TOPEKA, KAN. (RFD-TV) — Federal relief allowing the highway use of red-dyed diesel is offering temporary flexibility for farmers and truckers, but producers still face state restrictions and potential tax obligations in some states like Kansas.
Roger McEowen with the Washburn School of Law said President Donald Trump’s executive order provides temporary federal penalty relief, but it does not automatically override state law or eliminate the underlying federal fuel tax.
“The diesel tax is 24.4 cents per gallon,” McEowen said. “That’s potentially $244 on 1,000 gallons.”
Federal Penalty Relief Does Not Mean Tax Forgiveness
The IRS announced October 14 that it would not impose federal penalties for selling dyed diesel for highway use or using it on highways nationwide from October 1 through December 31, 2026. However, the agency said further guidance was forthcoming on postponing federal excise tax payments and how the relief applies to required tax forms.
In his interview with RFD-TV, McEowen cautioned farmers against assuming the tax has been permanently eliminated.
“Farmers need to understand that penalty relief does not necessarily mean that the underlying tax has been forgiven,” he said.
The federal excise tax on diesel is separate from the penalties associated with improper highway use of dyed fuel. McEowen said Congress could still act on whether the deferred tax obligation is ultimately eliminated.
Kansas Farmers Face Different Rules
McEowen said federal relief does not automatically change state fuel laws because federal and state requirements operate separately.
“The president can direct enforcement, but that doesn’t automatically change state law on this issue,” he said.
According to McEowen, Kansas had not provided comparable state-level relief at the time of the interview. Kansas generally restricts dyed diesel to non-highway use, and the state’s existing guidance continues to distinguish that fuel from diesel used in highway vehicles.
McEowen said neighboring states, including Nebraska, Missouri and Oklahoma, had taken steps to provide additional relief. Missouri, for example, extended its temporary suspension of state restrictions through December 31, 2026. The scope of relief varies by state, so farmers should check the rules that apply to their operations and routes.
Crossing State Lines Creates Additional Risk
Farmers who purchase dyed diesel in a neighboring state should not assume they can automatically use the fuel on Kansas highways without consequences.
McEowen said the location where fuel is purchased does not necessarily determine whether its subsequent use is legal or tax-exempt in another state.
“Buying fuel across state lines doesn’t necessarily automatically make its subsequent use legal or tax-exempt in that particular state,” he said.
He recommended consulting a tax adviser and maintaining clear records of fuel purchases and use, particularly for farmers operating trucks across state lines.
Record-Keeping and Tax Planning Remain Important
McEowen said accurate fuel records can help farmers determine what they owe and demonstrate how fuel was purchased and used.
“Keep those good records,” he said.
He also cautioned that the red-dyed diesel relief is separate from USDA’s announced $8 billion Harvest Fuel Relief program. The programs serve different purposes and have different tax implications.
McEowen encouraged farmers to consult their tax advisers and review state-specific rules before deciding whether to use dyed diesel in highway-operated vehicles.
READ MORE: Why Federal Red-Dyed Diesel Tax Relief May Not Apply at the State Level
