February 19, 2021

Comptroller’s Office Secures Temporary Waiver of Restrictions to Help with Diesel Fuel Supply

(AUSTIN) —Texas Comptroller Glenn Hegar announced today that, in partnership with Gov. Greg Abbott, the Comptroller’s office has lifted state restrictions on the use of dyed diesel fuel for vehicles on Texas roadways and suspended requirements to pay the state motor fuels tax on dyed diesel.

Hegar also announced that the Comptroller’s office has secured a temporary waiver from the Internal Revenue Service (IRS) to waive penalties and help clear the way for off-road diesel fuel to be used by on-road vehicles in all 254 counties to ensure the availability of reliable fuel sources for disaster relief.

Diesel fuel meant for off-road use only, such as in farm and construction equipment, isn’t taxed. Since 1994, federal law has required such diesel fuel to be dyed bright red to signify its taxability status. Using dyed diesel on the highway, or knowingly selling it for such use, is illegal under both Texas and federal law.

If vehicles powered by dyed diesel fuel are used on highways, the operator or the person selling the fuel must pay the federal tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use. The IRS will not impose penalties for failure to make semimonthly deposits of this tax. The state motor fuels tax of 20.0 cents per gallon is temporarily waived.

“The state motor fuels tax waiver, and the IRS penalty waiver, will help ensure fuel supplies for vehicles used by emergency responders, power companies and others to transport supplies and respond to the needs of Texans affected by this unprecedented winter storm,” Hegar said. “Supply chains for fuel sources have been disrupted, and it’s critical that we get fuel into these vehicles. Our disaster recovery can’t be hampered by concerns about whether the diesel has been taxed for on-road use.”

The IRS penalty waiver is retroactive to the beginning of the storm and covers the period of Feb. 12, 2021, through Feb. 26, 2021. The suspension of state restrictions and the suspension of the requirement to pay state motor fuels taxes on dyed diesel is in effect from Feb. 12, 2021, until Feb. 26, 2021, unless otherwise terminated by the Office of the Governor.