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

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.

What Is Suspended Right Now?

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

Indiana Gasoline Tax Relief

Indiana has provided one of the clearest examples of a true sales tax on gas adjustment.

Fuel in Indiana is typically subject to three layers:

1. Federal Gas Tax
2. Indiana Excise Tax
3. Indiana Gas Use Tax (which is functionally equivalent to the state’s 7% sales tax on gasoline)

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 and Indiana excise tax remain fully in place.

There is the possibility of an extension, though no additional executive action has been issued as of now.

Georgia Fuel Tax Suspension

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

On March 20, 2026, Governor Brian Kemp signed legislation 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 on gas, 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.

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, lawmakers introduced HB 5738, proposing a six-month pause on the Illinois sales tax on gas from July 1 through December 31, 2026. 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 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

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.