Farmers and others would face higher penalties for illegal diesel fuel purchases under legislation the governor signed into law this week. Taxes aren’t charged on diesel for off-road use — in tractors and construction equipment, for example.
But Victoria Daniels of the Iowa Department of Revenue says some people buy the tax-free fuel and then use it for vehicles they drive on the state’s roads. Daniels says the department asked for the higher penalties when fuel prices were extra high.
“We start working on our legislative package early in the year and about the time we were working on this we were seeing fuel prices at $4 a gallon and above and that just kind of sparked the idea that maybe this was something we needed to take a look at,” she says. Diesel fuel that’s not taxed is to be used for industrial and agricultural vehicles that do not traverse the state’s roads and streets.
“It’s always a problem. There are always people (who) want to circumvent the system,” she says. “But it was the anticipation that the higher costs could lead to increased noncompliance and fraud.” The bill also enhances penalties for trying to impede inspectors from checking for improper use of the fuel.
Diesel reserved for off-road use is dyed red. The diesel fuel used in school buses isn’t taxed either. According to the latest information from the Iowa Department of Natural Resources, diesel fuel for on-the-road vehicles was selling for an average price of $2.18 a gallon in the middle of May.
The state tax on a gallon of diesel is 22.5 cents. Those caught using red-dyed diesel in an on-the-road vehicle used to face a $200 fine for a first violation. That penalty will now be $500. The penalty for a second violation doubled to $1,000.