Congress passed a law exempting the fuel from federal tax in 1988
Dyed diesel is featured in the current news cycle as federal and state officials offer relief to farmers and Americans affected by high diesel prices.
On Oct. 6, for example, President Trump signed an executive order to immediately authorize tax-free use of dyed diesel on highways, and to defer the federal diesel excise tax through the end of 2026.
But when did diesel fuels begin receiving dye? And why?
Here’s a brief history of dyed diesel in the U.S.
1930s
The U.S. begins collecting motor fuel taxes to support emergency and war efforts.
1950s
In early 1956, farm organizations encouraged producers to write to their representatives explaining why the federal tax on gasoline is unfair for farmers.
“Agriculture, says the (Millam County Farm) Bureau, is the only industry whose source of production power is taxed,” the January 26, 1956, edition of The Cameron Herald says.
That June, President Eisenhower signs a bill establishing the U.S. Highway Trust Fund to collect fuel taxes to pay for the construction and maintenance of bridges and highways.
1980s
The Revenue Act of 1987 requires farmers to pay the federal excise tax at the time of their diesel purchase and apply for a refund or an income tax credit later.
The Technical and Miscellaneous Revenue Act of 1988 restores farmers’ ability to purchase diesel tax-free directly from fuel producers and distributors.
1990s
The Omnibus Budget Reconciliation Act of 1993 commits the IRS to dye untaxed off-road diesel to prevent highway tax evasion.
Blue was used for government vehicles, and to identify high-sulfur diesel. Blue was eventually phased out since it could’ve been confused with aviation fuel.
The U.S. officially began using Solvent Red 164 to identify tax-exempt, off-road diesel on Oct. 1, 1994.
Penalties for unauthorized use of dyed diesel on highways range from a minimum fine of $1,000, or $10 per gallon of dyed diesel used.