Dyed Diesel and Kerosene Regulations
Here is a reminder of the federal and state regulations for the sale of kerosene and dyed diesel at retail and bulk plant racks.
Newly Appointed IRS Compliance Officer in Tennessee
TFCA learned in early 2023 that after many years with out this position being filled, the IRS has hired a compliance officer for Tenn. This officer is making the rounds and is showing up at some retail stations. Apparently looking for dyed fuel being sold for on road use. If you are selling dyed diesel or kerosene at your retail stations, you might check them to be sure your labeling is correct.
Here is information from EMA staffer Mark Morgan:
The IRS checks for visible evidence of red dye in on road diesel fuel and clear kerosene as well as sulfur content. They also check to make certain the IRS label is on all dyed diesel dispensers. Here are the required IRS labels, the last one is for tax free sale of clear kerosene from a blocked pump:
"DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE”
or
“DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE"
"UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY”
Here is information from EMA staffer Mark Morgan:
The IRS checks for visible evidence of red dye in on road diesel fuel and clear kerosene as well as sulfur content. They also check to make certain the IRS label is on all dyed diesel dispensers. Here are the required IRS labels, the last one is for tax free sale of clear kerosene from a blocked pump:
"DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE”
or
“DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE"
"UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY”
View Tennessee Codes Here:
EMA Compliance Bulletin:
IRS Requirements for Tax Free Retail Sale of
Undyed Kerosene from Blocked Pumps
ISSUE: IRS regulations allow for the tax-free sale of undyed kerosene at retail dispensers. Retail dispenser means any dispenser, at any location, used to sell undyed, tax-free kerosene to a consumer. Retail dispensers include those located at bulk plants. Such sales are allowed so long as the undyed kerosene is sold from a “blocked pump” and proper notification is made.
COMPLIANCE:
I. Energy marketers may apply for a credit or refund of the federal tax on undyed kerosene provided the following conditions are met:
NONTAXABLE USE ONLY”
Contact Mark S. Morgan, EMA Regulatory Counsel
[email protected]
COMPLIANCE:
I. Energy marketers may apply for a credit or refund of the federal tax on undyed kerosene provided the following conditions are met:
- The undyed kerosene is sold for a non-taxable use
- The undyed kerosene is dispensed from a “blocked pump”.
- For purchases of five gallons or more, the vendor must record the date of sale, name and address of the buyer, and the number of gallons of kerosene sold to the buyer.
- The dispenser is used to make retail sales of undyed kerosene for use by the buyer in any non-taxable use.
- The dispenser it is in a fixed location.
- The dispenser is identified with a legible and conspicuous notice stating:
NONTAXABLE USE ONLY”
- The dispenser meets either of the following conditions:
- It cannot reasonably be used to dispense fuel directly into the tank of a diesel-powered highway vehicle or train. This can be achieved by using a short hose that cannot reach the tank of a diesel-powered highway vehicle or the use of barriers that prevent the vehicle from reaching the hose, OR
- It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer’s request for undyed kerosene for use as fuel other than in a diesel-powered highway vehicle.
- Who May File the Claim? The retail vendor selling the undyed kerosene from a blocked pump is the only party allowed to file a claim for a credit or refund on federally imposed excise tax. Before filing a claim for credit or refund, the retailer must first obtain an IRS ultimate vendor registration number.
- How an IRS is registered ultimate vendor number obtained? The retail vendor may obtain an ultimate registered vendor number (637 UP) by filing IRS Form 637.
- When Should I file a claim? A credit or refund may be submitted every seven days for claims exceeding $100.
- Which forms should be used to file the claim? IRS forms 8849 or 4136 must be used to file the claim for sales of undyed kerosene from a blocked pump. The claimant must write the word “KEROSENE “at the top of the form submitted to the IRS.
Contact Mark S. Morgan, EMA Regulatory Counsel
[email protected]
IRS Diesel Fuel and Kerosene Dispenser Label Requirements
Date: April 1, 2011
EXECUTIVE SUMMARY: The IRS requires all untaxed diesel fuel or untaxed kerosene dispensers to display specific labels describing the product and their taxable status and use. The IRS requires these labels to contain specific language that may not be altered or shortened in any way. EPA dispenser labels for low sulfur product are not a substitute for the IRS labels. The fine for failure to display the proper IRS label is $10 per gallon for every gallon contained in the storage tank at the time of violation. IRS enforcement of the dispenser label requirement is aggressive and ongoing.
IRS Continues to Levy Hefty Fines for
Failure to Display Dispenser Tax Labels
EMA is continuing to receive calls about ongoing IRS enforcement of dispenser labeling requirements.
The IRS requires all dyed diesel and dyed kerosene dispensers to have a specific label indicating that the fuel is for nontaxable use only. The labeling requirement has been in place for diesel dyed diesel dispensers since 1993 and for dyed and clear kerosene dispensers since 1998. The IRS recently stepped- up enforcement of the dispenser label requirements.
The following IRS labels must be posted on any retail dispenser or other delivery facility (skid tank, consumer dispensers at bulk plants or card locks) where dyed diesel fuel and/or dyed kerosene are dispensed for use by a purchaser/consumer:
“DYED DIESEL FUEL,
NONTAXABLE USE ONLY,
PENALTY FOR TAXABLE USE”
or
“DYED KEROSENE,
NONTAXABLE USE ONLY,
PENALTY FOR TAXABLE USE”
In addition, the following label must be posted on all blocked pumps that sell clear, untaxed kerosene:
"UNDYED UNTAXED KEROSENE,
NONTAXABLE USE ONLY"
The labels must be affixed to the dispenser in a conspicuous place within easy sight of the person dispensing the fuel either on the face of the dispenser (on both sides) or on the side of the dispenser just above the nozzle housing.
IMPORTANT! Undyed, kerosene may be sold tax fee only when dispensed through a blocked pump. A blocked pump is a fuel dispenser that meets all of the following requirements:
NONTAXABLE USE ONLY”
Contact Mark S. Morgan, EMA Regulatory Counsel
[email protected]
EXECUTIVE SUMMARY: The IRS requires all untaxed diesel fuel or untaxed kerosene dispensers to display specific labels describing the product and their taxable status and use. The IRS requires these labels to contain specific language that may not be altered or shortened in any way. EPA dispenser labels for low sulfur product are not a substitute for the IRS labels. The fine for failure to display the proper IRS label is $10 per gallon for every gallon contained in the storage tank at the time of violation. IRS enforcement of the dispenser label requirement is aggressive and ongoing.
IRS Continues to Levy Hefty Fines for
Failure to Display Dispenser Tax Labels
EMA is continuing to receive calls about ongoing IRS enforcement of dispenser labeling requirements.
The IRS requires all dyed diesel and dyed kerosene dispensers to have a specific label indicating that the fuel is for nontaxable use only. The labeling requirement has been in place for diesel dyed diesel dispensers since 1993 and for dyed and clear kerosene dispensers since 1998. The IRS recently stepped- up enforcement of the dispenser label requirements.
The following IRS labels must be posted on any retail dispenser or other delivery facility (skid tank, consumer dispensers at bulk plants or card locks) where dyed diesel fuel and/or dyed kerosene are dispensed for use by a purchaser/consumer:
“DYED DIESEL FUEL,
NONTAXABLE USE ONLY,
PENALTY FOR TAXABLE USE”
or
“DYED KEROSENE,
NONTAXABLE USE ONLY,
PENALTY FOR TAXABLE USE”
In addition, the following label must be posted on all blocked pumps that sell clear, untaxed kerosene:
"UNDYED UNTAXED KEROSENE,
NONTAXABLE USE ONLY"
The labels must be affixed to the dispenser in a conspicuous place within easy sight of the person dispensing the fuel either on the face of the dispenser (on both sides) or on the side of the dispenser just above the nozzle housing.
IMPORTANT! Undyed, kerosene may be sold tax fee only when dispensed through a blocked pump. A blocked pump is a fuel dispenser that meets all of the following requirements:
- The dispenser is used to make retail sales of undyed kerosene for use by the buyer in any non-taxable use.
- The dispenser it is in a fixed location.
- The dispenser is identified with a legible and conspicuous notice stating:
NONTAXABLE USE ONLY”
- The dispenser meets either of the following conditions:
- It cannot reasonably be used to dispense fuel directly into the tank of a diesel-powered highway vehicle or train. This can be achieved by using a short hose that cannot reach the tank of a diesel-powered highway vehicle or the use of barriers that prevent the vehicle from reaching the hose, OR
- It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer’s request for undyed kerosene for use as fuel other than in a diesel-powered highway vehicle.
Contact Mark S. Morgan, EMA Regulatory Counsel
[email protected]