Hendry | 5 | 4.2 | 13.1 | 22.3 | Sumter | 7 | 5 | 13.1 | 25.1 | |
| Hernando | 9 | 5 | 13.1 | 27.1 | Suwannee | 6 | 5 | 13.1 | 24.1 | |
| Highlands | 10 | 5 | 13.1 | 28.1 | Taylor | 4 | 3.4 | 13.1 | 20.5 | |
| Hillsborough | 7 | 5 | 13.1 | 25.1 | Union | 6 | 5 | 13.1 | 24.1 | |
| Holmes | 5 | 4.2 | 13.1 | 22.3 | Volusia | 7 | 5 | 13.1 | 25.1 | |
| Indian River | 6 | 5 | 13.1 | 24.1 | Wakulla | 7 | 5 | 13.1 | 25.1 | |
| Jackson | 6 | 5 | 13.1 | 24.1 | Walton | 7 | 5 | 13.1 | 25.1 | |
| Jefferson | 7 | 5 | 13.1 | 25.1 | Washington | 7 | 5 | 13.1 | 25.1 | |
| Lafayette | 6 | 5 | 13.1 | 24.1 |
| Legislated Price Per Gallon |
Sales Tax Per Gallon (6%) |
Actual Price Per Gallon |
Effective Sales Tax Rate |
Tax Per Gallon If Based on Actual Price | |
|---|---|---|---|---|---|
| 1990 | 115.0 | 6.9 | 119.6 | 6.1% | 7.2 |
| 1991 | 120.5 | 7.2 | 125.0 | 6.1% | 7.5 |
| 1992 | 126.6 | 7.6 | 122.3 | 6.6% | 7.3 |
| 1993 | 130.4 | 7.8 | 121.4 | 6.9% | 7.3 |
| 1994 | 134.4 | 8.1 | 123.3 | 7.0% | 7.4 |
| 1995 | 137.9 | 8.3 | 122.4 | 7.3% | 7.3 |
| 1996 | 141.8 | 8.5 | 125.3 | 7.3% | 7.5 |
| 1997 | 145.8 | 8.8 | 121.1 | 7.4% | 7.3 |
| 1998* | 149.7 | 9.0 | 106.4 | 9.2% | 6.4 |
| 1999 | 152.1 | 9.1 | 117.1 | 8.4% | 7.0 |
*In 1998, the effective rate (the rate felt by the taxpayer) was 50% higher than the state general sales tax rate due to an artificially inflated tax written into law.
Actual price per gallon is the average price of a gallon of regular unleaded gasoline for July of each year, according to the American Automobile Association Auto Club South's monthly survey of gas prices in Florida.
The effective sales tax rate is calculated by dividing the sales tax levied by the actual price per gallon minus the sales tax.
Source: Florida TaxWatch, AAA Auto Club South and Florida Legislature, Office of Economic and Demographic Research, September 1999.
Purchasers of motor fuel in Florida are not paying a true 6% sales tax. The above table demonstrates the effective tax rate of Florida's sales tax on motor fuel. The first column shows the "legislated price," or the price required to produce the actual tax levied on a gallon of gas. It also shows the actual price of regular unleaded gas (from AAA), the effective rate of tax and what the tax per gallon would be if the 6% sales tax were levied on the actual average price of regular grade gas.
The effective tax rate has been above the state's tax rate of 6%, reaching a high of 9.2% in 1998. The difference between the tax per gallon a 6% tax would produce on the actual price and the tax actually levied was 2.6 cents. The current effective rate (based on the July 1999 survey) is 8.4%.
Since 1992, purchasers of motor fuel in Florida have paid $700 million more in taxes than they would have if the sales tax was based on the actual price of regular grade gas. Of course, if motorists buy higher grade gas the effective rate goes down, but it would still be far in excess of 6%.
It should also be remembered that the price of gas in Florida also includes as much as 50 cents in taxes. Subtracting all taxes from the price of gas would result in a much higher effective tax rate.
The effective tax rate is also different for different consumers. In addition to geographic differences, buying habits also have an effect. While gas taxes tend to be regressive by nature, Florida's gas tax is somewhat more regressive since someone buying the more expensive full-serve premium gas pays the same tax (in cents per gallon) as someone buying the less expensive self-serve regular.
The sales tax and the SCETS motor fuel tax are expected to increase another 4.2 cents (30%) over the next ten years, reaching a total of 18.3 cents per gallon (see Table 1). If gas prices rise faster than inflation as a whole, the effective rate of Florida's sales tax on motor fuel will go down. If growth of average gas prices does not exceed the general inflation rate, the effective tax rate will increase.
The multi-billion transportation revenue increase of 1990 was legislatively enacted as a sound, accountable way to fund our state's transportation needs. With Florida TaxWatch's initiative, the Governor demanded and the 1990 Legislature responded and legally tied the multi-billion gas tax to accountable productivity measures for the Florida Department of Transportation with fiscal consequences for succeeding or failing. The elimination of performance standards tied directly to funding was another of the bait-and-switch methods used by the Legislature during this evolution of Florida's gas tax. Despite stated intent to the contrary, Florida taxpayers now have a sales tax on gas that has little relation to the actual price, indexed in a way that does not account for road building costs (especially decreases) and provides an annual tax increase that does not have to be debated or voted on by the Legislature or accountable to the taxpayers.
To remedy this situation, Florida TaxWatch recommends that the following options be explored: 1) a straight unit-based tax with increases voted on by the Legislature; or 2) if indexed, the tax should reflect the actual price of gas whether it rises or falls. In addition, the state should reinstate a revised accountable and consequential performance and productivity provision in law.
Adequate funding of Florida's transportation system for both expansion and preservation are of utmost importance to the health and well-being of our state. Florida has some significant transportation challenges ahead of it and Florida TaxWatch has supported increased revenue for transportation. However, Florida's automatic motor fuel tax increase based on a false and inflated price is deceptive, unaccountable and a dishonest way to treat hard-working taxpayers.
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Floridians are subject to an automatic, annual increase in motor fuel taxes that occurs without even the consideration and debate of the Legislature.