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Publication 225

Dyed Diesel Fuel and Dyed Kerosene(p80)

If you purchase dyed diesel fuel or dyed kerosene for a nontaxable use, you must use it only on a farm for farming purposes or for other nontaxable purposes. For example, you should not use dyed diesel fuel in a truck that is used both on the farm for farming purposes and on the highway, even though the highway use is in connection with farm business. Excise tax applies to the fuel used by the truck on the highways. In this situation, undyed (taxed) fuel should be purchased for the truck. You should keep fuel records of the use of the truck on the farm for farming purposes, and for other uses. You may be eligible for a credit or refund for the excise tax on fuel used on the farm for farming purposes.


A penalty is imposed on any person who knowingly uses, sells, or alters dyed diesel fuel or dyed kerosene for any purpose other than a nontaxable use. The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. For more information on this penalty, see Publication 510.