Truck drivers looking for some pricing relief at the pump now have at least some guidance from the federal government about President Donald Trump’s executive order to allow the use of red-dyed diesel for highway use through the end of the year.
On Oct. 14, the Internal Revenue Service (IRS) issued a notice stating that it will not impose a penalty when dyed diesel fuel is sold for use or used on highways nationwide. The IRS’ relief is retroactive to Oct. 1, 2026, and will remain in effect until Dec. 31, 2026. Relief is available to any person that sells dyed diesel fuel or uses dyed diesel fuel on-highway.
The guidance, however, does not address the postponement of the payment of taxes. IRS said it anticipates issuing further guidance in that respect. The agency also said it “will explore avenues to eliminate the obligation to pay any amounts deferred,” as required by Trump’s order.
During the relief period, ordinary procedures for collection and enforcement will be suspended, the agency said, adding that IRS Fuel Compliance Officers will be re-assigned other responsibilities, and no federal inspections of on-road dyed fuel usage will occur.
[Related: Trump orders relief for on-highway red-dyed diesel use]
During the relief period, IRS said taxpayers do not need to maintain records necessary to substantiate their eligibility for relief.
“The IRS will not impose any penalties related to the excise tax for dyed diesel fuel sold for use or used in diesel-powered vehicles on highways nationwide during the relief period,” the agency’s notice said. “This relief includes penalties for failure to make semimonthly deposits of tax or to maintain adequate records.”
Taxpayers who believe they qualify for relief but receive a penalty notice should follow the instructions in the notice or contact the IRS for assistance.
The IRS' relief only applies for federal tax purposes. It has no effect on state fuel taxes and penalties imposed on for dyed-diesel use on the highway. Some states have provided similar state excise tax-related relief. The IRS encouraged taxpayers to refer to their applicable state agencies for the latest guidance on state-level relief.
[Related: Could dyed diesel damage your engine or void your warranty?]
The International Fuel Tax Association (IFTA) provided a list of state-level orders related to dyed diesel, though some only apply to the transportation of certain commodities and do not apply to the trucking industry broadly.
“A carrier that purchases dyed diesel in a state permitting highway use may face penalties or other enforcement action when entering a jurisdiction that does not,” IFTA Executive Director Carmen Martorana Jr. said in an Oct. 8 memo. “Dyed diesel cannot be used broadly on public highways across the United States and Canada unless all 58 IFTA member jurisdictions issue their own Executive Orders or Notices.”
Martorana added that it’s “important to distinguish permission to use dyed diesel from its treatment on an IFTA return. Most states that have issued Orders do not exempt dyed diesel from fuel use tax. An IFTA-licensed carrier using dyed diesel on public roads must include all miles and gallons in total miles and total gallons when calculating MPG.”
[Related: North Carolina lawmakers pass fuel-tax suspension]
A few states have issued temporary fuel tax holidays suspending the fuel taxes altogether:
- North Carolina: From Oct. 10 through Nov. 30, the state’s fuel excise tax is 0 cents per gallon. Carriers must still report gallons and miles for the applicable period and should split by date on the 4th quarter IFTA return.
- Georgia: The state’s fuel tax is currently suspended from Sept. 29 through Nov. 5. All IFTA-licensed carriers must still file IFTA returns during the period. Miles traveled during the tax holiday period should be reported in the Total Miles and Total Gallons fields, but excluded from Total Taxable Miles and Tax-Paid Gallons.
- Ohio: Ohio reduced its diesel and gas taxes to one-hundredth of one cent ($0.0001) per gallon for the period of Oct. 4 through Jan. 2, 2027. All miles traveled and fuel purchased must be reported on IFTA tax returns to accurately reflect MPG for the period. IFTA taxpayers will see a split rate for the fourth quarter of 2026 and the first quarter of 2027.
IFTA’s “Important Notices” website contains the most up-to-date orders from states regarding fuel taxes and dyed diesel.
Truckers’ biggest dyed diesel risks
An update from trucking business services provider ATBS -- co-producer of Overdrive’s Partners in Business owner-operator business manual -- highlights the risks owner-operators are potentially taking by using red-dyed diesel, even in states that allow it.
First, while the IRS did issue guidance stating that federal dyed diesel tax relief is in place through the end of the year, further federal guidance is still unavailable, so it’s unclear what truckers’ tax burden will be after the relief period.
At the state level, trucking as a whole isn’t covered by most waivers. “Most states that have relaxed their dyed fuel rules have done so only for agricultural or timber harvesting use,” ATBS said in its Oct. 8 notice. If you do use dyed fuel in a state that allows it and then cross state lines into a state that doesn’t, “you could be cited, and those penalties are often costly,”
Additionally, the red dye isn’t easy to get out of a fuel tank, and that’s by design. ATBS said the dye “can stay in your fuel system for up to six months unless the system is flushed and cleaned,” meaning “you could face a citation after the relief period ends, even if you filled up when it was allowed.”
[Related: Diesel marks third week of price cuts, spot freight rates stable]
Is using dyed diesel worth it?
The federal tax on diesel fuel is 24.4 cents per gallon, what truck owners would be saving at the pump with the use of dyed diesel. Is that enough to make it worth the risk?
ATBS said for leased owner-operators, that relief may not outweigh the discount from a fleet’s fuel card discount program. Assuming the same starting fuel price, no additional state relief, and no extra fees or discounts on the red-dyed diesel, ATBS weighed the following scenario:
“For instance, if you have a $0.50-per-gallon discount through your fleet and purchase 250 gallons, that saves you $125. In the same situation, federal relief of $0.244 per gallon would provide about $61 in up-front relief. That puts the fuel discount ahead by $64.”
For independent owner-operators with authority, the situation is similar depending on the fuel discounts you’ve set up yourself through fuel-card and other networks.
“If you have no discount set up, about $61 in upfront relief on 250 gallons could be helpful,” ATBS said. “If you already receive a strong discount, your current option may still cost less.”
[Related: New trucking tool x-rays brokers' rate offers armed with cost per mile]
