Red dye diesel is a tax creditable diesel used by agriculture, construction equipment, generators, and heating applications where vehicles or machinery do not operate on public highways. Some fleet managers choose to simplify their fuel delivery by only requesting clear diesel and then applying for a tax refund for their off-highway vehicles.
Booster’s state of the art customer portal helps clear diesel clients submit accurate records to claim a tax refund each year that returns money based on how much of their clear diesel is used completely off-highway. Here’s a look at the related tax incentive and how Booster can help.
Why is Red Dye Diesel Refundable?
Red dye diesel qualifies for a tax refund because it is intended strictly for off-road use. It’s a unique situation where the government recognizes that vehicles fueled with red dye diesel are not using publicly funded roads and should not be charged for the taxes that go towards maintaining them. The red dye is added to a clear diesel to distinguish it from traditional – taxed – clear diesel and then is sold without the traditional taxes attached to the gallon price. As a result purchasing red dye diesel costs less than clear diesel. But a fleet that relies solely on clear diesel can still qualify for a tax refund when they can prove specific quantities of clear diesel were used off-highway only.
When businesses purchase taxed clear diesel, but later use it for qualifying off-road purposes, they can apply for a refund of the road taxes paid. This system ensures that users only pay fuel taxes that correspond to how the fuel is actually used. Likewise, when a vehicle is tested and found to be using red dye diesel on-highway, the fleet can be fined.
How Valuable Are Red Dye Diesel Tax Credits & Refunds?
Fuel is often the highest line item in a fleet’s budget. Strategically taking advantage of a tax refund by accurately reporting your off-highway clear diesel use can meaningfully impact your bottom line when fuel costs are high. Federal programs like the Off-Highway Business Use Fuel program allow fleet managers to better stabilize budgets and can provide an opportunity to reinvest savings into vehicle upgrades or telematics.
The Off-Highway Business Use Fuel Tax Credit allows businesses to claim a refund on federal taxes paid on fuel used for qualified off-road purposes, such as in farming equipment, construction machinery, and certain stationary engines. Because these activities do not use public highways, the credit ensures businesses are not paying highway taxes on fuel that does not contribute to road wear and infrastructure use. With these tax savings, individual fleets can remain competitive even during periods of price volatility.
Capturing the full benefit of a red dye diesel tax refund requires careful tracking and documentation to ensure claims are accurate and timely. Booster’s customer portal can help.
Booster Customer Portal Answers Questions
To claim this tax refund, clients have to be able to prove the gallons of clear diesel that were only used for qualifying vehicles. Our customer portal tracks vehicle-by-vehicle fuel usage as one element of our 360° view of your fleet. Our customer portal integrates with sophisticated finance management tools and can provide customizable analytics reports that prove your fuel usage per-vehicle–exactly what you need to demonstrate your off-road fuel usage.
With this data, our clients are able to apply for Off-Highway Business Use Fuel tax credits and refunds simply, with organized reporting that accurately reflects their clear diesel usage in vehicles that never touch the highway.
Whether your management team would like to save with a red dye diesel tax refund for equipment like lawnmowers or earth movers, or you are looking for a reliable source of clear diesel, Booster has the fuel – and the technology – that will help you save with clearly defined, vehicle-by-vehicle data.
Learn more from our team. Contact us today.