A New Wave of Gas Tax Relief: Indiana, Illinois, and Beyond

Updated July 8, 2026

Gas prices are once again front and center, with U.S. prices surging to their highest since August 2022.

As the conflict in Iran continues, state lawmakers are actively revisiting how (and whether) sales tax on gas and other fuel taxes should apply. Some states are moving fast, issuing immediate, temporary cessations. Others are still debating the trade-offs. Meanwhile, the federal gasoline tax remains in place—at least for now.

In this article, we cover the latest sales tax gas relief measures currently in effect, along with emerging proposals that could reshape the gasoline tax landscape in the months ahead.

FAQ: Gas Tax Relief & Sales Tax on Gas

What Is Suspended Right Now?

Let’s start with the states that have already taken action.

Indiana Gasoline Tax Relief

Update: Per the Indiana Department of Revenue, on May 6, 2026, Governor Mike Braun extended the suspension of Gas Use Tax from April 8 through June 7, 2026. He also added a suspension of Gasoline Excise Tax from May 6 through June 7, 2026.

Second Update: As of June 3, 2026, both Gas Use Tax and Gasoline Excise Tax have been suspended through July 7, 2026.

Third Update: on July 2, 2026, Governor Mike Braun extended the suspension once again. Gas Use Tax and Excise Tax won’t be collected through August 6, 2026.

Indiana has provided one of the clearest examples of a true adjustment on fuel taxes.

Fuel in Indiana is typically subject to three layers:

1. Federal Gas Tax
2. Indiana Excise Tax (now suspended May 6 through June 7, 2026)
3. Indiana Gas Use Tax (now suspended April 8 through June 7, 2026)

On April 8, 2026, Governor Mike Braun declared an energy emergency and suspended the Indiana Gas Use Tax for 30 days, through May 8, 2026.

This effectively removes the 7% sales tax component on gas, creating immediate downstream price relief. Because the tax is imposed at the distributor level, the expectation is that savings flow through the supply chain and show up at the pump. However, the federal gasoline tax remains fully in place.

Georgia Fuel Tax Suspension

Update: Governor Brian P. Kemp declared a State of Emergency and issued Executive Order 05.15.26.02, continuing the suspension from May 20 through June 2, 2026.

Georgia has also taken action, but through the excise tax channel.

On March 20, 2026, Governor Brian Kemp signed House Bill 1199, suspending the state motor fuel excise tax through May 19, 2026. Prior to the suspension, gasoline was taxed at approximately 33 cents per gallon, and diesel at approximately 37 cents per gallon.

While this is not a retail sales tax, the impact is similar: removing a per-gallon tax reduces the base cost of fuel, which should translate into lower pump prices as taxes levied along the supply chain are paid by the end-user (in other words, the consumer).

Local sales taxes and other fees still apply, which reinforces a key theme in fuel taxation—relief is rarely all-inclusive.

Kentucky Motor Fuel Tax Reduction

Kentucky has taken a two-pronged approach to fuel tax relief—both reducing the existing rate and blocking a scheduled increase from taking effect.

On May 5, 2026, Governor Andy Beshear declared a state of emergency related to rising gas prices and issued an executive order cutting the state motor fuels tax by 10 cents per gallon on both gasoline and diesel. The reduction took effect May 11. Separately, the governor signed a second executive order freezing a scheduled rate increase that had been set to take effect July 1, would would have increased the gas tax from 26.4 cents per gallon to 27 cents per gallon.

The orders were set to expire June 10, though Kentucky law allows local governments to request an extension. For those localities that did request an extension, the orders are implemented through June 30. Governor Beshear also activated the state’s price-gouging protections alongside the order, making it unlawful for sellers to fail to pass the tax savings along to consumers.

Utah Fuel Tax Cut

Utah’s fuel tax relief is the result of a legislative effort that predates the current spike in gas prices—but its timing has made it especially relevant.

In early March 2026, the Utah Legislature passed HB 575, the Fuel Tax and Supply Amendments bill, which cuts the state’s per-gallon gas tax from approximately 38 cents to 32 cents. That represents a roughly 15% reduction, and runs from July 1 through December 31, 2026.

Unlike the executive orders seen in Indiana, Georgia, and Kentucky, Utah’s approach was legislative and was planned well before the current wave of gas price increases tied to global oil market disruptions. The bill also goes beyond a simple tax cut: it includes provisions to streamline permitting for midstream pipeline infrastructure and includes commitments from major fuel suppliers—including Chevron, Maverik, and Marathon—to increase production in Utah over the next five years. The intent is to pair short-term consumer relief with longer-term supply-side pressure on prices.

The reduced rate will apply to the state’s portion of the gas tax only—the federal excise tax of 18.4 cents per gallon and any applicable local fees remain in place.

Current Proposals To Watch

Several states are now considering temporary fuel tax relief measures, largely framed as responses to sustained high fuel costs and geopolitical pressure on oil markets.

Illinois

Illinois’ proposal is one of the most closely watched right now.

On April 7, 2026, Illinois lawmakers introduced HB 5738, proposing a six-month suspension of certain fuel taxes to provide temporary relief amid high gas prices. Reports on the bill say the measure would suspend the state’s 6.25% sales tax on gasoline for six months. Motor fuel in Illinois is also subject to a separate per-gallon motor fuel tax (currently 48.3 cents per gallon).

The proposal targets the sales tax component only, leaving the per-gallon motor fuel tax untouched.

If this bill passes, it would not eliminate most of the gasoline tax burden, but it would still provide measurable (if modest) relief at the pump.

Pennsylvania

Pennsylvania lawmakers are actively considering multiple proposals:

• A Pennsylvania State Senate-backed plan to suspend the state gasoline tax for 60 days
• A House proposal for a six-month gas and diesel tax holiday beginning June 1, 2026

Both aim to reduce consumer costs and address sustained fuel price pressures.

California

California’s proposal is broader—and more aggressive.

SB 1035, the “Gas Tax Relief Act,” would:

• Suspend the state gasoline tax for one year
• Pause related regulatory programs, including the Low Carbon Fuel Standard and cap-and-invest system
• Require that savings be passed through to consumers

If enacted, this would represent one of the most comprehensive gasoline tax relief measures currently under consideration.

West Virginia

West Virginia lawmakers have proposed a more conditional approach.

A 30-day gas tax holiday would be triggered when fuel prices exceed a defined threshold (currently discussed in the $2.85–$3.00 range). This structure offers a dynamic tax bill tied to current market conditions, rather than a fixed period of relief.

Federal Gasoline Tax: Still in Place, But Facing Pressure

At the federal level, the federal gasoline tax remains 18.4 centers per gallon, unchanged since 1993.

However, multiple proposals intend to change that:

• Senator Mark Kelly has proposed suspending the federal tax through October 1, 2026
• Congressman Brendan Boyle has introduced a price-triggered suspension when gas prices rise above $4 a gallon
• Congressman Chris Pappas has backed a similar temporary suspension framework
• President Donald Trump has spoken publicly on his intentions to suspend the federal gas tax

None of these proposals have been enacted, but they signal an increase in discussion and potential willingness to revisit fuel taxation policies.

If passed, federal changes would apply nationwide, but their real-world impact would still vary due to differences in gasoline tax structures by state. Federal excise taxes, state excise taxes, state sales taxes, use taxes, local surtaxes, and other fees can all stack differently depending on the jurisdiction.

The Compliance Reality: Not All Gas Tax Breaks Are Equal

From an administrative standpoint, these tax holidays are anything but simple.

Each state approaches relief differently. Indiana suspends a distributor-level tax, requiring adjusted reporting and reconciliation. Georgia suspends excise tax but maintains other tax layers. And while Illinois’ proposal is not yet in effect, it still targets only one component of a multi-layer fuel tax system that is currently one of the highest in the nation.

All of that creates real administrative implications:

• Filing requirements may change mid-period
• Tax calculation logic must be updated quickly
• Erroneously collected tax may not be refundable (as noted by Indiana)
• Distributor-to-retailer pricing mechanics shift

In short, while headlines promote a “gas tax holiday,” the underlying tax structure remains highly fragmented.

As fuel prices remain volatile, expect more states to enter the conversation—and more variation in how gasoline tax relief is actually implemented.