How Red Dyed Diesel Pricing Works (2025 Guide)

Red Dyed Diesel is exactly like regular diesel in every way except that it’s red, available only for off-road use, and exempt from state and federal taxes. That last difference is the most important, because depending on which state you live in, using red dyed diesel in your off-road equipment can save you nearly a dollar per gallon.

Red dyed diesel is standard ultra-low sulfur diesel (ULSD) that’s been marked with a red dye to distinguish it from highway fuel. The red color signals that the fuel is not taxed for road use and is only for qualified off-road equipment.

Examples of approved uses include:

The main reason for it being cheaper is because there are no taxes added. Clear (on-road) diesel includes both state and federal taxes, which can add $0.40 to over $1.00 per gallon depending on where you buy fuel. Since off-road equipment doesn’t use highways, those taxes don’t apply, hence why its cheaper.

Below is a table that breaks down what costs taxes add to a gallon of diesel in each individual state, and how much can be saved when regular diesel is substituted for red dyed diesel in eligible off-road equipment.

Let’s take a company that purchases 2,000 gallons of regular diesel each month in Texas for off-road use. Using this information, we’re able to figure out that this company pays an extra $880 in taxes every month. If this company were to switch to red dyed diesel, then they’d save that money which in the course of a year would add up to $10,560. So this company could have an extra 10K at the end of the year, and just by switching to red dyed diesel.

A farm in Ohio burning 5,000 gallons of off-road diesel each year could save over $3,500 annually.

Unlike regular diesel, you generally can’t purchase red dyed diesel with a credit card at a retail station. To comply with state and federal regulations, you’ll need a business fuel card such as the CFN card,  or the Voyager fuel card.