IRS Gives Truckers a Tax Break in Response to the Colonial Pipeline Shutdown
The tax penalty for using dyed diesel fuel for highway use is temporarily suspended.


In response to the supply chain disruptions created by the Colonial Pipeline shutdown, the IRS is temporarily suspending the penalty for selling or using dyed diesel fuel for highway use in Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and the District of Columbia.
Normally, dyed diesel fuel is not subject to the 24.4¢ per gallon tax that is normally applied to diesel fuel for highway use because it's only sold for tax-exempt uses, such as for farming, home heating, and local government purposes. (The fuel is dyed – often red – to distinguish it from taxable fuel.)
The penalty is typically imposed if:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Any dyed fuel is sold or held for sale for a use the person knows or has reason to know isn't a nontaxable use of the fuel;
- Any dyed fuel is held for use or used for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed;
- The strength or composition of any dye in dyed fuel is willfully altered, or there is an attempt to alter it; or
- Altered fuel is knowingly sold or held for sale for any use that isn't a nontaxable use of the fuel.
The penalty is $1,000 or $10 per gallon of the dyed diesel fuel involved, whichever is higher. For multiple violations, the $1,000 portion of the penalty increases depending on the number of violations.
The penalty relief is retroactive to May 7, 2021, and will remain in effect through May 21, 2021. It's available to any person that sells or uses dyed diesel fuel for highway use. In the case of the operator of a vehicle in which the dyed diesel fuel is used, the penalty relief is available only if the operator or the person selling the fuel pays the 24.4 cents per gallon tax that is normally applied to diesel fuel for highway use. The IRS also won't impose penalties for the failure to make semimonthly deposits of this tax.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.
-
Donating Complex Assets Doesn't Have to Be Complicated
If you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Travel trends you can expect this summer
The Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
Missouri Leads Capital Gains Tax Repeal: Will Your State Follow?
State Tax As one state becomes a test case, policymakers and taxpayers across the U.S. will be watching closely to see what happens next.
-
Here's How the Child Tax Credit Could Increase Under Trump
Tax Credits House Republicans released details on President Trump’s ‘one big, beautiful bill,’ including an increased child tax credit.
-
New Overtime Tax Deduction Proposed for Millions Working Extra Hours
Tax Law Some lawmakers and President Trump want to offer overtime tax relief. But will a tax deduction or an exemption help you most?
-
Big Tax Deduction Increase Proposed for Those Over Age 65
Tax Deductions A new bipartisan bill and a tax plan from the House GOP could mean bigger retirement tax savings to offset taxes on Social Security and high prices.
-
Ten Cheapest Places To Live in New York
Property Tax If you’re planning a move in New York, here are the counties with the lowest property tax bills in the Empire State.
-
‘My Etsy Shop is Dead’: Vendors Cry for Help Amid Trump’s Tariffs
Tariffs Small businesses are struggling to thrive as they absorb the Trump administration’s new wave of tariffs.
-
New HSA Contribution Limits Are Set for 2026: What to Know Now
Health Savings The IRS says Health Savings Account contribution limits will increase again next year due to inflation.
-
Three Things Star Wars Fans Taught Me About Tax
Tax Tips May the force be with you and your taxes this Star Wars Day 2025.