IRS and Texas Comptroller Waive Diesel Fuel Penalty for Texas
IRS and Texas Comptroller Waive Diesel Fuel Penalty for Texas
Due to Hurricane Harvey, the IRS and Texas Comptroller will not impose a penalty when dyed diesel fuel is sold for use or used on the highway throughout the entire state.
The Internal Revenue Service (IRS) and Texas Comptroller, in response to shortages of undyed diesel fuel caused by Hurricane Harvey, will not impose a penalty when dyed diesel fuel is sold for use or used on the highway. This expanded waiver area now covers the entire state of Texas.
This relief applies retroactively, beginning Aug. 25, 2017, in the areas and counties for which the Environmental Protection Agency (EPA) issued waivers for Texas Low Emission Diesel Fuel. Those areas and counties now include the entire state of Texas, an expansion of the original areas announced earlier.
This penalty relief is available to any person that sells or uses dyed fuel for highway use. In the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the 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 semi-monthly deposits of this tax. IRS Publication 510, Excise Taxes, has information on the proper method for reporting and paying the tax.
Ordinarily, dyed diesel fuel is not taxed, because it is sold for uses exempt from excise tax, such as to farmers for farming purposes, for home heating use and to local governments for buses.
Finally, consistent with the EPA waivers, this penalty waiver for dyed diesel is effective through Sept. 15, 2017. Also, consistent with the EPA waiver, this waiver does not apply to the Internal Revenue Code penalty for using adulterated fuels that do not comply with applicable EPA regulations. Consequently, diesel fuel with sulfur content higher than 15 parts-per-million may not be used in highway vehicles.
The Internal Revenue Service (IRS) and Texas Comptroller, in response to shortages of undyed diesel fuel caused by Hurricane Harvey, will not impose a penalty when dyed diesel fuel is sold for use or used on the highway. This expanded waiver area now covers the entire state of Texas.
This relief applies retroactively, beginning Aug. 25, 2017, in the areas and counties for which the Environmental Protection Agency (EPA) issued waivers for Texas Low Emission Diesel Fuel. Those areas and counties now include the entire state of Texas, an expansion of the original areas announced earlier.
This penalty relief is available to any person that sells or uses dyed fuel for highway use. In the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the 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 semi-monthly deposits of this tax. IRS Publication 510, Excise Taxes, has information on the proper method for reporting and paying the tax.
Ordinarily, dyed diesel fuel is not taxed, because it is sold for uses exempt from excise tax, such as to farmers for farming purposes, for home heating use and to local governments for buses.
Finally, consistent with the EPA waivers, this penalty waiver for dyed diesel is effective through Sept. 15, 2017. Also, consistent with the EPA waiver, this waiver does not apply to the Internal Revenue Code penalty for using adulterated fuels that do not comply with applicable EPA regulations. Consequently, diesel fuel with sulfur content higher than 15 parts-per-million may not be used in highway vehicles.
Motor Fuels Tax - Q & A
How can I get licensed as a motor fuel distributor, importer, or transporter to assist in delivering fuel into Texas?
To respond to the natural disaster and speed up the delivery of fuel into Texas from Sept. 1 through Sept. 30, the Comptroller’s Office will issue expedited licenses to motor fuel distributors, importers, and transporters to import fuel. The Comptroller’s office will waive the bond requirement for these distributors and importers. There is no bond requirement for transporters.
- Distributors, importers and transporters will electronically submit their applications (PDF) to fuelstax@cpa.texas.gov.
- Applicant should include “Hurricane Harvey” in the email subject line so we can route and process quickly.
- Applicant should also include a statement in the email requesting that the license be placed inactive as of Sept. 30, 2017 and that they will remit any taxes due.
- We will process the application within 24 hours. Once processed, the license status will be available through our online Fuel License Search tool.
Did the IRS and EPA lift federal restrictions for using dyed diesel fuel on roads and highways in response to the declared natural disaster?
Yes. On August 30, 2017, the Internal Revenue Service (IRS) and the Environmental Protection Agency (EPA), in response to the emergency caused by Hurricane Harvey, temporarily lifted their restrictions on using dyed diesel fuel on roads and highways. The penalty relief is available statewide if:
- the fuel is used between August 25, 2017 and September 15, 2017; and
- the operator of the highway vehicle in which the fuel is used pays the federal tax of 24.4 cents per gallon.
Will the Comptroller's office also lift the state's restrictions on dyed diesel fuel?
The Governor and Comptroller support the Hurricane Harvey relief action and are lifting the state's restrictions on the taxable sale and use of dyed diesel fuel in state declared disaster areas. The Governor’s disaster proclamation (PDF) is limited to the following counties: Angelina, Aransas, Atascosa, Austin, Bastrop, Bee, Bexar, Brazoria, Brazos, Burleson, Caldwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Orange, Polk, Refugio, Sabine, San Jacinto, San Patricio, Trinity, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy and Wilson counties.
The Comptroller will not impose or collect the state motor fuel tax on dyed diesel fuel sold and used on-highway between August 25, 2017 and September 15, 2017, in the above declared disaster areas.
As with the federal tax, the operator of the highway vehicle in which the dyed diesel fuel is used will be required to pay the 20 cents per gallon state tax on the fuel used on-road outside of the counties listed above.
What happens if I paid tax on clear diesel fuel purchased and used in off-highway equipment for disaster relief and recovery efforts?
A person who paid the tax on clear diesel fuel purchased and used in off-highway equipment for hurricane relief and recovery efforts within the counties declared disaster areas (PDF) by the Governor can file a refund claim with the Comptroller's office. The refund claim is valid for clear diesel fuel used from August 25 through September 15, 2017.
A person filing for refund will use Form 06-106, Texas Claim for Refund of Gasoline and Diesel Fuel Taxes (PDF). To claim a refund, simply enter the number of gallons of clear diesel fuel purchased and used on line 10 "Other claims not covered by above methods." The explanation required should indicate that the claim is due to Hurricane Harvey. Refund claims must be supported by fuel receipts and documentation of use as provided on the form.
Refund claims must be postmarked on or before December 31, 2017.
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