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:
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free 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.
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.
-
Stocks Slide to Start September: Stock Market Today
Seasonal trends suggest tough times for the stock market as we round into the end of the third quarter.
-
Here's What You'd Have If You Invested $1,000 Into Sherwin-Williams 20 Years Ago
Sherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
New Trump Tax Bill: Five Changes Homeowners Need to Know Now
Tax Changes Trump’s new tax legislation is reshaping how tax breaks for homeowners work.
-
Stay NJ Could Give You $6,500: The Deadline You Can't Miss
Property Taxes New Jersey has a new property tax relief program for 2025. The application deadline is approaching fast.
-
How the 2025 Child Tax Credit Rules Impact Single Parents
Tax Credits New changes to family tax credits, like the Child Tax Credit, will impact the eligibility of some households.
-
The Fall Garden Tax? What to Plant and How to Prepare
Tax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
How Your 2025 Wedding Could Save You Money on Taxes
Tax Breaks There are some wedding expenses that are tax-deductible, and you don’t want to miss out on savings.
-
Texas Sales Tax-Free Weekend 2025
Tax Holiday Here's what you needed to know about the Texas sales tax holiday.
-
Retirees Should Watch These Four Key Tax Changes in 2025
Tax Changes This year brings key tax changes that could affect your retirement taxes and income.
-
The Most Tax-Friendly State for Retirement in 2025: Here It Is
Retirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?