Reference Number: 
CTAS-1622

Description.  This tax is on liquefied gas used for the propulsion of motor vehicles on the public highways of this state.  Governmental agencies are exempt. This tax is paid in advance annually by the owner of each motor vehicle licensed in Tennessee using liquefied gas as fuel. Out-of-state users pay upon delivery of the liquefied gas into the fuel supply tank of a motor vehicle. T.C.A. §§ 67-3-1102 through 67-3-1112.

Rate:   Fourteen cents (14¢) per gallon T.C.A. § 67-3-1102.  

Distribution.  The distribution of the liquefied gas tax is as follows:

  1. Nine cents (9¢) of the fourteen cents (14¢) distributed as follows:
    a. 1.58 percent to the general fund.
    b. 28.28 percent to the counties to become a part of the county highway fund as follows:
         (1)  Fifty percent (50%) equally among all counties;
         (2)  Twenty-five percent (25%) on the basis of population; and
         (3)   Twenty-five percent (25%) on the basis of area
    c.  14.14 percent to the municipalities on a population basis, with minor exceptions.
    d.  56 percent to the state highway fund.
  2. Three cents (3¢) of fourteen cents (14¢) distributed to the state sinking and highway funds.
  3. One cent (1¢) of fourteen cents (14¢) distributed as follows:
    a.  66 percent to the counties as other county aid funds are distributed, less one percent (1%) to the Department of Revenue for administration expenses.
    b.  33 percent to the municipalities as other municipal aid funds are distributed, less one percent (1%) to the Department of Revenue for administration expenses.
  4. One cent (1¢) of fourteen cents (14¢) is distributed to the state highway fund.  T.C.A. § 67-3-908.

As part of the IMPROVE Act, the tax will increase to seventeen cents (17¢) effective July 1, 2017, to nineteen cents (19¢) effective July 1, 2018 and to twenty-two cents (22¢) effective July 1, 2019.  The revenue from this increase goes to the state highway fund.