Indiana drivers are set to face even higher costs at the pump beginning on Wednesday, April 1—as a scheduled increase in the state’s gasoline sales tax collides with a broader surge in fuel prices driven by the U.S. conflict with Iran.
The state’s 7 percent sales tax on gasoline will rise to 17.2 cents per gallon, up 2.1 cents from March, according to the Indiana Department of Revenue. Combined with the state’s 36-cent-per-gallon excise tax and the federal gas tax of 18.4 cents, Hoosiers will pay roughly 71 to 72 cents per gallon in total taxes each time they fill up—among the highest gas taxes in the country.
The increase stems from a formula tied to the average pre-tax price of gasoline, which climbed in recent weeks. While the excise and federal taxes remain fixed—aside from an annual 1-cent increase in Indiana’s excise tax each July—the sales tax fluctuates with fuel prices and typically rises heading into the summer driving season.
This year’s jump, however, comes at a particularly volatile moment. Gas prices have surged nationwide following the Feb. 28 U.S.-Israeli military action against Iran, which has disrupted global oil supplies. Crude prices have spiked sharply, with benchmark international and U.S. oil prices climbing well above levels seen just weeks earlier.
As a result, drivers across the country are paying the highest prices at the pump in more than two years. In Indiana, gasoline prices have jumped by about $1.20 per gallon since the conflict began, with diesel prices rising even more steeply—climbing by about $1.37 a gallon since Feb. 27.
For Indiana’s farmers, the added tax comes as another financial headwind during an already difficult period for the agricultural economy. Many producers are grappling with lower commodity prices, tighter margins and elevated input costs, and fuel is a major expense for planting, harvesting and transporting crops. Higher diesel and gasoline prices—combined with the tax increase—are expected to further squeeze profitability, particularly for row-crop operations that rely heavily on fuel-intensive equipment.
The impact is rippling beyond the gas station. Economists warn that higher fuel costs increase transportation expenses, which businesses often pass on to consumers through higher prices for goods. For farmers, trucking companies and other fuel-dependent industries, the added burden can be especially acute.
State officials note that revenue from Indiana’s gasoline taxes is earmarked for road construction, infrastructure maintenance and local transportation projects. But for many Hoosiers, the timing of the increase is adding strain to already tight household budgets.
CLICK HERE to read the revised state gasoline tax memo from the Indiana Department of Revenue.
