IRS announces waiver of dyed fuel penalty in Texas

TX-2021-01, February 19, 2021

AUSTIN - To minimize or prevent disruptions to the supply of fuel for diesel-powered highway vehicles because of severe winter weather impacting Texas, the Internal Revenue Service announced today it will not impose a penalty when dyed diesel fuel is sold for use or used on the highway in the State of Texas.

This relief is retroactive to February 12, 2021 and will remain in effect through February 26, 2021.

This penalty relief is available to any person that sells or uses dyed fuel for highway use. In the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use. The IRS will not impose penalties for failure to make semimonthly deposits of this tax. IRS Publication 510, Excise Taxes, has information on the proper method for reporting and paying the tax.

Ordinarily, dyed diesel fuel is not taxed, because it is sold for uses exempt from excise tax, such as to farmers for farming purposes, for home heating use and to local governments for buses.

The IRS is closely monitoring the situation and will provide additional relief as needed.