Dyed Diesel Notice

October 1, 2026

Secretary of Revenue McKinley Wooten, Jr. announces that, effective today through December 31, 2026, the Department of Revenue (Department) will not impose a penalty1 when dyed diesel fuel is sold or used from bulk storage for highway use associated with farming and agricultural purposes2.

This penalty relief is available to any person that sells or uses dyed diesel fuel for use on the highway for farming or agricultural purposes.  In the case of the operator of the vehicle in which the dyed diesel fuel is used, the relief is available only if the operator3 or the person selling4 the fuel pays the North Carolina State excise tax of 41 cents per gallon5.

Vendors who sell dyed diesel fuel for highway use and bulk end-users who use dyed diesel fuel for highway use must file the Department’s Motor Fuel Backup Tax Return (GAS-1259) to pay the State excise tax on the dyed diesel fuel.

Ordinarily, dyed diesel fuel is not subject to motor fuel tax because it is sold for uses exempt from State excise tax, such as for off-highway use6, although it may be subject to sales and use tax7.

Taxpayers who use dyed diesel fuel during this relief period should be aware that this penalty relief is only available within North Carolina.  Motor vehicles operated using dyed diesel fuel outside the State may be subject to federal penalties and penalties imposed by other States.

Taxpayers who use dyed diesel fuel during this relief period should be aware that remnants of dyed fuel products will remain in the fuel supply tank and are advised to take necessary actions to flush their fuel supply tanks to avoid any possible penalty after the relief period has ended. 

  • 1

    Penalties pursuant to N.C. Gen. Stat. §§ 105-449.117(b), 105-449.118, and 105-449.118A. 

  • 2

    Farming and agricultural purposes include crop cultivation, livestock rearing, forestry, aquaculture, and related agribusiness activities. 

  • 3

    See N.C. Gen. Stat. § 105-449.87(a)(2). 

  • 4

    Id. 

  • 5

    Inspection tax pursuant to 119-18 is imposed on dyed diesel at the time of purchase. 

  • 6

    See N.C. Gen. Stat. § 105-449.105(d). 

  • 7

    See N.C. Gen. Stat. § 105-449.107A. 

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