How Does the Colorado Gas Tax Work?
Learn how Colorado's fuel tax functions as a system, from its collection from suppliers to its allocation for state and local transportation projects.
The gas tax in Colorado is a user fee levied on each gallon of motor fuel sold, serving as a funding source for the state’s transportation network. This revenue finances the maintenance, construction, and improvement of roads and bridges. The system is designed to ensure that drivers contribute directly to the upkeep and development of the transportation infrastructure.
Components of the Colorado Fuel Tax
The total amount paid at the pump in Colorado combines state and federal taxes. The primary state component is an excise tax of 22 cents per gallon on gasoline. The cost of fuel also includes a federal excise tax, which adds another 18.4 cents per gallon.
A recent addition to state fuel charges is the Road Usage Fee (RUF), established under Senate Bill 21-260. This fee is being implemented in phases and was 4 cents per gallon as of July 1, 2024. The fee is scheduled to increase to 5 cents per gallon on July 1, 2025, and will reach 8 cents per gallon by July 2028.
Other smaller, specific fees also contribute to the total cost. These include charges like the Environmental Response Surcharge and the Bridge and Tunnel Impact Fee, which applies to special fuels.
Allocation of Gas Tax Revenue
Revenue from Colorado’s fuel taxes and fees, including the excise tax and the Road Usage Fee, is deposited into the Highway Users Tax Fund (HUTF). This fund allocates money to various government entities responsible for maintaining public roads.
The distribution of money from the HUTF follows a statutory formula. The Colorado Department of Transportation (CDOT) receives 60 percent of the funds, the state’s counties are allocated 22 percent, and the remaining 18 percent is distributed to municipalities.
The funds distributed to CDOT, counties, and cities are used for a wide range of transportation-related activities. This includes routine road maintenance like paving, major construction projects, bridge repairs, and safety improvements.
Collection and Remittance Process
Colorado’s fuel tax is levied on licensed fuel distributors and suppliers, not directly at the pump. These entities remit the payment to the Colorado Department of Revenue. The cost of this tax is then incorporated into the wholesale price of the fuel and passed on to the consumer.
State law allows businesses in industries like agriculture or construction to claim a refund for the tax paid on fuel consumed by non-highway equipment. Refunds are not permitted for fuel used for recreational purposes. To obtain a refund, a business must complete the following steps:
- Apply for a permit with the Department of Revenue using the Gasoline/Special Fuel Tax Refund Permit Application (DR 7189).
- File a quarterly claim using the Fuel Tax Refund Claim for Exempt Use of Fuel (DR 7118) once the permit is approved.
- Support claims with detailed invoices that show the date, seller, purchaser, fuel type, quantity, and price per gallon.
- File the claim within one year of the fuel purchase date.