Legal with Leah: Changes to Fuel Taxes and Dyed Diesel Regulation
Associate General Counsel Leah Curtis breaks down the changes to Ohio’s fuel tax, recent guidance on dyed diesel and what farm families need to know.
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Recent state and federal actions have brought changes and relief to fuel taxes and dyed diesel regulations during Ohio’s harvest season. On this Legal with Leah, Ohio Farm Bureau Associate General Counsel Leah Curtis breaks down the changes to Ohio’s fuel tax, recent guidance on dyed diesel and what farm families need to know.
Listen to Legal with Leah, a podcast featuring Ohio Farm Bureau’s Associate General Counsel Leah Curtis discussing topics impacting farmers and landowners.
Transcript
Ryan Matthews: Rising fuel costs continue to be a major concern for Ohio farmers, especially during the busy harvest season. In recent weeks, state and federal leaders have taken steps to provide some relief, including Ohio’s Temporary Motor Fuel Tax holiday and executive orders addressing the use of dyed diesel on public highways. Leah Curtis, associate general counsel for Ohio Farm Bureau, joins this legal with Leah to explain these changes, how they affect farmers, and what folks need to know moving forward.
Ryan Matthews: Good to see you, Leah.
Leah Curtis: It’s always good to be here, Ryan.
Ryan Matthews: Leah, let’s start with the state level. So back in September, we saw Governor DeWine sign a 90-day state fuel tax waiver. Can you tell us what that means and how that affects our farmers?
Leah Curtis: Sure, so that waiver essentially waived the collection of the majority of our state gas tax and fuel taxes, which we normally refer to as excise taxes on gas and diesel. They are still collecting about a one 100th of a cent tax and that’s mainly to just help with the changes to technology and systems and all that have to happen because of this waiver. And again, it’s going to apply to both gas and diesel. So for any fuel that farmers are buying at the pump at your normal gas stations, for trucks or cars, for hauling, they’re going see that relief from those state fuel taxes.
Ryan Matthews: Now, some drivers may have noticed that prices at the pump haven’t dropped the same amount at every single station. So could you maybe explain a little bit more about how fuel tax is collected and why we might be seeing some of those differences?
Leah Curtis: So fuel tax is actually paid for by the rack seller or the retailers, and then it’s passed on to us as consumers within the gas price. So unlike, for example, sales tax, which we see added once we get to the checkout counter, as we all see our gas prices are just the price and it includes that tax. Gas stations would have had gas on hand at the time that this was passed. And so they would have already paid the tax on that fuel. And there was some variability of course and how they were implementing the waiver of the tax. Also keep in mind that first, gasoline diesel are commodities. They have market price fluctuations. We are largely all price takers when it comes to fuel. So that price is still going to be subject to the market fluctuations that are happening due to various things. And second, there is still federal excise tax on your fuels at this time. So you do pay 18.4 cents for gasoline and 24.4 on diesel and that is still applied.
Ryan Matthews: I wanna echo what you talked about, just saying that we’re price takers. Farmers use a lot of fuel, especially diesel fuel during harvest season, whether it’s our tractors or combines or just the semi trucks going from one field to another. And I think this has been a very interesting reality point just to see how many different factors play into our fuel. And knowing that farmers and our partners across the supply chain can’t get around this expense. This is one that we have to utilize, especially right now during harvest. And I think that kind of brings us to the next point that another big topic around this has been dyed diesel. So can you explain the difference between regular diesel and dyed diesel and why has there traditionally been restrictions on using dyed diesel when it comes to public roads?
Leah Curtis: So dyed diesel is regular diesel, it’s the same fuel, but it has a red dye and it also has chemical additives that can identify it as non-taxed diesel. So essentially, dyed diesel is diesel that you do not pay taxes on, and you don’t pay taxes on it because it is intended for off-road use. So that is what we typically have for farm equipment, you’ll typically see it on construction machinery and because it does not pay a tax, it’s because it’s not used on the roadways.
Ryan Matthews: Now, I know we’ve had some updates to regulation, but just kind of stepping back and thinking holistically about the difference between a dyed diesel and diesel, could you talk about what could happen if a farmer had used dyed diesel in an on-road vehicle without meeting those legal requirements? And are there any penalties or other concerns that they should be aware of?
Leah Curtis: Dyed diesel, as we said, it’s intended for off-road use. There are both federal and state laws that identify that you cannot use dye diesel on a public roadway. And so in both federal and state law, essentially there’s a penalty if you are found to be using dyed diesel or untaxed diesel on a roadway, generally it’s $10 per gallon or $1,000, whichever is greater. And as an individual, you could be subject to both a federal and a state penalty at the same time, because there are separate taxes and separate laws. That is not unique to Ohio either, almost every state, I believe, has the exact same prohibition. They may have different penalties. they may different, you know, procedures around it, but essentially every state in the federal government prohibits that use of untaxed diesel on the public roadway.
Ryan Matthews: As mentioned in recent weeks, we’ve seen some updates. So I want to start with federal. The administration recently took some action to provide some flexibility when it comes to dyed diesel. And we’ve also now seen some additional guidance from the IRS. Can you tell us what exactly has changed at the federal level?
Leah Curtis: So the executive order from President Trump allowed for the deferral of excise taxes on fuel. It allowed for potential use of dyed diesel on public roadways and then potential forgiveness of the tax. So the order specifically does say it will defer the excise tax. Unfortunately, that does mean that it may be due later, but it does say there will be charge of interest or penalties related to this deferral. Typically, removing a tax requires a legislative act, creating an exemption, and so that’s why this is a deferral at this time. It also directed the IRS to issue a waiver for dyed diesel use on roadways. The IRS issued that order last week, announced that it will not be testing, enforcing the off-road dyed diesel requirements, and any staff that are dedicated to that enforcement or investigation are going to be redirected during this time frame. Essentially, that has clarified that from a federal standpoint, you are free to use dyed diesel on public roadways. Executive order also asked for Treasury to explore the possibility of some sort of tax forgiveness for federal fuel taxes as well and then this is in effect from October through Dec. 31, so keep in mind that time frame.
Ryan Matthews: You mentioned this on the federal level, and now Governor DeWine has signed an executive order addressing dyed diesel here in Ohio. Can you talk about what does that state action do here for the Buckeye State, and how does it work alongside that federal order that we saw?
Leah Curtis: Yeah, so as I mentioned, you know, we have our own state laws and even the federal executive order did state, you know, this does not impact state laws. So the governor had to take action to have similar allowing for dyed diesel on public roadways. The agriculture community did ask Governor DeWine to issue similar relief for diesel and in response on Oct. 21, the governor issued that executive order. It provides relief from state laws that penalize the use of dyed diesel on the public roadway and it also directs the state to waive enforcement and investigations of dyed diesel use. And that, again, goes through the end of the year. We certainly thank Governor DeWine, as well as Director of Agriculture Brian Baldridge, for their work to help provide some more relief for our farmers during this busy harvest season and kind of supplement that federal order.
Ryan Matthews: Absolutely, yes. Very much appreciate our leaders stepping in and trying to provide some of that short-term relief, as you mentioned, just very busy time for farmers, right? This is the most fuel-intensive season that we have when it comes to harvest, so very much appreciate that quick action from the Ohio Department of Agriculture, Governor DeWine, and the administration.
Ryan Matthews: Now, last question for you Leah, for farmers who have dyed diesel on hand or may be considering using it on public highways, what should they know about this temporary relief? Is there any remaining tax obligations? And when do these changes, if you could emphasize one more time, when do they expire?
Leah Curtis: Our federal and Ohio government have both now waived enforcement investigation again. So therefore it is permitted through the end of this year, Dec. 31, to use dyed diesel on public roadways. So again, keep in mind, Dec. 31 is going to be the time frame for this right now. I do want to make sure people keep in mind that we are speaking to the federal law and to the state of Ohio. Traveling outside of Ohio to other states is something that we should still be exercising caution around. There have been some dyed diesel relief orders in our neighboring states, but not all of them. And they do not have all the same time frames or same conditions as what we have in the state of Ohio. So if you’re going into another state, make sure you take a few minutes to check that out before just assuming that it will apply across that state line. And then last, one thing we have had questions on and we’re trying to get some more information through working with our other states and American Farm Bureau is what impacts could there be to warranties by using dyed diesel? Technically, dyed diesel is the same fuel as tax diesel. It burns the same. And so for most warranties, that should not be an issue. However, everyone should review their own warranties to make sure that there’s no concerns. And then another tip that we’ve seen shared and we would share with our members is, pay attention to fuel quality and storage, make sure the fuel’s been stored in appropriate ways and that’s not creating any issues for your engine or your warranty as well.
Ryan Matthews: Leah, thanks again for joining us and helping explain all of these different changes. Always appreciate you keeping our members informed.
Leah Curtis: Thanks.
Ryan Matthews: Leah Curtis, Associate General Counsel for Ohio Farm Bureau with this Legal with Leah. Leah, Thanks again for being here.
Leah Curtis: Thank you, Ryan.
Online extras:
Ohio Farm Bureau applauds Gov. DeWine dyed diesel executive order
My first recommendation in your journey is to start out with a local farming friend or mentor along with joining an organization like Ohio Farm Bureau.
We’re just so thankful for the Farm Bureau and the foundation for helping put this together. And of course, the Boyert family for the vision they had with this grant. It’s jumping us forward 10 years. It’s unbelievable.
I could not have done it without the resources I have found through Farm Bureau.
It wasn’t until I joined the Wilmington College Collegiate Farm Bureau that I truly saw how my passion could translate into leadership, advocacy and a career.
The issue of property taxation remains as one of the biggest challenges our members face today. Ensuring agricultural property is valued for its agricultural potential and not development is critical to the continued success of Ohio agriculture.
Through the Select Partner program, we became educated in farm insurance and weren't just selling policies. It became more and more clear why farmers need an advocate like Ohio Farm Bureau.
So many of the issues that OFBF and its members are advocating for are important to all Ohioans. I look at OFBF as an agricultural watchdog advocating for farmers and rural communities across Ohio.
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