Motor Fuels Excise Tax Relief Act of 1988

Motor Fuels Excise Tax Relief Act of 1988 - Amends the Internal Revenue Code to exempt from the gasoline excise tax any sale of gasoline to: (1) a State or local government (or to a purchaser for resale to such government) for its exclusive use; or (2) a nonprofit educational organization for its exclusive use.

Permits wholesale distributors of gasoline who have registered with the Secretary of the Treasury and posted the required bond to pay the gasoline tax (in lieu of the person otherwise liable for the tax).

Requires that the reduced gasoline tax rate (3.4 cents instead of 9.1 cents) be applied with respect to gasoline used to produce gasohol after the time of the relevant removal or sale.

Prohibits the imposition of the excise tax on diesel and aviation fuels on the sale of these fuels to any purchaser (or purchaser for resale) for use in any off-highway business use. (Although fuel used for such purposes is generally tax-exempt under current law, provisions of the Revenue Act of 1987 require purchasers to pay the tax and subsequently apply for a refund based on the nontaxable use of the fuel.)

Directs the Secretary of the Treasury to study and report to specified congressional committees concerning motor fuels excise tax collection procedures, in the interest of determining methods that will provide the least onerous treatment of tax-exempt entities and at the same time raise necessary revenue.