From EMA & ESEA
The IRS has issued additional guidance implementing President Trump’s October 5, 2026, Executive Order 14435, “Emergency Tax Relief on Diesel Fuel.” On October 14, the IRS announced federal penalty relief for highway sales and use of dyed diesel, retroactive to October 1, 2026.
On October 21, the IRS announced further relief covering certain Form 720 filing, reporting and recordkeeping requirements for liabilities under Internal Revenue Code § 4041(a) arising from taxable uses of dyed diesel between October 1 and December 31, 2026. For covered liabilities, the IRS will not challenge failures to file Form 720 solely for that liability, report it on an otherwise required return, or create and maintain records solely to substantiate it. No later filing or reconstruction of those records will be required solely for the covered liability.
This is reporting and recordkeeping relief, not forgiveness of the federal excise tax. The IRS has not eliminated the underlying tax liability or resolved when payment may be due or whether interest will apply. Additional federal guidance remains pending. Members must continue meeting other Form 720 obligations and retaining ordinary business records, including invoices, bills of lading and delivery tickets.
EMA is seeking confirmation that the new relief applies to qualifying retail sales as well as taxable uses under § 4041(a). Members should consult their tax advisors regarding any potential tax liability.
View the October 21 IRS Announcement
View the October 14 IRS Release
View the Full EMA Regulatory Report (October 22, 2026)
It is important to note that New York State must take separate action before dyed diesel can be used on public highways under the temporary federal relief.
The use of dyed diesel fuel for ordinary on-road operation on New York State public highways remains prohibited under existing state requirements. New York State Tax Law §§ 282 and 282-a govern highway and non-highway diesel fuel and their respective tax treatment, while § 1812 establishes penalties for certain violations involving dyed diesel.
New York State has not issued corresponding relief. The federal action does not override New York State requirements or suspend applicable state fuel taxes and penalties.
Accordingly, ESEA advises members not to sell or deliver dyed diesel for on-road use or use dyed diesel in on-road vehicles unless New York State expressly authorizes such use. Members should continue complying with all applicable state fuel tax, reporting and recordkeeping requirements.
ESEA will continue monitoring New York State's response to the federal action and will keep members informed of any developments.
General member information; not legal or tax advice. Confirm any Federal or subsequent NYS authorization or agency guidance before changing practices.
