Excise Tax in California: Complete Guide 2026
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Excise Tax in California: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
California imposes some of the highest excise taxes in the nation on fuel, tobacco, alcohol, and cannabis. These taxes are levied in addition to the state’s general sales tax and generate billions of dollars annually for transportation infrastructure, public health programs, and other state priorities. California’s excise tax rates are adjusted periodically for inflation and legislative changes, making annual review essential for businesses and consumers alike.
California Excise Tax Rates (2026)
Fuel Taxes
| Fuel Type | State Rate per Gallon | Federal Rate per Gallon | Combined |
|---|---|---|---|
| Gasoline | ~$0.596 | ~$0.184 | ~$0.78 |
| Diesel | ~$0.460 | ~$0.244 | ~$0.704 |
California’s gasoline excise tax of approximately ~$0.596 per gallon is the highest in the nation. The rate is adjusted annually for inflation through a CPI-based formula, producing small increases most years.
Tobacco Taxes
| Product | State Rate |
|---|---|
| Cigarettes (per pack of 20) | ~$2.87 |
| Other tobacco products | ~61.74% of wholesale cost |
| Electronic cigarettes / vaping products | ~12.5% of retail price |
Combined with the federal tax of approximately ~$1.01 per pack, the total excise tax on cigarettes in California reaches approximately ~$3.88 per pack.
Alcohol Taxes
| Product | State Rate |
|---|---|
| Beer (per gallon) | ~$0.20 |
| Wine (per gallon) | ~$0.20 |
| Distilled spirits (per gallon) | ~$3.30 |
| Sparkling wine (per gallon) | ~$0.30 |
California’s beer and wine excise tax rates are among the lowest in the nation, having remained unchanged since 1991.
Cannabis Taxes
| Tax Type | Rate |
|---|---|
| Cannabis excise tax | ~15% of average market price |
| Cultivation tax | Suspended (eliminated July 2022) |
The cannabis excise tax of approximately ~15% applies to all retail cannabis sales, on top of the state and local sales tax.
How California Excise Taxes Work
Fuel Excise Tax
California’s fuel excise tax is collected at the terminal rack when fuel is removed from the refinery or import terminal. Distributors and refiners pay the tax, which is passed through to retailers and ultimately consumers. The rate is adjusted annually on July 1 based on the California Consumer Price Index. Revenue funds the Road Maintenance and Rehabilitation Account, supporting highway repairs and local road improvements under SB 1 (the Road Repair and Accountability Act of 2017).
In addition to the excise tax, California imposes a sales tax on gasoline (calculated on the pre-excise-tax wholesale price) and a cap-and-trade program cost embedded in fuel prices. Combined, total taxes and fees on a gallon of gasoline in California can exceed approximately ~$1.00.
Tobacco and Vaping Excise Tax
California’s cigarette excise tax of approximately ~$2.87 per pack was established through Proposition 56 (2016), which added ~$2.00 per pack to the prior rate. Revenue funds Medi-Cal healthcare programs, tobacco use prevention, and medical research. Other tobacco products are taxed at approximately ~61.74% of wholesale cost, a rate equivalent to the per-pack cigarette tax as a proportion of the wholesale price of a pack.
Electronic cigarettes and vaping products are subject to a separate tax of approximately ~12.5% of the retail price, enacted to align taxation of vaping products with traditional tobacco products.
Alcohol Excise Tax
California’s alcohol excise tax rates have not been increased since 1991 and rank among the lowest in the country. Beer and wine are each taxed at approximately ~$0.20 per gallon, while distilled spirits are taxed at approximately ~$3.30 per gallon. These rates are paid by manufacturers and distributors and embedded in the retail price. The California Department of Tax and Fee Administration (CDTFA) administers collection.
Comparison to Other States
| Category | California | New York | Texas | National Avg. |
|---|---|---|---|---|
| Gasoline excise (per gallon) | ~$0.596 | ~$0.338 | ~$0.20 | ~$0.31 |
| Cigarettes (per pack) | ~$2.87 | ~$5.35 | ~$1.41 | ~$1.91 |
| Beer (per gallon) | ~$0.20 | ~$0.14 | ~$0.20 | ~$0.25 |
| Distilled spirits (per gallon) | ~$3.30 | ~$6.44 | ~$2.40 | ~$4.50 |
California has the highest gasoline excise tax in the nation but is mid-range for tobacco and near the bottom for alcohol.
Tips for Businesses Subject to California Excise Taxes
- Register with the CDTFA. All manufacturers, distributors, and importers of excise-taxable products must register and file returns with the California Department of Tax and Fee Administration.
- Track annual fuel tax adjustments. The gasoline excise tax changes each July 1. Update pricing and budgets accordingly.
- Apply correct tobacco tax rates. The ~61.74% rate on other tobacco products and ~12.5% on vaping products are distinct. Verify which rate applies to each product line.
- Separate cannabis excise tax from sales tax. The ~15% cannabis excise tax and the general sales tax are calculated differently. The excise tax is based on average market price, not the actual retail price.
- Claim fuel tax exemptions. Certain agricultural, governmental, and export uses of fuel qualify for excise tax refunds.
- Maintain detailed records. Excise tax audits by the CDTFA require documentation of volumes produced, imported, sold, and exempt.
- Monitor legislative proposals. California regularly considers excise tax rate changes, particularly for alcohol (which has not been adjusted since 1991) and vaping products.
Key Takeaways
- California’s gasoline excise tax of approximately ~$0.596 per gallon is the highest in the nation and is adjusted annually for inflation
- Cigarettes are taxed at approximately ~$2.87 per pack at the state level, plus approximately ~$1.01 federal, for a combined excise tax of approximately ~$3.88 per pack
- Beer and wine excise taxes (~$0.20 per gallon each) have not been increased since 1991 and are among the lowest in the country
- The cannabis excise tax of approximately ~15% applies to all retail sales in addition to sales tax
- Total taxes and fees on a gallon of gasoline in California can exceed approximately ~$1.00
- Revenue from fuel excise taxes funds road maintenance under SB 1, while tobacco taxes fund Medi-Cal and health programs
Next Steps
- See the full California tax picture at Taxes in California: State Tax Guide 2026
- Explore sales tax obligations at Sales Tax in California 2026
- Learn about federal excise taxes in the Federal Income Tax Guide 2026
- Compare state tax burdens at State Income Tax Rates Comparison 2026
- Get local help: Find a CPA Near You