Michigan’s New Gas Tax Is Here. What Will It Cost You?

Michigan’s new gas tax is now in effect. Here’s what it will cost you at the pump.

Signed by Governor Gretchen Whitmer in October, the new law scraps Michigan’s sales tax on fuel, raises the state gas tax from 31 to 51 cents per gallon, and directs all fuel tax revenue to roads, with the changes now in effect at the pump.

Here’s How It Works at $3.00 per Gallon

Under the old system (before January 1, 2026)

Michigan gasoline was taxed in three layers:

• State motor fuel tax: 31¢ per gallon (fixed amount)
• Federal fuel tax: 18.4¢ per gallon (fixed amount)
• 6% state sales tax, applied to the final pump price (which already included both per-gallon fixed taxes)

At a $3.00 per-gallon pump price, the sales tax portion works out to 18¢ per gallon.

That brought total taxes per gallon to roughly:

• 31.0¢ state fuel tax
• 18.4¢ federal fuel tax
• 18.0¢ state sales tax

Total: about 67.4¢ per gallon, including almost 3¢ of “sales tax on the fixed taxes.”

Under the new system (now in effect)

The sales tax on fuel is eliminated and replaced with a higher flat fuel tax:

• State motor fuel tax: 51¢ per gallon
• Federal fuel tax: 18.4¢ per gallon
• No state sales tax on fuel

That brings total taxes per gallon to 69.4¢ per gallon.

What this means at the pump

At a $3.00 price point, the new system collects about 2¢ more per gallon in total taxes than the old system did. However, the old sales tax rose and fell with fuel prices. The new tax does not. It is now a fixed amount. If fuel prices hit $3.50/gallon, consumers begin paying about a penny less per gallon under the new system.

Most importantly

The pennies-per-gallon incremental impact (more or less per gallon) will be obliterated by the constantly changing wholesale fuel prices.

The biggest change is where the money goes, not how gas prices are set. Under the new system, all state fuel taxes collected at the pump go directly to transportation (roads), rather than being split with school and general fund budgets through the sales tax.

Photo: Michigan’s new gas tax took effect January 1, changing how fuel is taxed at the pump. Photo: iStock