Penalty Relief for Dyed Diesel Fuel in the Wake of Cyberattack

Federal and state responses are in motion to grant tax penalty relief for dyed diesel fuel following the fuel disruptions resulting from the Colonial Pipeline shutdown.

IRS Grants Dyed Diesel Penalty Relief

The Internal Revenue Service approved a penalty relief on dyed diesel fuel when sold for use or used on the highway in Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and the District of Columbia.

The penalty relief is retroactive to May 7, 2021, and will remain in effect through May 21, 2021.

In addition to this penalty relief, the IRS will not levy penalties for failure to make semi-monthly deposits of this tax.

States Manage the Tax Implication

On the state side, Georgia Governor Brian P. Kemp issued an executive order to temporarily suspend collection of its motor fuel tax from May 11-15, 2021. The tax collection suspension was extended to May 29, 2021. None of the states bordering Georgia have issued formal statements about how they plan to manage the tax impact, but they will need to consider alternatives for fuel that is destined for Georgia.

From a tax reporting and collection standpoint, Florida and Alabama currently have a process in place, but other states, such as North Carolina, may need to determine whether a temporary exporters license will be required if fuel is destined for states with destination tax clauses.

For more information or help with your tax situation, contact us. We’re here to help.

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