IRS extends diesel fuel penalty waiver - KPMG United States
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IRS extends diesel fuel penalty waiver; Hurricane Irma-related shortages

IRS extends diesel fuel penalty waiver

The IRS today announced that because of shortages of undyed diesel fuel caused by Hurricane Irma, a penalty will not be imposed when dyed diesel fuel is sold for use or is used on the highway in Florida before October 6, 2017.


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Typically, dyed diesel fuel is not taxed because it is sold for uses exempt from excise tax—such as sales to farmers for farming purposes, for home heating use, and to local governments for buses.

The penalty relief was originally effective September 6, 2017, but today was extended to October 6, 2017 (from September 22, 2017). Today’s IRS release—IR-2017-159—extends penalty relief so that any dyed diesel fuel that is stored for distribution to retailers, wholesale purchasers, and consumers in Florida prior to October 6, 2017, may continue to be distributed and sold until the supply is exhausted. 

The penalty relief does not apply to use of adulterated fuels that do not comply with Environmental Protection Agency (EPA) regulations. Consequently, diesel fuel with sulfur content higher than 15 parts-per-million may not be used in highway vehicles.

For operators of vehicles in which the dyed fuel is used, the penalty relief is available only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use. The IRS said that it will not impose penalties for failure to make semi-monthly deposits of this tax.

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