Dyed Diesel Tax

Motor fuel taxes on diesel fuel help pay to maintain and construct our roads. Dyed diesel fuel is intended for off-road use in equipment or machinery and is not assessed motor fuel taxes. You must pay the diesel motor fuel tax before dyed diesel can be pumped into a highway vehicle.

Any person who uses dyed diesel in a highway vehicle should pay the tax on the product before dispensing it into the vehicle.

Any person who will use dyed diesel in a highway vehicle must pay the tax on the fuel before dispensing it into the vehicle. It is not limited to vehicles involved in certain uses.

The tax rate on dyed diesel when used in a highway vehicle is the same as rate as clear diesel fuel.

Before dispensing the dyed diesel into the highway vehicle, complete the form. DMV staff will contact you and for the necessary vehicle information to include your plate and odometer reading along with the gallons of dyed diesel that will be placed in the highway vehicle. Once you pay DMV over the phone, you can pump the fuel into the vehicle. The receipt must be kept in the vehicle as proof of payment to show law enforcement.

The receipt will indicate you paid motor fuel diesel tax on dyed diesel fuel before it was dispersed into the highway vehicle noted. It will contain the vehicle plate, odometer reading and number of gallons to assist with enforcing the law.

No, DMV needs the license plate number and odometer reading of the vehicle receiving the dyed fuel. The information must be on the receipt so by law enforcement can ensure the tax was paid on dyed fuel.  Penalties will be imposed if a vehicle operates on public roadways using dyed fuel and the operator cannot prove the highway taxes were paid.

Dispensing dyed diesel directly into a highway vehicle from a retail station is not recommended because the motor fuels tax on diesel will not be charged by the retail station.

The burden of proof resides with the operator of the vehicle to show that motor fuel diesel tax was paid on the dyed fuel that is in the tank of the vehicle. The receipt from DMV containing the plate and odometer readings should be presented to indicate the tax was paid on the gallons of dyed diesel in the tank of the vehicle. If proof cannot be supplied, criminal and civil penalties will be assessed.

You may follow the refund process to certify that gallons of taxed dyed diesel were used for an off-road purpose and were not dispensed into a highway vehicle.

Yes, customers who paid retail sales tax on dyed diesel may seek a refund once they can show that sales tax was paid on the original purchase and that the motor fuels diesel tax has also been paid. Customers must first request the refund from the retailer, who generally must issue the refund unless specific exceptions apply. The retailer may recover the refunded tax on their next Retail Sales and Use Tax Return. If the customer has made every effort to receive a refund from the retailer and the retailer is unable to provide a refund when requested, the customer may apply directly to the Department of Taxation. For more information see the Retail Sales and Use Tax Refund Claim Procedures.

The invoice proof of payment will include the odometer reading of the vehicle when it received the fuel, which can justify the presence of dye after the executive directive ends on December 31, 2026. Law enforcement will use discretion when determining the level of dye present compared against the level expected based on the vehicle’s fuel economy.

 Please refer to this IFTA guidance.