Compressed Natural Gas Tax

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Description. A tax on the privilege of using compressed natural gas for the propulsion of motor vehicles on the public highways of this state.  Governmental agencies are exempt. T.C.A. §§ 67-3-1113 through 67-3-1118.

Rate. 13 cents (13¢) per gallon. For the purpose of determining the tax, a gallon equivalent factor of 5.66 pounds per gallon is used. T.C.A. § 67-3-1113.

Distribution. The tax is distributed as follows:

  1. 1.62 percent to the state general fund.   
  2. 24.75 percent to the counties to become a part of the county highway fund in the following manner:
    a.   50 percent equally among all counties;
    b.   25 percent on the basis of population; and
    c.    25 percent on the basis of area.
  3. 12.38 percent to the municipalities on the basis of population, with minor exceptions.
  4. 61.25 percent to the state highway fund.  T.C.A. § 67-3-905.

As part of the IMPROVE Act, the tax will increase to sixteen cents (16¢) effective July 1, 2017, to eighteen cents (18¢) effective July 1, 2018 and to twenty-one cents (21¢) effective July 1, 2019.  The revenue from this increase goes to the state highway fund.