In addition to the flat excise tax rate assessed on each gallon of fuel, at least nine states-California, Delaware, Georgia, Hawaii, Illinois, Indiana, Michigan, New York and West Virginia-also levy a sales or gross receipts tax as a percentage of the retail price.15 Revenues from these taxes are linked to motor fuel prices so that states with sales or gross receipt taxes on motor fuel experienced revenue growth as gas prices rose to more than $3 per gallon in late summer 2005 in the wake of hurricanes Katrina and Rita. If these sales taxes are dedicated to transportation purposes, they could become another method of maintaining the purchasing power of transportation revenues.
In addition, motor fuel sales tax revenues usually are not dedicated to transportation purposes. State DOTs often face competition from other state agencies that believe they should have first right to sales tax revenues since transportation already receives motor fuel excise tax funds.