Fuel and transportation industry leaders say that using red dye diesel to save money in the short term may not be worth the risk of being taxed later.
This week, President Trump signed an executive order “temporarily” promoting the use of red dye diesel, which is exempt from federal excise taxes and intended only for use in farm equipment and other off-highway vehicles. The order instructs Treasury Secretary Scott Bessent to “defer certain diesel fuel tax payment obligations and to provide penalty relief to the extent permitted by law.”
Now, industry leaders in the oil and gas, and trucking industries, are warning truck stops and truck drivers that buying the tax free fuel now may cost them more in taxes later, reports NBC.
“Whether relief is available, whom it covers, and on what conditions depend on Treasury determinations and guidance not yet issued,” the Energy Marketers of America said of the order. “Deferral is not forgiveness.”
“The White House appears to be trying to encourage the supply chain to move toward selling dyed fuel in non-traditional ways,” the Society of Independent Gasoline Marketers of America and the National Association of Truck Stop Owners wrote in a note to their members.
“We do not expect most reputable diesel retailers and fuel marketers to do this,” the groups continued. “First, the tax is still owed, so there’s limited upside… The logistical challenges outweigh any visible upside: Residual dye lingers in tanks and fuel systems… The liability and customer risk outweigh any temporary, uncertain benefit.”
OOIDA president Todd Spencer acknowledges that the red dye fix may offer temporary relief, but points out that only long-term market stability will truly allow truckers to stay on their feet.
“Allowing the wider use of red-dyed diesel will provide minimal relief. Market stability is essential to bring down costs for the long haul,” he said.
