Diesel Fuel and Kerosene Excise Tax; Dye Injection

Regulation 48.4082-1(d) amends the Manufacturers and Retailers Excise Taxes Regulations to reflect changes made by the American Jobs Creation Action of 2004, Pub.L. 108-357 relating to the tax imposed under section 4082(a) on diesel fuel and kerosene. Any diesel fuel or kerosene that is destined for a nontaxable use must be indelibly dyed by mechanical injection. The regulations describe the requirements for each mechanical dye injection system in order to make that system tamper resistant. Applications for approval by the Commissioner must met the standards as prescribed by §§48.4082-1T and 48.4101-1T. Although § 48.4082-1T(d) requires mechanical injection of dye into diesel and kerosene, this is temporarily suspended by Notice 2005-80. The Notice lifted the requirement for mechanical injection. Section 6 of Notice provides, in part: (1)(i) Any means of dyeing by mechanical injection will be deemed to meet the mechanical injection requirements of § 4082(a) if the dyeing system includes measures to resist tampering that are consistent with customary business security practices. Thus, mechanical injection systems at a terminal are not required to meet the specific requirements of § 48.4082-1T(d) and no penalty will be imposed under § 6715A(a)(2) for a failure to meet those specific requirements. Because of this, there is currently no requirement in the regulations for pre-approval by the IRS to inject dye into exempt fuel. The statutory requirement remains codified until such time they are finalized or removed. Due to the temporary suspension, the burden has been adjusted to 1 hour as a placeholder until the requirement is reinstated.

The latest form for Diesel Fuel and Kerosene Excise Tax; Dye Injection expires 2027-11-30 and can be found here.