INSIGHTS AND RESOURCES

IRS temporarily waives penalty for using dyed diesel fuel in Southeast

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Authored by RSM US LLP


The IRS recently announced relief, retroactive to May 7, 2021, on the use and sale of dyed diesel fuel used on the highway in the states of Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and the District of Columbia. The waiver of penalties for the sale of dyed diesel fuel for use on the highway is meant to minimize or prevent disruptions to the fuel supply for diesel-powered highway vehicles due to the fuel shortage from the shutdown of the Colonial Pipeline. The relief is in effect through May 21, 2021.

Generally, dyed diesel fuel is not taxed, because it is sold for exempt uses, such as for use in farming, home heating and local government run buses. Ordinarily, if a person uses dyed diesel fuel for a taxable use, such as use in a vehicle on the highway, there is a penalty for such use. This announcement to waive the penalty is applicable for any person who sells or uses dyed fuel for highway use. For vehicle operators using the dyed diesel fuel, the relief is available only if the operator or the fuel seller pays the 24.4 cents per gallon tax that is normally applied to undyed diesel fuel used on the highways. The IRS will not impose penalties for failure to make semimonthly deposits of this tax and recommends taxpayer check IRS Publication 510, Excise Taxes, for information on the proper method for reporting and paying the tax.

Taxpayers should seek advice from their tax preparers if they need help determining if this waiver applies to them or if they need assistance of reporting and paying the tax.

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This article was written by Debbie Gordon and originally appeared on 2021-05-14.
2020 RSM US LLP. All rights reserved.
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The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

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