IRS suspends dyed diesel fuel penalty due to Hurricane Sandy 

November 5:  The IRS announced on November 3, 2012, that it will not impose an excise tax penalty when dyed diesel fuel is sold for use or used on highways in response to shortages of clear diesel fuel caused by Hurricane Sandy.

Dyed diesel fuel typically is not subject to tax if sold for uses that are exempt from imposition of the excise tax—such as sales to farmers for farming purposes, sales for home heating use, and sales to local governments for buses. If sold for other non-exempt purposes (such as for use on highways), the sale of dyed diesel fuel can be subject to a penalty.


According to IRS release IR-2012-85, the excise tax penalty relief applies beginning October 30, 2012, and applies through November 20, 2012, for fuel sold in New Jersey, New York, and Pennsylvania.


The penalty relief is available to any person that sells or uses dyed fuel for highway use. The IRS release notes that in the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for on-road use.


The IRS stated that:


  • It will not impose penalties for failure to make semimonthly deposits of this tax.
  • It will not impose the tax penalty on a failure to meet the requirements of EPA highway diesel fuel sulfur content regulations if the EPA has waived those requirements.



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©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

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