Fuel marketers told to await Saturday Treasury diesel guidance

Ten states issue varying diesel relief measures, EMA says

The Energy Marketers of America warned its members in the Tuesday note that the executive order leaves the scope of any relief unresolved until Treasury acts. The note stated: “Importantly, the Executive Order does not itself authorize highway sales or on-highway use of dyed diesel fuel. Whether relief is available, whom it covers and on what conditions depend on Treasury determinations and guidance not yet issued. State actions also may be necessary.” It added: “EMA members, therefore, should proceed with caution.”

The order, issued Monday, directs Treasury to determine whether it can defer — not remove — the federal excise tax and to explore ways to eliminate the obligation to pay the tax when due on qualifying transactions from Monday through Dec. 31. The directive is intended to lower diesel costs amid reduced global supplies.

Treasury has until Saturday under the order to determine whether it can legally defer the federal diesel taxes on red-dyed diesel used in highway vehicles and to direct the IRS to announce relief from certain penalties associated with its sale and use. EMA noted that the order does not authorize the use of red-dyed diesel in highway vehicles, eliminate the federal excise tax, or override state laws and Environmental Protection Agency regulations.

Red-dyed diesel is exempt from federal highway fuel taxes and is generally restricted to off-road uses such as in farming equipment and for heating.

Pending Treasury guidance on covered taxpayers and payment dates, “marketers should consider documenting any such sales and customer use,” EMA said, warning that fuel distributors could ultimately remain liable for the 24.4-cent-per-gallon tax when the deferral expires at year’s end, because the order does not eliminate the tax outright.

The trade group also flagged potential penalties for truckers and others who use red-dyed diesel, noting that dye residue could remain in tanks and fuel filters for months even after the temporary penalty relief expires on Dec. 31. EMA raised that prospect as a compliance concern distinct from the excise-tax question.

EMA also cautioned that existing supply constraints, combined with added demand during the harvest season and the start of heating season, could strain dyed diesel and heating fuel supplies.

The ten state emergency measures issued so far vary in their terms, resulting in different rules for fuel distributors and drivers depending on the state, according to EMA.