South Dakota Clarifies Red-Dyed Diesel Rules: Agricultural Use Only, Tax Restrictions Remain
Northeast Radio SD News – South Dakota - The South Dakota Department of Revenue reminds retailers and consumers that red‑dyed diesel remains restricted to agricultural use, despite recent confusion from reports in other states.
In guidance issued Thursday, the Department said only agricultural producers with a valid agricultural exemption certificate may use red‑dyed diesel for on‑road purposes at this time. The clarification aligns South Dakota with other states that have temporarily relaxed certain dyed‑fuel rules while awaiting federal direction.
The Department emphasized that dyed diesel is not tax‑exempt for commercial or personal vehicles, and non‑agricultural users may still owe federal taxes in January.
“Non‑agricultural users still owe other state and local taxes that reduce or eliminate any tax benefits of using red dyed diesel for non‑agricultural purposes,” the release states.
Retailers must continue honoring exemption certificates for qualifying agricultural purchases. Dyed diesel remains subject to state and municipal sales tax unless the purchase meets the agricultural exemption outlined in SDCL 10‑45‑19. Sellers must keep properly completed exemption certificates on file.
Highway Patrol Enforcement
Gov. Larry Rhoden has directed the South Dakota Highway Patrol not to stop or check vehicles solely for dyed‑fuel violations, citing inconsistent directives from other states and pending federal guidance. However, the Department noted that it cannot waive state taxes, and non‑agricultural users who pay sales tax on dyed diesel may, in some cases, pay more than the regular diesel tax.
Definition of Agricultural Purposes
Under SDCL 10‑45‑1, agricultural purposes include “producing, raising, growing, or harvesting of food or fiber… including dairy products, livestock, and crops.”
Custom harvesters, chemical applicators, fertilizer spreaders, hay grinders, cultivators, and timber harvesters also qualify.
Recordkeeping Encouraged
The Department advises anyone using dyed fuel for on‑road use to maintain accurate fuel‑use records and monitor future state and federal updates.
“Now that state guidance is established, only agricultural producers can use dyed diesel tax exempt,” the release states.
Retailers received posters and the full DOR statement through the South Dakota Retailers Association and are encouraged to display the information for customers.
Questions regarding compliance may be directed to the Department of Revenue at 605‑773‑5869.
