Understanding Minnesota's Fuel Excise Tax Increase
Did You Know? Minnesota's fuel excise tax rates increased on January 1st, 2026.
As fuel costs continue to be a significant expense for farms, businesses, and households across Minnesota, understanding what you're paying at the pump becomes increasingly important. A portion of every gallon purchased goes toward state and federal excise taxes—and as of the new year, that portion just got a bit larger.
What Changed?
Effective January 1st, 2026, the State of Minnesota increased its excise tax on motor fuels:
- Standard 87 octane E10 gasoline (on-road): Increased from 0.318¢ per gallon to 0.326¢ per gallon
- On-road clear diesel fuel: Increased from 0.318¢ per gallon to 0.326¢ per gallon
While an increase of less than one cent per gallon may seem modest, it adds up—especially for operations fueling multiple vehicles or equipment regularly.
Breaking Down the Total Tax Per Gallon
When you fill up in Minnesota, you're paying both state and federal excise taxes. Here's what that looks like now:
On-Road Gasoline (87 E10):
- Federal excise tax: 0.184¢ per gallon
- Minnesota state excise tax: 0.326¢ per gallon
- Total excise tax: 0.51¢ per gallon
On-Road Clear Diesel:
- Federal excise tax: 0.244¢ per gallon
- Minnesota state excise tax: 0.326¢ per gallon
- Total excise tax: 0.57¢ per gallon
Why Does This Matter?
Fuel excise taxes help fund transportation infrastructure such as roads, bridges, and transit systems at both the state and federal levels. While these taxes are built into the price of fuel, they can represent a noticeable portion of the total cost per gallon — especially for customers who rely on fuel daily for business, farming, or transportation needs.
At Farmward Energy, we believe transparency matters. Sharing this information helps our customers better understand what goes into fuel pricing beyond market conditions, supply, and demand.
Have questions about fuel pricing or want to discuss ways to manage your fuel costs more effectively? Contact the Farmward Energy team—we're here to help you navigate the road ahead.
Thank you for reading this month’s edition of Fuel for Thought. Be sure to check back next month for more energy updates, insights on the markets shaping energy trends, and exciting promotions from our Farmward Energy division.
-Bill Pelzel, SVP Energy