Dyed diesel relief temporarily pauses certain federal and state penalties when tax-exempt, red-dyed diesel is used on public roads, but it does not wipe out every underlying fuel tax. Here is what businesses need to know before changing their fueling practices.
Key Takeaways
- The federal government has directed temporary relief from specified dyed diesel penalties for highway use from October 5 through December 31, 2026.
- State relief varies significantly because some states broadly suspend enforcement or penalties, while others limit relief to agriculture, forestry, specified vehicles, or specified products.
- Temporary relief from dyed diesel restrictions or penalties does not necessarily eliminate the underlying federal or state fuel tax.
What Is Dyed Diesel & Why Does Temporary Relief Matter?
Dyed diesel is ordinary diesel fuel that contains a red dye used to identify fuel intended for tax-exempt or lower-taxed uses, including certain off-highway agricultural, construction, industrial, and other qualifying activities. Clear diesel is ordinarily required for taxable highway use. The dye allows federal and state authorities to identify fuel that may have been used on-road without payment of the applicable highway fuel tax.
Under ordinary rules, federal and state authorities may inspect or sample fuel from vehicle tanks at roadside inspection points or business locations. Improper highway use can result in fuel-tax levies and significant penalties. In response to elevated diesel prices, the federal government and a growing number of states have temporarily relaxed certain restrictions, penalties, taxes, or enforcement priorities associated with on-road use of dyed diesel.
Forvis Mazars Insight: The current measures do not create a single nationwide rule making dyed diesel tax-free. A business must separately decide whether federal penalty relief applies, whether the state permits or declines to penalize the on-road use, and whether an underlying federal or state fuel tax remains due.
Which States Offer Dyed Diesel Relief?
As of October 20, 2026, more than a dozen states have published or announced temporary action addressing on-road use or enforcement of dyed diesel. The scope of relief differs materially by state.
| State | Government Action | Relief Period | Summary |
|---|---|---|---|
| Alabama | Office of Alabama Governor Kay Ivey, Governor Ivey Directs Alabama Law Enforcement Agency to Halt Enforcement on Dyed Diesel Fuel to Relieve Agricultural & Timber Communities (September 24, 2026), including directive. | Effective September 24, 2026, for 120 days, through January 22, 2027. | Alabama directed ALEA and other enforcement agencies to adjust their dyed diesel enforcement priorities concerning dyed diesel. The official announcement states that the change is intended to relieve the agricultural and timber communities, but the published directive does not expressly limit the enforcement adjustment to particular vehicle classes. |
| Arkansas | Arkansas Executive Order 26-15 (Sept. 29, 2026). | Effective September 30, 2026, through October 30, 2026, unless extended. | Arkansas temporarily permits qualifying farmers and timber harvesters to use dyed diesel in specified highway vehicles and suspends the applicable state tax and penalty provisions during the relief period. |
| Georgia | Georgia Department of Revenue, Informational Bulletin MFT-2026-04, Temporary Waiver of State Dyed Fuel Penalties (October 6, 2026); Georgia Executive Order 10.06.26.01. | Effective October 6, 2026, through 11:59 p.m. on November 5, 2026. | Georgia waives specified state penalties for selling or delivering dyed fuel and for dyed fuel consumed in on-road vehicles or for highway use in all 159 counties. Georgia also separately suspended the state motor-fuel tax during the emergency period. |
| Idaho | Idaho Executive Order 2026-07 (October 9, 2026). | Effective October 9, 2026, through November 8, 2026, unless extended. | Idaho temporarily suspends state dyed fuel inspections under Idaho Code § 49-676. The order does not waive fuel taxes or other applicable legal requirements. |
| Illinois | Illinois Executive Order 2026-08 (October 6, 2026). | Effective October 6, 2026, through December 31, 2026. | Illinois directs the Department of Revenue and State Police not to impose a penalty when dyed diesel from bulk storage is sold or used on highways and state roads for farming and agricultural purposes. The Department of Revenue is also directed to issue implementation and recordkeeping guidance. |
| Indiana | Indiana Executive Order 26-34 (September 30, 2026); Indiana Department of Revenue, Gasoline Use Tax notice. | Effective September 30, 2026, for the duration of Indiana’s energy emergency. | Indiana suspends specified special-fuel restrictions for farmers and timber harvesters. Indiana DOR explains that farmers and timber harvesters may use dyed diesel in vehicles hauling farm and timber products on Indiana roads during the emergency. |
| Iowa | Iowa Governor, Dyed Diesel Use Proclamation (October 6, 2026). | Effective October 6, 2026, for 120 days, through February 2, 2027, unless sooner terminated or extended. | Iowa suspends identified regulatory and tax provisions for dyed diesel used in motor vehicles hauling specified agricultural products, including corn, soybeans, hay, straw, silage, stover, fertilizer, manure, and distillers’ grains, on Iowa highways and public roads. |
| Kentucky | Kentucky Executive Order 2026-667 (October 7, 2026); Attorney General Executive Order 2026-07 (October 7, 2026). | Effective October 8, 2026, subject to the 30-day limitation in KRS 39A.090(2), unless extended. | Kentucky suspends restrictions on highway use of untaxed or dyed diesel under KRS 138.502(1)–(3) and related penalties under KRS 138.502(5)(a)–(b). The suspension received the Attorney General’s approval. |
| Louisiana | Office of Louisiana Governor Jeff Landry, emergency dyed diesel order and official announcement (September 23, 2026). | Effective September 23, 2026, through October 22, 2026. | Louisiana suspends the state penalty for highway use of dyed diesel by vehicles registered as Class 2 (Forest Products) or Class 5 (Farm Use). |
| Maryland | Maryland Executive Order 01.01.2026.19 (October 9, 2026). | Effective October 9, 2026, for the duration of the declared emergency, unless extended or terminated. | Maryland permits qualifying agricultural and forestry haulers to use dyed diesel on public roads without specified penalties. Drivers must document eligible activities, and certain 30-day hauling permit fees are waived. |
| Missouri | Missouri Executive Order 26-19 (September 30, 2026). | Effective September 30, 2026, through October 30, 2026, unless extended. | Missouri suspends enforcement of the restrictions and associated penalties in Section 142.932, RSMo, exclusively for vehicles operating on public highways in agricultural operations. The order also prohibits state agencies from assessing taxes or administrative, civil, or criminal penalties under Section 142.932 against qualifying owners or operators. |
| Montana | Montana Executive Order 11-2026 (October 9, 2026). | Effective October 9 to November 23, 2026. | Montana temporarily suspends enforcement of certain dyed fuel restrictions for commercial vehicles directly involved in agricultural or timber operations. Qualifying transportation includes agricultural products and supplies, livestock feed, and timber-related materials. |
| Nebraska | Nebraska Executive Order 26-21, Agricultural Diesel Fuel Supply (Sept. 24, 2026); Nebraska Department of Revenue implementation FAQs. | Effective September 24, 2026, for 90 days, through December 23, 2026. | Nebraska provides state dyed diesel penalty relief and motor-fuel tax refund relief for qualifying transportation of Nebraska-sourced commercial agricultural products. Nebraska DOR explains that qualifying taxpayers may claim refunds through Form 84AG and that nonqualifying roadway use remains subject to normal enforcement. |
| North Carolina | North Carolina Department of Revenue, Dyed Diesel Notice (October 1, 2026). | Effective October 1, 2026, through December 31, 2026. | North Carolina will not impose the specified penalty when dyed diesel from bulk storage is sold or used for highway use associated with farming and agricultural purposes. The 41-cent-per-gallon state excise tax remains due and must be remitted as directed by NCDOR. |
| North Dakota | Office of North Dakota Governor Kelly Armstrong, dyed diesel emergency action (September 29, 2026). | Effective September 29, 2026, through November 30, 2026. | North Dakota temporarily expands permitted dyed diesel use to licensed motor vehicles used in connection with agricultural operations, including hauling grain, livestock, feed, seed, fertilizer, equipment, and other agricultural inputs and products. The state action does not itself waive federal tax. |
| Oklahoma | Office of Oklahoma Governor Kevin Stitt, dyed diesel enforcement directive (September 28, 2026). | Effective September 28, 2026, for 120 days, through January 26, 2027. | Oklahoma directs a pause on enforcement of state taxes, regulations, and fines levied on the use of red-dyed diesel in farm vehicles and directs state public-safety and regulatory agencies to suspend enforcement actions regarding dyed diesel in highway vehicles during the relief period. |
| South Dakota | Office of South Dakota Governor Larry Rhoden, Governor Rhoden Adjusts Enforcement Priorities for Dyed Diesel (October 6, 2026). | Effective October 6, 2026, through December 31, 2026. | South Dakota directs the Department of Public Safety to prioritize commercial vehicle inspections presenting public-safety concerns rather than identifying dyed diesel use. The governor expressly states that he cannot unilaterally waive statutory state taxes or penalties, so the directive changes enforcement priorities but does not itself eliminate the underlying state liability. |
| Tennessee | Governor Lee directive dated October 2, 2026; the action was publicly confirmed by federal and Tennessee officials on October 6, 2026. | Through October 31, 2026. | Tennessee directs state departments to suspend enforcement of dyed diesel restrictions to provide relief for farmers and foresters during harvest season. The state should be monitored for additional published implementation detail. |
| Texas | Texas Governor, statewide disaster proclamation (Sept. 28, 2026); Texas Comptroller, Diesel Fuel – Disaster Declaration. | Effective September 28, 2026, while the applicable disaster suspension remains in effect. | Texas suspends restrictions on using dyed diesel on highways. The Texas Comptroller expressly states that the suspension does not waive the 20-cent-per-gallon tax owed when dyed diesel is used in a taxable on-highway manner. |
| Virginia | Virginia Executive Directive 5 (October 16, 2026); Virginia DMV, Use of Dyed Diesel on Virginia Roadways. | Effective October 16, 2026, through December 31, 2026, unless extended or rescinded. | Virginia waives specified civil penalties under Va. Code Ann. § 58.1-2265 for highway use of dyed diesel when the applicable backup tax under Va. Code Ann. § 58.1-2225 is paid. Motor-carrier road tax obligations remain applicable, and DMV is developing payment procedures. |
Forvis Mazars Insight: The key important distinction is the nature of each state’s suspension. Some states remove a penalty, some suspend a statutory restriction or tax, and others only change enforcement priorities. A state’s presence on the dyed diesel relief list therefore does not, by itself, confirm that the fuel may be used on-road without an underlying state tax liability.
What Trends Are Emerging Across States?
Although the state actions respond to the same diesel-cost pressures, several distinct approaches have emerged.
Agriculture and forestry are the primary focus of many state measures. Indiana, Illinois, Iowa, Louisiana, Missouri, Nebraska, North Carolina, North Dakota, and Tennessee expressly tie relief to agricultural, forestry, timber, or specified agricultural transportation activities.
Some states use broader enforcement language. Alabama directs enforcement agencies to adjust dyed diesel enforcement priorities without an express vehicle-class limitation in the published directive, while Georgia waives specified penalties for dyed fuel consumed in on-road vehicles during the emergency period.
Penalty relief and tax relief are not interchangeable. North Carolina requires payment of its 41-cent-per-gallon excise tax despite penalty relief, and Texas expressly preserves its 20-cent-per-gallon tax on taxable highway use. South Dakota changes enforcement priorities but states that the governor cannot unilaterally waive the statutory tax or penalty.
Other states provide more direct tax relief. Iowa’s proclamation suspends identified tax provisions for the specified agricultural transportation, while Nebraska provides a refund mechanism for qualifying fuel used to transport Nebraska-sourced agricultural products.
The relief periods vary considerably. Current end dates range from October 2026 through February 2, 2027, and some emergency-based measures may be extended or terminated separately.
Forvis Mazars Insight: Multistate operators should weigh each jurisdiction in which a vehicle will travel. Relief available at the point where dyed diesel is purchased does not necessarily set the tax or penalty treatment after the vehicle crosses a state line.
What Federal Relief Applies to Dyed Diesel?
On October 5, 2026, President Donald Trump issued the executive order, “Emergency Tax Relief on Diesel Fuel.”
The order directs the Secretary of the Treasury, within five days, to direct the IRS to announce that it will not impose penalties under Internal Revenue Code (IRC) Section 6715(a)(1) or §6715(a)(2) when dyed diesel is sold for highway use or used on a highway from October 5 through December 31, 2026. The order also directs the IRS to provide the needed relief from penalties associated with failure to make semi-monthly deposits of the applicable tax.
The order treats the underlying federal excise tax separately. Treasury must first decide whether relief is authorized under IRC §7508A, including whether a qualifying event has occurred and which taxpayers are affected. The order directs Treasury, to the extent authorized by law, to defer payment of specified federal excise taxes incurred from October 5 through December 31, 2026, if Treasury makes those determinations. Amounts properly deferred are to be deferred without penalties or interest to the extent authorized by law.
The executive order therefore sets a clear directive for temporary relief from the specified IRC §6715 penalties, but it does not itself eliminate the underlying federal excise-tax liability. It directs Treasury to to evaluate, weigh, and use available deferral authority. The executive order also directs Treasury to explore every available avenue, including legislation, to eliminate the obligation to pay the deferred amounts, although the executive order itself does not eliminate that liability.
Forvis Mazars Insight: The IRC §6715 penalty relief is broader on its face than many state measures because the executive order does not limit the penalty directive to agricultural or forestry vehicles. Clear diesel is not part of this executive order. State restrictions and state fuel taxes nevertheless remain separate considerations.
What Should Businesses Consider Before Using Dyed Diesel Relief?
Businesses considering on-road use of dyed diesel during the temporary relief periods should address the following questions before changing their fueling practices:
- Has each state in which the vehicle will operate adopted dyed diesel relief, and does the vehicle, activity, or commodity qualify?
- What are the exact effective and expiration dates of the applicable state and federal relief?
- Does the state merely suspend enforcement or penalties, or does it also suspend or refund the underlying state fuel tax?
- What federal excise-tax liability remains after application of the October 5 executive order and any subsequent Treasury or IRS implementation?
- Are the company’s systems and reports available to separately identify qualifying dyed diesel transactions beginning October 5, track gallons, taxable uses, and maintain the data necessary to support future excise tax filings and reporting?
- What records must be maintained to show qualifying use, including gallons purchased, dates, vehicles, routes, commodities transported, and business purpose?
- Will the vehicle travel into another state that provides narrower relief or no state relief?
Businesses should also plan for the end of the temporary relief periods. Dyed fuel or residual dye may remain in a vehicle tank after ordinary enforcement resumes. Nebraska, for example, has expressly acknowledged that trace dye may remain after its relief period and has indicated that this will be taken into consideration, but other jurisdictions may issue different transition rules.
Forvis Mazars Insight: The principal compliance risk is treating relief from a dyed diesel penalty as equivalent to forgiveness of the fuel tax. The tax and penalty provisions should be considered separately at both the federal and state levels.
How Forvis Mazars Can Help
The state and local tax team at Forvis Mazars can help you see whether temporary dyed diesel relief applies to your operations, weigh remaining federal and state motor-fuel tax obligations, look at multistate vehicle activity, and develop the needed reporting and documentation procedures. Because these measures are developing quickly and may be extended, modified, or supplemented by agency guidance, please contact a professional at Forvis Mazars to discuss how the temporary relief may affect your business.