Michigan Overhauls Fuel Taxes: What It Means at the Pump

Photo: Mugg & Bopps at the corner of Main and I-94 in Chelsea. Google Street View

On October 7, 2025, Governor Gretchen Whitmer signed into law a package of four bills that completely change how Michigan taxes gasoline and diesel. The goal is to simplify the system, stop taxing fuel twice, and send more money directly to fix the roads.

What the Four Bills Do

The new fuel tax package includes four connected laws: House Bill 4180 ends Michigan’s 6% sales tax on gasoline, diesel, and aviation fuel beginning October 1, 2025; House Bill 4181 updates how interstate trucking companies pay fuel taxes so they aren’t taxed twice; House Bill 4182 eliminates the use tax on motor and aviation fuels, the business version of the sales tax, and redirects that money to protect school and airport funds; and House Bill 4183 raises the per-gallon state fuel tax from 26.3 cents to 51 cents starting October 1, 2025, with automatic annual increases tied to inflation.

Although Gov. Whitmer signed the bills on October 7, 2025, the legislation was written to take effect retroactively on October 1, the start of the state’s new fiscal year, which is common for tax and budget-related changes.

Here’s How It Works for $3.50 per gallon

The old plan:

• The state motor fuel tax (26.3¢ per gallon for gas).
• The federal fuel tax (18.4¢ per gallon).
• The 6% state sales tax, which is calculated on top of the wholesale fuel price plus those per-gallon taxes.
• Total taxes per gallon are about 65.7¢.

The new plan:

• The state motor fuel tax changes (51¢ per gallon for gas).
• The federal fuel tax (18.4¢ per gallon).
• The 6% state sales tax goes away.
• Total taxes per gallon are about 69.4¢.

What It Means

At $3.50 per gallon (before the change), if wholesale fuel prices stayed the same, you’d now pay roughly $3.54 per gallon instead of $3.50, and all that tax money would go directly toward roads and infrastructure, not into the general or school funds.