Sep 10 ,2025
Gasoline vs. Diesel: Fuel Tax Differences on Form 720
Introduction to Fuel Excise Tax on Form 720
Fuel excise tax is a federal tax imposed on the sale and use of taxable fuels in the United States. Businesses involved in the production, import, or sale of fuel are required to report and pay this tax using IRS Form 720, which is filed quarterly. Diesel and gasoline both fall under the fuel excise tax category on Form 720 and are among the most commonly reported fuels. These taxes contribute to national highway maintenance, transportation infrastructure, and environmental programs.
What Is Diesel Excise Tax
Diesel excise tax is a federal tax applied to diesel fuel when it is sold, removed from a terminal, or used in a taxable manner. Standard diesel used for highway vehicles is subject to a federal excise tax of 24.4 cents per gallon. Diesel is widely used in commercial transportation including trucks, buses, and freight vehicles, which places higher demand on public roads. Special types of diesel such as dyed diesel, biodiesel, and renewable diesel are also regulated under specific IRS fuel tax rules depending on their usage.
What Is Gasoline Excise Tax
Gasoline excise tax is a federal tax imposed on gasoline when it enters taxable use through sale, removal, or blending. The standard federal gasoline excise tax rate is 18.4 cents per gallon. Gasoline is mainly used in passenger vehicles and light transportation. Gasoline blendstocks and aviation gasoline are also taxable under fuel excise tax regulations. The tax applies at different transfer and sale points and must be properly reported on IRS Form 720.
Diesel vs Gasoline Fuel Tax Differences on Form 720
| Category | Diesel | Gasoline |
| Federal Excise Tax Rate | 24.4 cents per gallon | 18.4 cents per gallon |
| Common Usage | Commercial trucks buses freight transport | Passenger vehicles light transport |
| Tax Reporting | Reported quarterly on Form 720 | Reported quarterly on Form 720 |
| Special Fuel Types | Dyed diesel biodiesel renewable diesel | Gasoline blendstocks aviation gasoline |
| Tax Liability Trigger | Sale terminal removal taxable use | Sale terminal removal taxable use |
| Road Impact | Higher due to heavy duty usage | Moderate compared to diesel |
Key Reasons Why Diesel Tax Is Higher Than Gasoline
Diesel carries a higher federal excise tax rate because it is primarily used in heavy duty vehicles that place greater strain on highways and bridges. Commercial fleets traveling long distances depend on diesel, contributing to greater infrastructure usage. Diesel powered transportation also plays a major role in nationwide freight movement, which increases its economic and environmental impact. To balance this higher usage and road wear, diesel is taxed at a higher rate than gasoline.
Conclusion
Both gasoline and diesel are taxable fuels that must be reported to the IRS using Form 720. While gasoline is taxed at 18.4 cents per gallon, diesel is taxed at a higher rate of 24.4 cents per gallon due to its heavy commercial usage and infrastructure impact. Understanding these differences is essential for fuel distributors, importers, trucking companies, and fleet operators. Accurate reporting ensures IRS compliance, prevents penalties, and streamlines fuel excise tax filing. Choosing electronic filing further simplifies the process by reducing errors and speeding up IRS processing.