DMV Businesses Face Growing Fuel Tax Impact
California Tops Nation with Highest Gasoline Tax at 70.9 Cents Per Gallon
California leads the nation in gas taxes at 70.9 cents per gallon, followed by Pennsylvania at 57.6 cents and Washington at 55.4 cents. State gas taxes significantly affect transportation costs, which can impact pricing, logistics, and budgeting—especially for businesses operating across state lines.
Business owners in the DMV (District of Columbia, Maryland, Virginia) region face different fuel tax environments, but should closely monitor changes nationwide when expanding or contracting suppliers and logistics routes. Estate planning, tax allocation, and corporate structuring may require revaluation when business assets (such as fleets or transport operations) involve high-tax states.
Proactive tax planning can help mitigate unexpected costs and preserve margins, especially in industries like delivery, distribution, and field services.
Understanding the Impact of Gas Taxes on DMV Businesses
Gasoline taxes may seem like an issue far removed from the office of a small business owner or private client in the D.C., Maryland, or Virginia region—but look closer, and you'll see just how deeply they can affect operations and financial strategy. While states like California, Pennsylvania, and Washington are topping the national charts in gas taxes, the implications reach well beyond the borders of those states.
At 70.9 cents per gallon, California holds the highest state gas tax in the U.S. This isn't just burdensome for drivers—it also increases the cost of transporting goods and services. And when those goods are moving across the country or when you depend on national or regional suppliers, your bottom line is directly affected.
For business owners in the DMV region, understanding these gas tax discrepancies is more than a headline; it's a strategic consideration. Whether you're managing a delivery fleet, overseeing multi-state warehousing, or structuring a business acquisition that includes transportation assets, you need to understand how fuel costs—and the taxes that influence them—impact your business.
How Gas Taxes Differ—and Why It Matters
State gas taxes can vary widely. For instance, as of 2025:
California: 70.9 cents per gallon
Pennsylvania: 57.6 cents per gallon
Washington: 55.4 cents per gallon
Illinois: 48.3 cents per gallon
Maryland: 46.1 cents per gallon
Virginia: 30.8 cents per gallon
D.C.: 23.5 cents per gallon
This disparity creates meaningful cost differences for fleets, vendors, and logistics providers. Let's say your company relies on a supplier who transports inventory through one of these high-tax jurisdictions, such as through ports in Los Angeles or routes spanning Illinois. The gas taxes in those states could drive up freight or delivery costs—sometimes significantly.
For example, a moving company headquartered in Maryland but storing client goods in Washington State could see higher fuel and freight charges simply because of Washington's gas tax. A regional distributor in Virginia that sources from Illinois warehouses may face similar issues unless those costs are already baked into supplier contracts.
Implications for Your Business Model
Regardless of whether you own trucks or rely on third-party logistics providers, rising fuel costs and variable tax burdens affect your planning. Here's how:
Supply Chain Management
Businesses with wide-reaching distribution channels should assess how state taxes shape supplier pricing and delivery fees. It's not uncommon for vendors to pass along fuel surcharges—especially in states with high tax rates. Even if you're not purchasing fuel directly, you're paying for it indirectly.
Franchise Operations and Multi-State Entities
For S-corporations or LLCs operating across jurisdictions, fuel cost and tax variability can complicate profit allocation, budget forecasting, and logistics expense deductions. The state in which your vehicles are registered also matters—those registered in high-tax states often shoulder greater registration and compliance fees as well.
Fleet Management and Depreciation
If your business owns service vehicles spread across multiple states, fuel tax planning affects operational costs and may influence where those vehicles are housed, how depreciation is calculated, and even what types of vehicles are most tax-efficient to own.
Estate Planning and Business Succession
Consider a client who owns a family-run logistics company with operations across California and Virginia. The valuation of that business (and its ongoing expenses) must take into account higher operating costs in California—especially if that location is the primary revenue driver. These elements can materially affect estate tax projections, trust plans, and buy-sell agreements.
Entity Structuring and Tax Strategy
Some business owners opt to structure holding companies or subsidiaries based on geographic tax efficiency. While it's generally not advisable to form entities solely to avoid state taxes, understanding how different jurisdictions treat gasoline taxes, licensing fees, and operating expenses is part of a sound tax minimization strategy.
What About the Mid-Atlantic?
The DMV region generally falls in the middle of the pack in terms of gasoline taxes. Virginia's sits on the lower end (just under 30 cpg), while Maryland and D.C. are somewhat higher. For locally based businesses with operations limited to the region, the immediate impact of California's 70.9 cpg tax may seem distant. But if vendors, employees, or contracts involve cross-country services or materials, it can become real, fast.
Example
Let's say a construction firm based in Northern Virginia sources equipment from a California supplier. Rising California gas taxes bump up the delivery pricing by 8%. If the firm doesn't audit changes in those shipping invoices—or worse, if its bids are based on outdated delivery prices—their margin could shrink rapidly.
Risk Management and Compliance Strategies
Gas taxes are just one piece of a complex compliance puzzle, but they're a cost that too often escapes scrutiny until it builds into a pattern. Here are a few strategies DMV-area business owners can consider:
Audit your vendor contracts
Check whether fuel surcharges are adjustable or formula-based. A clear surcharge clause may enable you to plan ahead—or renegotiate more favorably if those surcharges grow unexpectedly.
Review tax allocations across states
If your businesses are operating in multiple jurisdictions, ensure your CPA or attorney is performing proper apportionments. Misallocation of operational costs—or missing deductions tied to transportation or logistics—could trigger audits or lead to paying more tax than necessary.
Plan for fuel-intensive growth
If your business is expanding and fuel-intensive (such as a mobile-range service or regional logistics arm), consider how differing gas taxes will shape operating costs. Create a blended analysis of routes to measure where hidden costs might lie.
Account for depreciation strategically
When you operate vehicles in states with higher maintenance or fuel-related taxes, weigh whether those real costs offset investment in newer vehicles or more efficient logistics systems.
Incorporate location-based planning
Particularly in family enterprises or high-net-worth estate planning, consider how significant fuel-heavy assets should be assigned—or whether their operating costs in specific states should trigger trust or entity restructuring.
What's the Bigger Picture?
The variation in gas taxes is a strong reminder that tax policy is deeply woven into business efficiency. The national spotlight may be on California's 70.9-cent fuel tax right now, but it's just one symptom of the broader complexity business owners deal with. You're not just paying attention to income taxes or payroll compliance. A comprehensive tax strategy factors in the cumulative weight of state-level levies—including those that show up in fuel bills, equipment transport, and third-party surcharges.
At Thienel Law, we advise clients across Maryland, D.C., and Virginia to not overlook these seemingly peripheral taxes. Whether it's passing on cost increases in formal contracts, planning fleet depreciation across jurisdictions, or using operating cost analysis as a lever in business valuation or litigation, fuel taxes play an important yet understated role.
When You're Buying, Selling, or Expanding
This topic also becomes critical when evaluating business acquisition targets. Are you buying a company with operations concentrated in high-tax states? If so, the cost of doing business may be climbing in ways the seller hasn't forecasted. Are contributions to revenue evenly matched by contributions to the cost base? These are questions you want your legal and financial advisors asking early in the deal conversation.
Even during routine business expansion, such as deploying a new product fleet or establishing a new distribution warehouse, understanding local tax structures—including fuel taxes—can help align expectations with costs.
Thienel Law: Your Legal Partner in Operational Tax Planning
Every dollar spent on additional gas tax in California or freight surcharges from Illinois is a dollar not going toward profits, reinvestment, or liquidity. Taxes tied to day-to-day operations require the same attention as payroll, trust structures, and entity planning.
Feeling the pressure from rising operational taxes? Wondering if you're missing deductions or exposure in out-of-state deliveries? Concerned about how transportation assets affect your estate plan? These are exactly the kinds of questions we help clients analyze, prepare for, and plan around.
If you're unsure how this applies to your business or personal situation, we're here to help. Schedule a consultation with Steve Thienel to get advice tailored to your goals. Let's make sure your strategy accounts for every mile—and every tax cent—it will cost.