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Understanding how to use dyed diesel properly is important, especially if you are running a fleet of vehicles or equipment. There is actually a history behind this fuel that can be interesting to know too. In some countries, such as Ireland, dyed fuel has been taken out of use for taxation purposes. In the United States, dyed fuel is a commodity used in many industries that benefit from lower taxes or none at all for this product.

The beginning of dyed diesel usage

In 1932, motor fuel taxes were necessary to help fund emergency and war efforts. This gas and diesel excise tax was transferred to the Highway Trust Fund in 1956 and is now used for road construction and related projects. Many can see the logic in having this tax added to the cost of purchasing fuel since road vehicles use highway systems and ultimately damage them. But, for those who have vehicles and equipment that use diesel off of roadways, the tax does not make sense.

In the early 1990s, the Internal Revenue Service (IRS) started thinking about an easier way to gather taxes from gasoline and diesel purchases. They also saw the logic in giving tax exemptions for offroad diesel. At this time, the Environmental Protection Agency (EPA) set a regulation that diesel fuel that did not meet their sulfur standards must be dyed blue.

When did dyeing offroad diesel start?

The IRS mandated that all offroad fuel be dyed red in 1994. This would help prevent fraud and allow offroad fuel users to continue seeing benefits. It did away with the EPA’s mandate of dyeing diesel blue, though. Today, dyed diesel is used in a variety of industries including construction, boating, residential heating, manufacturing, and agriculture.

Laws surrounding dyed diesel

It could be tempting to use offroad diesel in on-road vehicles, but this can result in heavy legal repercussions. If you are caught using dyed diesel fuel in your fleet vehicles, for example, you could be fined by federal or state investigators. Also, if you do not report the legal use of your dyed diesel, you could lose out on the tax exemptions.

How to know you are getting legal dyed diesel

To ensure that you are buying properly taxed diesel, whether it is dyed or not, you should start with your supplier. You must work with a reliable wholesale distributor that has great reviews and a strong reputation. Watch out for those who are offering fast discounts or rates that are too good to be true. Here are some other steps you can take.

  1. Check the label on the pump. Stations must label dyed diesel and regular diesel. It is up to you once you see the correct labels to use the correct fuel.
  2. Look for signs of tampering. Check the pump itself, the label, and your receipts. If an unethical supplier wants to participate in fraud, they may try to push it off on you or your drivers.
  3. Inspect the fuel. You can take a look at the fuel you are buying to make sure it is what you ordered. Look through the sight glass on the hose if there is one. If there is no glass present, use a clear container to inspect it first.
  4. Keep all of your receipts and records. This is more of a safety measure than a preventative method of stopping fraud. If an investigator finds that you aren’t using fuel correctly or that it hasn’t been taxed correctly, you will have records of who is really at fault.

Dyed diesel from Kendrick Oil Company

To learn more about red diesel or getting this fuel in bulk quantities, contact Kendrick Oil Company. We provide a variety of Fuels and Services throughout Texas, New Mexico, Oklahoma, Kansas, Colorado, and Louisiana. You can reach us at (800) 299-3991 or speak with a member of our experienced Team.