Pumping gas

A customer pumps gas into their vehicle.

(The Center Square) – The North Carolina Department of Revenue is alerting motorists that the state’s motor fuels tax rate will increase by 2 cents next year.

The department issued a news release on Tuesday announcing the motor fuels and alternative fuels tax for 2023 will increase from the current 38.5 cents to 40.5 cents per gallon.

“The motor fuel excise tax rate is calculated by using the motor fuel excise tax rate of the preceding calendar year, multiplied by a percentage,” the notice said. “The percentage is 100 percent plus or minus the sum of the annual percentage change in State population for the applicable calendar year, multiplied by 75 percent and the annual energy index percentage change in the Consumer Price Index for All Urban Consumers, multiplied by 25 percent.”

Over the last decade, North Carolina’s motor fuels tax has ranged from a high of 38.9 cents per gallon in 2012 to 34 cents per gallon in 2016. The current 38.5 cents per gallon rate marked a 2.4 cents increase over the previous rate of 36.1 cents per gallon for 2020 and 2021, according to NCDOR data.

In addition to the road tax, every gallon of motor fuel also includes a .0025 cents per gallon inspection tax, which is slated to remain the same in 2023.

Gas tax revenues are the DOT’s largest funding source, and the law requires revenues to only be used for transportation purposes. In fiscal year 2020, the motor fuels tax revenue was $1.9 billion, with $1.35 billion or 71% going to the Highway Fund and $563 million or 29% to the Highway Trust Fund, according to a report by the NC First Commission.

“COVID-19 impacts reduced the consumption of motor fuels and lowered revenues 7.5 percent compared to FY 2019,” the report read. “Representing 52 percent of state transportation resources, changes in fuel economy, consumer mobility preferences, and alternative fuel vehicles will erode these revenues.”

Gov. Roy Cooper issued an executive order in 2018 that aims to increase the number of zero-emission vehicles registered in North Carolina to at least 80,000 by 2025. While electric vehicle owners in North Carolina pay an additional $140 vehicle registration fee, hybrid vehicle owners pay no additional fee.

The situation means the NC First Commission expects to lose between $10.7 million and $18.4 million in revenue from electric vehicles, and between $25 million and $28 million from hybrids by 2030, assuming a 3% growth rate.