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.
-
What Wall Street's CEOs Are Saying About Trump's Tariffs
We're in the thick of earnings season and corporate America has plenty to say about the Trump administration's trade policy.
By Karee Venema
-
The Role of the U.S. Dollar in Retirement: Is It Secure?
Protect your retirement from de-dollarization, because “capital always goes where it is treated best."
By Adam Shell
-
Ten Cheapest Places To Live in Florida
Property Tax Make your Florida vacation spot daily living — these counties have the lowest property tax bills in the state.
By Kate Schubel
-
Trump’s Tax Cut Risks Your SNAP, Medicaid Benefits
Tax Cuts The GOP budget blueprint could slash lifesaving programs for millions of U.S. households.
By Gabriella Cruz-Martínez
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax Refunds
Tax Refunds As many as one million taxpayers could be missing out on a significant tax refund.
By Gabriella Cruz-Martínez
-
Which Generation Pays the Most Tax in the US?
Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
By Kelley R. Taylor
-
How the Trump Harvard IRS Tax Threat Could Impact You
Tax Law Trump's latest higher education showdown raises fundamental questions that could reach beyond Harvard's nonprofit tax status.
By Kelley R. Taylor
-
Tax Day 2025: Don’t Miss These Freebies, Food Deals and Discounts
Tax Day You can score some sweet deals on April 15 in some select restaurants like Burger King, Shake Shack, and more.
By Gabriella Cruz-Martínez
-
Tax Time: Does Your Kid Influencer Owe Taxes?
State Tax Some minors are making big money on social media. Here’s how to know if they need to file taxes.
By Gabriella Cruz-Martínez
-
Trump Plans to Terminate IRS Direct File program
Tax Filing The IRS Direct File program was piloted last year in 12 states and has since expanded to 25. But will it last under the Trump administration?
By Gabriella Cruz-Martínez