Red-Dyed Diesel Waiver Expands: 31 States In, 19 Still to Go
The U.S. Department of Agriculture says 31 states have taken or announced steps related to dyed-diesel enforcement after federal agencies moved to ease the burden of elevated fuel costs on agricultural producers and transportation operators.
States Take Action on Dyed Diesel
Agriculture Secretary Brooke Rollins said the states are joining a federal effort to reduce diesel-related costs. The actions include suspending certain penalties, modifying enforcement practices and taking other steps intended to limit unnecessary burdens on farmers and transportation operators.
The federal action suspended enforcement of the national 24.4-cent-per-gallon diesel tax on certain dyed-diesel use. Dyed diesel is generally intended for off-road applications, including agricultural equipment, and is subject to different tax and enforcement requirements than highway diesel.
State Taxes Remain in Effect
While 31 states have taken or announced related action, state fuel taxes remain a significant portion of the total tax burden. State diesel taxes average about 35 cents per gallon, according to the information provided.
As of Oct. 6, no state had exempted its own fuel tax on dyed diesel used on the highway, according to the executive director of the International Fuel Tax Agreement.
Potential Future Liability
Agricultural groups expect the tax issue could come due in early 2027 unless the federal deferral is converted into a permanent waiver, according to Land Line. The timing and scope of any future liability will depend on whether federal and state relief measures remain temporary or become permanent.
USDA has estimated that the broader dyed-diesel relief effort could save farmers and transportation operators more than $640 million. Federal officials continue to encourage the remaining states to take similar action.
