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Last Updated: 7/16/2018

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Petroleum Taxes

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Petroleum Taxes > Tax Information > Dyed Fuel

  • Why is some fuel dyed?Back to top

    To help reduce tax cheating. Dyed fuel indicates that no Motor Fuel Excise Tax has been paid on the fuel. It may only be used in non-licensed vehicles or equipment for specific, tax-exempt activities. Anyone using dyed fuel on public roads or for non-exempt purposes is evading the excise tax and will be penalized if caught.​

  • What are the penalties for using dyed fuel on public roads or highways?Back to top

    When dyed fuel is used in a licensed motor vehicle, the vehicle's registered owner can be penalized $10 per gallon or $1,000 per violation, which ever is greater. The Internal Revenue Service also may penalize the vehicle owner, separately from any Minnesota penalties. View the statute, M.S. 296A.22, subd. 4.​

  • What if I find someone selling dyed fuel for use on public roads ("highway use")?Back to top

    Anyone selling dyed fuel for use on public roads is breaking the law. Please report them to the proper authorities by calling the Department of Revenue tip line at 651-297-5195 or 1-800-657-3500.​

  • Can dyed fuel be used to power refrigeration units or other equipment on a vehicle?Back to top

    Yes, as long as the dyed fuel is stored in a separate tank that isn't connected to the tank that is used to propel the vehicle.

    Dyed fuel can also be used off-road in non licensed vehicles.​

  • I purchased dyed fuel, do I qualify for a Motor Fuel Tax refund?Back to top

    No. The Motor Fuel Refund is for excise tax only. When you purchased dyed fuel you weren't charged Motor Fuel Excise Tax, though you may have paid sales tax.
    Some fuel purchases are exempt from sales tax, depending on how the fuel is used. You may qualify for a Sales and Use Tax refund if you were charged sales tax on dyed fuel that was used for a tax-exempt purpose. For details, see Petroleum Products (Sales Tax Fact Sheet 116).

  • Is the fuel I use in my personal boat or watercraft subject to the state Motor Fuel Excise Tax?Back to top

    Yes. All fuel used in personal boats and watercraft is taxable. For diesel powered craft, you must use undyed diesel fuel when buying for non-business use.

  • What if I find dyed fuel in my vehicle?Back to top

    If you're using dyed fuel in a licensed vehicle on public roads, you will be penalized if caught. You should remove any dyed fuel from the tank before driving the vehicle.​

  • What if undyed fuel isn't available?Back to top

    IRS officials have been monitoring possible supply problems with undyed diesel fuel and will announce any remedial actions taken.

    Please report supply problems to the IRS. If you have questions or see any evidence of violations, call the nearest IRS office or the Minnesota Petroleum Tax Unit at 651-556-6354. ​