Idaho State Tax Commission

Dyed Diesel

Consumers who buy dyed diesel are buying it without federal or Idaho motor fuels taxes included in the price. It's dyed red to mark it as untaxed fuel. Dyeing diesel is a federal program adopted by Idaho. The IRS requires mechanically dyeing diesel at an approved terminal registered with the IRS.

If Idaho fuels tax is included in the price, Idaho law exempts that fuel from the Idaho sales tax. But if it's not included in the price, you could owe sales tax on the fuel unless an exemption applies.

Dyed diesel uses

It isn't allowed in a vehicle that requires licensing. You can use dyed diesel for nontaxable use only. Some examples include:

  • Farming equipment such as combines, tractors, and other unlicensed equipment used off-road
  • Construction equipment such as welders and front-end loaders,
  • Home heating
  • Refrigeration units on trailers with a separate supply tank
Tax and penalties

Vehicle operators found using dyed diesel in the main fuel supply tank of a licensed or required to be licensed motor vehicle must pay motor fuels tax and will receive a fine. Penalties start at $250. Additional federal penalties may also apply.

Approved uses of dyed diesel in a motor vehicle

Federal and Idaho law allows federal government agencies and Idaho political subdivisions to use dyed diesel in motor vehicles:

  • Owned or leased, and
  • Operated by a federal agency or Idaho political subdivision.

These vehicles include, but aren't limited to:

  • School buses operated by school districts
  • Highway maintenance trucks
  • Fire trucks
Reporting fraud

Not paying motor fuels tax is tax fraud. This places an unfair burden on taxpayers who follow the laws passed by their representatives.

You can report tax fraud online.

What to do if you accidentally put dyed diesel in the tank of your licensed vehicle:
  1. Drain the dyed diesel from the main supply tank of the licensed vehicle,
  2. Replace the fuel filter,
  3. Clean the main supply tank and fuel supply lines, and
  4. Pay fuels tax on any dyed diesel used on a taxable road with the Form 75, Idaho Fuel Use Report.
Undyed diesel

Undyed diesel, also called clear diesel, includes state and federal taxes in the price. These taxes help fund highway construction and maintenance in Idaho.

Page last updated July 20, 2018. Last full review of page: July 20, 2018.

This information is for general guidance only. Tax laws are complex and change regularly. We can't cover every circumstance in our guides. This guidance may not apply to your situation. Please contact us with any questions. We work to provide current and accurate information. But some information could have technical inaccuracies or typographical errors. If there's a conflict between current tax law and this information, current tax law will govern.