Red Dyed Diesel and the New Executive Order: What Changed, What Didn’t, and What It Means for Your Fleet

Our phones have not stopped this week. Some version of the same question keeps coming in: “I heard I can get red diesel now, no fuel card, no questions asked. Is that true?”

The short answer is no not really. On October 5, President Trump signed an executive order on diesel fuel that points the IRS toward temporary relief on red dyed diesel used on the highway. That is a real action. It is also narrower, slower, and more conditional than the “free fuel for everyone” version making the rounds in the news.

Here is what the order actually does, what it does not do, and what it means for you, whether you run a fleet or just want to fill a tank.

Red dyed diesel is regular diesel fuel with a red dye added to it. The dye is a marker. It tells anyone looking, inspectors included, that the fuel was sold without road taxes added, because it is meant for off-road use only.

That off-road limit is the whole point. Highway diesel carries federal and state taxes that pay for the roads. Fuel burned off the road does not use the roads, so it is sold without those taxes, and the red dye flags it as untaxed.

The normal, allowed uses are things like:

• Farm equipment
• Construction machinery
• Generators
• Heating
• Engines that never touch a public highway

Because it is untaxed, putting red dyed diesel in a vehicle you drive on public roads is normally against the law. Do it without authorization and you can owe the road tax after the fact, plus a penalty on top of that. That penalty piece matters for understanding this week’s news, because pausing it is one of the main things the new federal order is trying to do.

The order Trump signed in Nebraska is titled “Emergency Tax Relief on Diesel Fuel.” You can read the full text of the executive order on the White House site.

It is aimed squarely at one situation: dyed diesel used on the highway between October 5 and December 31, 2026. For that window, it directs the IRS to do two things:

• First, hold off on the penalty that normally applies when dyed fuel is used or sold for highway use.
• Second, defer the federal diesel tax (24.4 cents per gallon) that would normally come due on that fuel.

Notice the word “defer.” The federal tax is being postponed, not erased. Someone still owes it later unless Congress acts to forgive it, which is a heavy lift and far from certain.

There is also a timing catch. None of this is live until the IRS publishes its own announcement putting it into effect, and as of this writing that announcement has not been posted. Outlets covering the Nebraska signing noted the same gap.

One more point that matters for every state: a federal order cannot override a state’s own diesel laws. State fuel taxes and state road rules still apply unless each state changes them on its own.

Not on its own, and not yet. The order is a federal penalty pause plus a tax deferral, not a nationwide “red diesel is now legal on the road” switch.

Two limits keep it from being that simple:

• It is federal only, so it does nothing about a state’s own ban on running dyed fuel on the road.
• And it does not take effect until the IRS publishes guidance, which had not happened as of this writing.

So the claim that anyone can now run red diesel on the highway, anywhere, with nothing owed goes well past what the order actually says. The reporting on what the order does and does not cover lands in the same place.

No, and this is the piece that gets mangled the most. Red dyed diesel is only tax free when it is used off the road. That has always been the deal, and it is still the deal. The moment the fuel goes into a highway vehicle, the road tax is owed, dye or no dye.

What the executive order does is narrower than “tax free.” For the October 5 to December 31 window, it tries to do two things for dyed diesel used on the highway:

• Defer the federal tax that would normally come due
• Waive the penalty that would normally apply for using dyed fuel on the road.

Deferring a tax is not the same as removing it. The federal tax is still owed, just later, and the state tax is a separate bill that the order does not touch at all.

So here is the honest version. Off the road, dyed diesel stays tax free the way it always has been. On the road, it is not free. It is a deferred federal tax, a still-owed state tax, and a temporary pause on the penalty. “Tax free for everyone” is the rumor, not the rule.

Here is the key thing to hold onto: the federal order does not change any state’s taxes on fuel or on dyed diesel.

States set their own fuel taxes and their own road rules, and in the states where we operate, nothing has changed on the tax side. A state has to take its own action to waive its own tax, and the ones that matter for us have not.

A handful of states have made their own moves on dyed diesel in the past couple of weeks, and they vary a lot. Some paused penalties, a few touched their own taxes, most did neither. Our two states are a good example of how differently this plays out on the ground.

Texas acted first. On September 28, Governor Abbott issued a statewide disaster proclamation that suspends the state restriction on using dyed diesel on Texas roads.

You can read the Governor’s announcement for the official wording. A proclamation like this lasts 30 days unless it is renewed, so the current window closes around late October.

Here is the catch, and it is a big one. The proclamation lifts the road-use restriction, but it does not waive the state diesel tax. The Texas Comptroller’s diesel fuel page states plainly that the 20 cent per gallon state tax is still owed on dyed diesel used on the highway, and that the office is still working out how that tax gets paid.

So in Texas the “use it on the road” part is live, while the “here is how you pay the tax on it” part does not exist yet.

If your operation qualifies to buy dyed diesel and you are weighing this, talk to your tax advisor and watch for the Comptroller’s guidance before you change anything. It helps to understand how red dyed diesel pricing works and the standing rules for red dyed diesel in Texas so you know what you are weighing.

California is the opposite case: nothing has changed at all. If you fuel at our Santa Fe Springs or San Diego stations, the rules are exactly what they were last month.

California still prohibits dyed diesel in the fuel tank of any vehicle driven on public roads, and the federal order does not change that. The state action out of California in late September dealt with gasoline supply, not dyed diesel.

A federal penalty pause does not make on-road dyed diesel legal in a state that bans it, and California’s own fuel taxes are untouched. If you buy off-road diesel in California, the same qualification and documentation rules apply, which we cover in our guide on how to buy dyed diesel in California.

Here is the part that gets lost in all the headlines: none of the normal requirements for buying red dyed diesel went away this week. The recent orders changed some rules about using the fuel. They did not change who is allowed to buy it tax free, or the paperwork that comes with it.

To buy dyed diesel without the tax, a buyer has to be set up with the state first. In Texas, that means holding an End User Number issued by the Comptroller and providing a signed statement that the fuel will be used off road and will not go into vehicles driven on public highways.

California has its own version of the same idea, where you have to qualify and document that the fuel is for off-road use. Those registrations and signed statements are what allow the fuel to be sold tax free in the first place, and they are still required today.

That paperwork is the real reason you still need a fuel card with us to buy dyed diesel at most of our locations. The card is tied to an account we have already verified and documented, so the purchase lines up with what the state requires. Selling dyed diesel to a walk-up with no number on file and no signed statement would skip the exact step that keeps the sale compliant, which is why, for the most part, the card requirement stays in place.

The biggest takeaways: Red dyed diesel is not a free-for-all, because the federal tax is only deferred and the state tax is still owed. And the rules that decide how any of this works day to day, at the pump and on your tax return, are still being written.

One last thing worth saying plainly: this order does not fix why diesel is expensive in the first place. Prices are high because global supply is tight, with the conflict in the Middle East and the war between Russia and Ukraine both pulling diesel off the market, and a change to how one tax is handled does not touch any of that.

So do not expect this to move the number on the pump by much.

Our advice is simple: do not make a fuel decision based on a headline or a group text. If you run a fleet and you are trying to figure out whether off-road diesel fits your operation, or you just want a straight answer about what is and is not allowed right now, get in touch with our team. We would rather talk it through than have you guess.