Dyed diesel is not allowed in use of private on-road vehicles. Farm producers or others who do so risk damaging their engines, voiding their vehicles’ warranty, and, if they’re caught, a big fine.
The fuel is dyed because it’s exempted from highway taxes; it can be used in farm implements, timber harvesting and construction equipment, and other vehicles that are not licensed for highway travel. Keith Gast of the Missouri Department of Revenue’s Taxation Division told Ozarks Farm & Neighbor when it comes to over-the-road uses, dyed fuel “can’t be used in any vehicle except for vehicles owned by the state, or by local or city governments… It can be used in state vehicles that travel on the road, because they are exempt by federal law from the federal tax, they are also allowed to run the dyed fuel in school buses and city vehicles, like city fire trucks.”
The Department does conduct dyed diesel inspections, sometimes in conjunction with the Internal Revenue Service. Gast said the agencies will establish inspection points and will pull over pickup trucks and semis, checking the fuel tank for dye; there is also, he believes, residual evidence when an unapproved vehicle has been using dyed diesel. The penalty has been in place since 1999; it’s a minimum fine of $1,000 or $10/gallon, whichever is more.
Why is it a threat to engines? Because dyed fuel does not necessarily have to meet the ultra-low-sulfur requirements for over-the-road diesel imposed by the federal EPA in 2006. This means engines built since 2007 may be harmed, and the engine’s warranty may be voided.
There is only one red dye legal for use nationwide in diesel fuel; it’s called “Solvent Red 164” or “Oil Red B,” and is a synthetic red diazo dye. These dyes are used because diazo dyes are soluble in hydrocarbons like fuel and are known for their vivid colors; the IRS only requires the use of 3.9 pounds of the dye in 1,000 barrels of fuel.
Just so there’s no mistake, the IRS requires the message, “DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE” to be posted by the seller of dyed diesel fuel; if the message is not posted, the government presumes the seller knows the fuel will not be used for a nontaxable use. Gast said the Missouri Department of Revenue also requires an agricultural off-road user to submit a form indicating the purchase is exempt from highway taxes.
Of course, another tax break went into effect in 2008 for agricultural fuel users; motor fuel purchased for agricultural purposes is exempt from all sales tax. Prior to Aug. 28, 2008, sales tax applied to only one-half of diesel fuel gallons purchased. The buyer must furnish the seller with a Form 149 Sales/Use Tax Exemption Certificate.
