Where Road Money Comes From: Fuel Tax, Fees, Sales Tax and Property Tax

Ask ten Idahoans where road money comes from and most will say "the gas tax." They are partly right. Fuel taxes are the largest single state source. But Idaho's roads are paid for by a stack of revenues, each with its own legal rules, its own politics and its own trend line. Some grow automatically with population. Some are fixed in cents per gallon and shrink in real terms every year. Some depend on federal law that expires on a set date. Some are one-time transfers that a single legislative session can create and the next can drop.

This lesson lays out each source, shows where it goes, and gives you the tools to trace the money for your own city, county or highway district. It ends with a worked example of what one household actually pays. Facts are current as of October 2026, using the latest statutes posted on the Legislature's website (which are updated each July 1 after the session) and the most recent state budget documents. Revenue forecasts change; where a figure is a forecast, the text says so.

The stack of road revenue

Think of road funding in Idaho as layers:

• State highway user revenue: fuel taxes, vehicle registration fees and related fees. These are constitutionally dedicated to highways (see Lesson 3) and shared between ITD and local agencies by formula.
• State sales tax transfers: a fixed annual amount of sales tax sent to ITD's congestion program (TECM) and to local agencies.
• One-time General Fund transfers: surplus money the Legislature chooses to send to roads in a given year, often through the Strategic Initiatives Program.
• Federal aid: Highway Trust Fund money apportioned to Idaho by formula, plus competitive grants.
• Local revenue: property taxes levied by counties, highway districts and cities; voter-approved local vehicle registration fees; development impact fees; and local bonds.

The rest of this lesson takes these one at a time. Figure 1 shows the biggest layer, state-raised highway user revenue, by source.

The fuel tax

The rate and who pays it

Idaho Code 63-2402 imposes the tax on the distributor that receives motor fuel in Idaho, at 32 cents per gallon. "Motor fuel" is defined broadly in section 63-2401 to include gasoline, ethanol blends, special fuels such as diesel, and other fuels that propel motor vehicles. The legal incidence falls on the distributor, which may (and does) build the tax into the price. Off-road uses can qualify for refunds, which is why the state subtracts refunds before distributing the money. Dyed diesel, which is untaxed fuel for off-road use, is exempt.

The current rate dates to House Bill 312 of 2015, signed April 21, 2015 (Session Law Chapter 341). Its statement of purpose described raising the motor fuels tax from 25 cents to 32 cents a gallon and raising registration fees, with the new money split 60 percent to the state highway account and 40 percent to local governments. The fiscal note estimated the fuel tax increase alone at about $63.2 million a year. The bill also created the Strategic Initiatives Program discussed below. The Division of Financial Management's revenue table confirms the 32-cent rate for gasoline, gasohol and diesel in every year from fiscal 2021 through 2025.

Because the tax is a fixed number of cents per gallon, it does not rise when pump prices rise, and it buys less pavement every year that construction costs climb. It also falls as cars get more efficient. DFM's table shows gross gasoline tax collections nearly flat from fiscal 2021 ($271.4 million) through fiscal 2023 ($273.0 million), even as Idaho's population grew.

For comparison, the federal government adds 18.4 cents a gallon on gasoline and 24.4 cents on diesel, rates unchanged since 1993, according to the Tax Policy Center's Highway Trust Fund brief. That money goes to the federal Highway Trust Fund and returns to Idaho through the federal-aid program (Lesson 7).

Where each gallon's tax goes

The distribution rules are in Idaho Code 63-2412 for gasoline and 63-2418 for special fuels. For gasoline, the first 25 cents of every 32 go through a sequence of deductions:

1. The Tax Commission keeps its actual cost of collecting and enforcing the tax, up to its appropriation.
2. Money goes to the state refund account to pay refund claims.
3. $250,000 a year goes to the railroad grade crossing protection fund.
4. $300,000 a year goes to the local bridge inspection fund. (This was $175,000 until House Bill 716 of 2026; the bill's statement of purpose says inspection costs and the number of inspections had grown.)
5. 7 percent goes directly to ITD's state highway account. DFM's table labels this line "Ethanol Exemption (7% Net Fuel Tax)."
6. Of what is left, 1.28 percent goes to waterways improvements, park capital and search and rescue; 1.28 percent goes to the off-road motor vehicle account, park capital and search and rescue; and 0.44 percent goes to roads, bridges and parking in state parks. These are the shares of the gas tax attributed to fuel burned in boats, off-road vehicles and park roads.
7. The balance goes to the Highway Distribution Account.

The other 7 cents of every 32 skip those steps and go straight to the Highway Distribution Account under section 63-2412(2). Before 2026, the law tracked those 7 cents (the 2015 increase) separately and split them 60/40 on their own track. House Bill 716 of 2026 folded them into the regular Highway Distribution Account; its statement of purpose says the change "does not change any current revenue sources to the HDA or the 60/40 split." Diesel follows a similar but simpler path under 63-2418: collection costs, refunds and the 7 percent to the state highway account come off the first 25 cents, the rest goes to the Highway Distribution Account, with no parks and off-road deductions.

Vehicle registration and related fees

The second big user fee is annual vehicle registration. Idaho Code 49-402 sets the state fee for passenger cars, pickups and other vehicles up to 8,000 pounds by age:

Vehicle age	Annual state registration fee
1 and 2 years old	$69
3 and 4 years old	$57
5 and 6 years old	$57
7 and 8 years old	$45
Over 8 years old	$45
Motorcycles	$19

Electric and plug-in hybrid vehicles pay an extra fee because they buy little or no taxed fuel. Idaho Code 49-457 adds $140 a year for an electric vehicle and $75 for a plug-in hybrid, on top of the regular fee. Both go to the Highway Distribution Account. The fees were created in 2015 and amended in 2017; ITD's distribution chart still lists separate lines for electric and hybrid vehicles.

Commercial trucks register separately, by weight, under Idaho Code 49-434. DFM's table shows state truck registration bringing in about $80 million in fiscal 2025 (forecast), roughly three-quarters as much as all passenger car and pickup registrations combined. Who should pay more, heavy trucks or cars, is a long-running Idaho debate. Engineering studies generally find pavement damage rises steeply with axle weight, which truck operators answer by pointing to the fuel tax, federal heavy vehicle use taxes and weight-distance and permit fees they also pay. Some states commission highway cost allocation studies to test whether each vehicle class pays its share; ask ITD whether a current Idaho study exists before citing one.

Not every fee collected at the counter is a "registration fee" in the constitutional sense. Section 49-402(11) lets registrants buy an optional $10 Idaho State Parks Passport with their registration, and the statute states those dollars go to the park and recreation fund and "shall not be considered a motor vehicle registration fee" under the Idaho Constitution. Driver's license and ID card fees also flow partly into the Highway Distribution Account by statute, with set portions kept by counties and other programs. Lesson 3 explains why the label matters.

The Highway Distribution Account and the 60/40 split

Almost all state highway user revenue lands in one place: the Highway Distribution Account (HDA) created by Idaho Code 40-701. The account receives the fuel tax balances described above, "all moneys collected" by ITD, its agents and county assessors and sheriffs under Title 49 (registrations, titles, permits, licenses) unless the law says otherwise, and any other money the law directs. As amended in 2026, the statute splits the account:

• 60 percent to the state highway account (section 40-702), which ITD spends on the state system, and
• 40 percent to local units of government under section 40-709.

The state controller pays the local share quarterly, by January 25, April 25, July 25 and October 25. The state share moves as money arrives.

Until recently there was a third slice. Before the phase-out, the Idaho State Police (through the state law enforcement account) received 5 percent of the account. Senate Bill 1201 of 2019 phased that share down by one point a year (5 percent in fiscal 2021, 4 in 2022, 3 in 2023, 2 in 2024, 1 in 2025) to zero from fiscal 2026 on, with ISP funding moved to the state General Fund. During the phase-out the freed-up points were divided between ITD and local governments until the split reached 60/40 in fiscal 2026. DFM's table shows the ISP slice falling from $20.5 million in fiscal 2021 to a forecast $4.2 million in fiscal 2025. Lesson 3 covers why.

How the local 40 percent is divided

Section 40-709 (last amended in 2014) sets the formula for the main split:

1. 0.326 percent goes off the top to LHTAC, the Local Highway Technical Assistance Council, for its operations.
2. 30 percent of the rest goes to the 189 incorporated cities, divided by population as of the last federal census.
3. 70 percent goes to counties, then is divided three ways: 10 percent equally among all 44 counties; 45 percent in proportion to each county's motor vehicle registration collections; and 45 percent in proportion to each county's miles of improved highways in the county highway system.
4. In counties with highway districts, the county's share is split again among the county (if it maintains roads) and the districts, using the same 10/45/45 approach: equal shares, registrations collected in each area, and improved road miles.

Cities must spend the money only on highways within city limits and on related bond payments. Highway districts must pay bond obligations first, then use the rest for highway and bridge construction and maintenance. Unspent balances carry forward for road purposes. ITD certifies each county's improved miles by January 1 each year, and those mileage reports, posted on ITD's Local Highway Distribution Fund page, show how much road each jurisdiction claims.

DFM's fiscal 2025 forecast puts the dollar results at about $217.6 million to local governments ($65.1 million to cities, $151.9 million to counties and highway districts, $0.66 million to LHTAC) and about $325.0 million to ITD, or $344.5 million including the 7 percent fuel tax set-aside. ITD posts the actual quarterly payments to each county, city and highway district in its current distribution report. For state fiscal year 2026, that report shows, for example, Ada County Highway District receiving about $15.2 million from the regular HDA distribution and Bonneville County about $5.7 million.

State sales tax for roads

Since 2017, Idaho has also sent a slice of sales tax to transportation. Senate Bill 1206 of 2017 (Session Law Chapter 322) authorized more GARVEE bonding, created the sales tax distribution for transportation projects and revised the Strategic Initiatives Program. The current rule is Idaho Code 63-3638(16), rewritten by House Bill 25 of 2025 (Session Law Chapter 250, passed 70-0 and 34-0, signed April 1, 2025). Before July 1, 2025, the law sent 4.5 percent of sales tax revenue, with a floor of $80 million and a ceiling of $140 million: the first $80 million to the Transportation Expansion and Congestion Mitigation (TECM) fund and the rest to local units of government. HB 25 replaced that with fixed dollar amounts:

State fiscal year	Total sales tax to roads	To TECM fund (state)	To local units of government
Before FY2026	4.5% of sales tax, $80M to $140M	First $80M	Amount above $80M
FY2026 (July 2025 to June 2026)	$145M	$100M	$45M
FY2027 (July 2026 to June 2027)	$165M	$120M	$45M
FY2028 and after	$185M	$140M	$45M

The local share is divided using the same city and county percentages as the HDA in section 40-709, and local agencies may pool it for joint projects. HB 25's fiscal note said the change reduced General Fund revenue by about $23 million in fiscal 2026 and another $20 million in each of fiscal 2027 and 2028, compared with the Legislative Budget Book's estimates. The TECM fund can be pledged to repay bonds issued through the Idaho Housing and Finance Association (Idaho Code 40-720), which is how Idaho has financed large expansion projects. Lesson 4 covers TECM and bonding in detail.

Sales tax is not a highway user fee. Everyone who buys taxable goods pays it, whether or not they drive. That is the main argument in its favor among supporters (growth in the whole economy, not just fuel use, drives road demand) and the main objection among critics (road users should pay for roads, and sales tax spent on roads is not available for schools, tax relief or other needs).

One-time General Fund transfers and the Strategic Initiatives Program

The most volatile layer is General Fund surplus. The 2015 law that raised the fuel tax also created the Strategic Initiatives Program, now in Idaho Code 40-719. Money in the program's fund is split 60 percent to projects proposed by ITD's six districts and 40 percent to local governments through a program LHTAC administers. State projects compete on return on investment in safety, mobility, economic opportunity, bridge repair, right-of-way purchase and child pedestrian safety.

The fund has no permanent revenue source. The Legislature fills it, or does not, each year. The fiscal 2026 ITD budget bill, Senate Bill 1218 of 2025, transferred $165 million from the General Fund to the Strategic Initiatives Program fund and $110 million from the General Fund to the Local Highway Distribution Fund, to be paid out with the first HDA distribution. That is $275 million in one year. The fiscal 2027 ITD budget, Senate Bill 1426 of 2026, contains no General Fund money at all: its fiscal note shows $0 in the General Fund column for a total ITD budget of about $1.04 billion. Gov. Brad Little's fiscal 2027 budget had proposed removing the $275 million, describing it as "a one-time reduction in transportation investments," according to the Idaho Association of Counties.

The 2026 Legislature also moved money the other way. House Bill 968 (Session Law Chapter 311) transferred interest earnings from the Strategic Initiatives state and local funds (about $12.9 million each) and a $4.15 million local grant closeout to the General Fund for fiscal 2027, while also sending about $32.9 million in federal ARPA interest earnings into Strategic Initiatives for fiscal 2026, according to its revised fiscal note.

ITD's draft 2027 to 2033 plan, unveiled in summer 2026, assumes the Strategic Initiatives fund stays at zero through 2033 and moves about $1.3 billion in highway work to an "unfunded" list, East Idaho News reported, republishing the Idaho Statesman. The same report said the fund made up roughly 18 percent of ITD's revenue in 2025. Lesson 5 explains that plan.

Federal aid

Federal money is the other half of ITD's budget. In the fiscal 2027 ITD appropriation, federal funds total about $492.4 million of $1.037 billion, roughly 47 percent, and state dedicated funds (highway user revenue, sales tax transfers and other dedicated accounts) make up the rest, according to the S1426 fiscal note. Federal aid comes mostly by formula from the Highway Trust Fund, which is fed by federal fuel taxes and truck taxes, under programs authorized in Title 23 of the U.S. Code. It usually requires a state or local match, comes with federal rules on design, environmental review, wages and contracting, and must flow through the Statewide Transportation Improvement Program (STIP). Local agencies reach federal aid mainly through LHTAC and metropolitan planning organizations. Lesson 7 covers formulas, the match and the 2026 reauthorization fight.

Local revenue: property tax, local fees, impact fees and bonds

Property tax

Counties, highway districts and countywide highway districts may levy property taxes for roads under Idaho Code 40-801:

• a levy of up to 0.2 percent of market value for highway and bridge construction and maintenance; if that levy is collected on property inside a city, 50 percent of the money must go to that city;
• a special levy of up to 0.084 percent for bridges, matching state and federal funds, secondary highways and emergency maintenance, none of which is shared with cities; and
• a combined cap of 0.284 percent of market value.

In practice, the binding limit for most districts is not the rate cap but the property tax budget limit in Idaho Code 63-802. That law caps growth in a taxing district's property tax budget at 3 percent a year over its highest of the prior three years, plus revenue from new construction and 90 percent of annexation value, with other adjustments, including the use of "forgone" increases a district did not take in earlier years. Course 26, Lesson 5 explains the cap and forgone balances. Your property tax bill lists each road levy; Course 26, Lesson 8 shows how to read it.

The 2026 ACHD budget fight shows the cap in action. BoiseDev reported on August 27, 2026, that ACHD's commission unanimously approved a $261 million fiscal 2027 budget that took all available increases: the 3 percent increase (about $1.7 million) plus $2.27 million from its forgone balance, including a one-year 3 percent ($1.7 million) to fund Cloverdale Road between Victory and Overland. Lesson 6 looks at district budgets in detail.

To see how much of a large district's budget comes from each source, look at ACHD's fiscal 2026 budget memo (Figure 4).

Local option vehicle registration fees

Idaho generally forbids cities and counties from charging their own vehicle taxes (Idaho Code 49-207), but two statutes carve out exceptions, both requiring voter approval:

• Counties: Idaho Code 40-827 lets county voters, at a general election, authorize the county commissioners to adopt a local registration fee of up to twice the state fee in section 49-402. The ballot must state the exact rate and duration; raising the rate or extending it needs another vote. ITD collects the fee for a deduction of no more than 1.5 percent. Unless the local road agencies agree otherwise, the money is split 30 percent to cities by population and the rest among the county and highway districts by formula.
• Countywide highway districts: Idaho Code 40-1416 gives the same authority, also capped at twice the state fee and requiring a vote at an even-year general election, to a countywide district. That is ACHD's fee.

ACHD's fee is on the ballot as this lesson is written. According to ACHD and BoiseDev, Ada County voters first approved the fee in 1990 and renewed it in 2008; it is authorized through December 31, 2028; and it raises about $14 million a year. The current amounts, paid on top of state fees, are $40 for vehicles one to two years old, $36 for three to seven years, $24 for vehicles over seven years, $16 for vehicles for hire and school buses, and $8 for motorcycles. The November 3, 2026, ballot question asks whether to extend the same rates, with no increase, through December 31, 2046. BoiseDev reported the fee raised about $2.4 million when first approved; growth in the number of vehicles, not rate changes, explains the increase.

Both sides have made their case. ACHD Commission President Miranda Gold told Idaho News 6 that it is a fee residents are "already paying" and that it funds maintenance, congestion relief and safe routes to school. Vice President Alexis Pickering told BoiseDev the fee is "an essential funding piece of our overall pie," especially given less support from the state. Former Boise Guardian editor Dave Frazier told Idaho News 6 he does not object to paying for roads but wants the charge "uniformly administered, uniformly levied," because the fee applies to vehicles under 8,000 pounds while heavier commercial trucks, which register under the state system, do not pay it. ACHD says changing which vehicles pay would take action by the Legislature.

Development impact fees

Cities, counties and highway districts can charge new development for a proportionate share of the cost of new road capacity under the Idaho Development Impact Fee Act, Idaho Code 67-8201 and following. The act's purpose section says those who benefit from new growth should pay a proportionate share of the public facilities needed to serve it, and no more. The act requires a capital improvements plan (section 67-8208) and rules for earmarking and spending the fees (section 67-8210); the fees pay for growth-related capital projects, not routine maintenance. ACHD budgeted about $23.4 million in impact fees for fiscal 2026 (Figure 4). Lesson 8 covers impact fees, development agreements and the court limits on what agencies can demand from developers.

Bonds and local improvement districts

Local road agencies can borrow, through voter-approved bonds and through local improvement districts that assess the owners who benefit from a specific improvement. Article VIII, section 3 of the Idaho Constitution bars counties, cities and other subdivisions from incurring debt beyond the year's income and revenue without the assent of two-thirds of voters at an election, except for "ordinary and necessary expenses" authorized by general law; the Independent Highway District raised that argument in the Sandpoint case described in Lesson 1, though the Idaho Supreme Court declined to reach the constitutional question and decided the case on statutory grounds. Course 26, Lesson 6 explains levies and bonds.

The policy debate in brief

Every option for closing Idaho's road funding gap has supporters and critics. Raising the fuel tax again keeps the user-pays principle, but it falls harder on rural drivers who travel farther and on lower-income households, and it erodes as vehicles get more efficient. Indexing the fuel tax to inflation, as some states do, avoids repeated votes but means automatic increases without a fresh vote, which some legislators oppose on principle. Higher registration or EV fees spread costs differently. Sales tax transfers tap broad growth but compete with every other General Fund need and with tax cuts. One-time surplus transfers built many projects in the early 2020s but, as 2026 showed, can disappear in a single budget cycle. Local option fees and property taxes keep decisions local but are capped by state law and need voter or board approval. Mileage-based charges are discussed nationally as a long-term replacement for fuel taxes, with privacy and administration questions unresolved.

Advocates on any side are most credible when they say which source they want to use, how much it would raise, who would pay it and what it would replace.

Where this fits in the rest of the course

This lesson described the sources. The next lesson explains the constitutional limit on the biggest of them:

• Lesson 1: Who Owns Your Road? identifies the agencies that receive the money.
• Lesson 3: The Constitution's Highway Fund Wall and the 2025 Budget Fight covers Article VII, section 17, the Idaho State Police phase-out and the April 2025 Senate vote.
• Lesson 4: TECM, GARVEE Bonds and the Strategic Initiatives Fund goes deeper on sales tax, bonds and surplus transfers.
• Lesson 5: Reading ITD's Seven-Year Plan, Lesson 6: Highway Districts Up Close, Lesson 7: Federal Money and Lesson 8: Growth Pays for Growth? follow each money stream to decisions.
• Lesson 9 and Lesson 10 turn this into action and reporting.

Related courses on this site:

• Course 26: Local Government: the budget cycle, the 3 percent cap, levies and bonds and reading a tax bill.
• Course 35: Idaho Property Taxes.
• Course 36: Idaho Planning and Zoning, especially subdivisions and impact fees.
• Course 39: Urban Renewal and Economic Development, since urban renewal districts also pay for roads in some cities.
• Course 27: How an Idaho bill becomes law, for following fuel tax and budget bills.
• Data and Statistics training, for working with revenue tables, and Budgets and Fiscal Duty for elected officials.