WASHINGTON – In response to the continued shortages of diesel fuel caused by Hurricane Katrina, the Internal Revenue Service will extend penalty relief on the sale of dyed fuel and its use on the highway.
Previously, the relief was to remain in effect through Sept. 15, but will now last through Oct. 5.
Guidelines. To the extent permitted by Environmental Protection Agency rules, dyed high-sulfur fuel received by retailers, including fuel received after Oct. 5, may be sold for highway use only if the dye is added at the refinery, not if it is added at the terminal.
IRS will waive penalties for highway use of high sulfur fuel that is dyed only at the refinery.
Retailers may rely on the representations of their suppliers that fuel received after Oct. 5 has not been dyed at the terminal.
Terminal operators should not dye, or add additional dye, to any fuel on which tax is paid.
Position holders are reminded that they are required to pay tax on any high-sulfur diesel fuel that has not been dyed at the terminal to meet IRS standards.
In the case of fuel that is dyed at the terminal to meet IRS standards, the relief is available to the operator of the vehicle that uses the fuel only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon.
Ordinarily, dyed diesel fuel is not taxed because it is sold for uses exempt from excise tax, such as farming or public transportation.
Additional relief. The IRS is also extending the penalty relief on the recently enacted tax penalty for a failure to meet the requirements of EPA highway diesel fuel sulfur content regulations if the EPA has waived those requirements.
This relief will remain in effect until the EPA waiver or any extension of that waiver expires.
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