The IRS penalty relief for dyed diesel for highway vehicle use is set to expire on October 15.

The IRS regulations on dyed diesel, which has a sulfur content that does not exceed 15 parts-per-million (ppm), stipulates that dyed diesel is to be used only for off-road use.  Undyed diesel fuel, which can be used on highways, has a state and federal tax imposed at the point of purchase (i.e., the fuel pump).  These state and federal taxes are used to fund road construction and maintenance in North Carolina.

Dyed diesel fuel, which is typically used for farm machinery and off-road vehicles, is subject to North Carolina sales tax and an additional North Carolina inspection tax (0.0025 cents per gallon) but is not subject to the typical state and federal taxes imposed on undyed diesel.

As part of a broader tax relief plan in response to Hurricane Helene, the IRS suspended enforcement of the dyed diesel penalties in order to minimize the impact of potential fuel disruptions.  Unless the IRS chooses to extend the penalty suspension, the penalty for using dyed diesel for highway use will resume on October 15th.