Gas Guzzler Tax – A Simplified Guide
What is the Gas Guzzler Tax?
The Gas Guzzler Tax is a surcharge imposed on new cars that fail to meet minimum fuel economy standards. This tax applies exclusively to passenger cars, which are vehicles primarily designed for personal use, and does not cover trucks, SUVs, or minivans. This distinction exists because these vehicle types were not commonly available when Congress introduced the Gas Guzzler Tax under the Energy Tax Act of 1978.
Manufacturers or importers of vehicles subject to the tax are responsible for paying it. However, in most cases, the tax is passed on to consumers as an additional cost, reflected on the vehicle’s window sticker (also called the Monroney label).
Why is the Gas Guzzler Tax Implemented?
The Gas Guzzler Tax was introduced as part of the Energy Tax Act of 1978, a response to the energy crisis and concerns over rising oil prices. The law was passed to reduce the reliance on imported oil, encourage fuel-efficient vehicle production, and reduce overall energy consumption.
Passenger cars that do not meet the minimum fuel economy standards set by the government are subject to this tax. To avoid the tax, a car must achieve at least 22.5 miles per gallon (mpg) in combined city and highway driving.How Much is the Gas Guzzler Tax?
The amount of the Gas Guzzler Tax depends on the fuel efficiency of the car. The tax is calculated progressively, meaning the worse the vehicle’s fuel economy, the higher the tax. Below is a breakdown of the tax rates for different fuel economy levels:
To know the detailed tax rates depending on the model and year, you can visit the official IRS regulations page at Cornell Law
The Gas Guzzler Tax is filed one-time during the sale or transfer of a vehicle, and it is typically paid by the manufacturer or importer. The tax is reported using Form 720 (Quarterly Federal Excise Tax Return) and Form 6197 (Gas Guzzler Tax).
Form 720 is filed quarterly, and it includes a section for the Gas Guzzler Tax, among other excise taxes.
Form 6197 is used specifically for reporting the Gas Guzzler Tax, and it is filed after the end of the production year when the total number of vehicles produced is confirmed.
Which Cars Are Subject to Gas Guzzler Tax?
How to Know if Your Vehicle is Taxable Under Gas Guzzler Tax?
To determine whether your vehicle is subject to the Gas Guzzler Tax, you can visit the EPA’s official website or use the Fuel Economy Guide. The guide lists vehicles based on their fuel economy, and you can check if your vehicle falls below the 22.5 mpg threshold.
You can also look at the Monroney label on the window of a new vehicle, which will indicate whether the vehicle is subject to the Gas Guzzler Tax and display the specific amount of the tax.
Which Vehicles Are Exempt from Gas Guzzler Tax?
SUVs, Trucks, and Minivans: These vehicles are exempt from the Gas Guzzler Tax, as they were not considered passenger vehicles when the law was passed.
Electric and Hybrid Vehicles: These vehicles are exempt from the tax due to their high fuel efficiency or lack of fuel consumption.
- Low-emission Vehicles: Cars that meet or exceed the minimum government fuel economy standards (22.5 mpg combined) are exempt from the Gas Guzzler Tax.
WRAP
The Gas Guzzler Tax is an important regulatory measure aimed at reducing fuel consumption and encouraging the purchase of more fuel-efficient vehicles. While it applies to a small group of high-performance passenger cars, it does not affect the majority of vehicles on the road today, especially as SUVs and trucks have grown in popularity and are exempt. By understanding how the tax works and whether your vehicle is subject to it, you can make more informed decisions when purchasing a car, whether you're looking for performance or efficiency.