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

Editor’s note: An earlier version of this article referenced an October 1, 2025, effective date for the new tax plan. It has since been corrected to the act’s effective date of October 7, 2025. It will go into operational effect at the pump on January 1, 2026. Also, the former state fuel tax has been adjusted for inflationary increases.

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 31 cents to 51 cents.

Governor Whitmer signed the bills on October 7, 2025, when the act went into effect. The prices kick in at the pump on January 1, 2026.

Here’s How It Works for $3.50 per gallon

The old plan:

1. The state motor fuel tax (31¢ per gallon).
2. The federal fuel tax (18.4¢ per gallon).
3. The 6% state sales tax, which is calculated on top of the wholesale price plus both of those per-gallon taxes.
4. At a $3.50 per-gallon pump price, that sales tax adds 21¢, bringing total taxes per gallon to about 70.4¢ (including about 1½¢ in “tax on the taxes”).

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.