Iowa Department of Revenue Guidance on Dyed Diesel Fuel

On Thursday, October 15, 2026, the Iowa Department of Revenue (IDR) issued further guidance following the proclamation issued by Governor Kim Reynolds on October 5, 2026, and expanded on October 6, 2026. The IDR guidance can be viewed here.

The guidance issued by IDR makes clear that dyed diesel fuel gallons used for an on-road purpose during the term of Governor Reynolds proclamation will be subject to repayment of the 6 percent sales tax after the proclamation expires on February 4, 2027. As the proclamation relates to sales tax, end-users should treat relief granted under the proclamation as a deferment of payment in lieu of an outright exemption. Regarding state motor fuel excise tax ($32.5 cpg), IDR does not anticipate recouping the state excise tax that would otherwise be due for on-road use of dyed diesel fuel after the proclamation expires.

FUELIowa members should encourage customers to exercise caution around the use of dyed diesel fuel for an on-road purpose following the guidance issued by IDR. All dyed diesel fuel transfers between FUELIowa members and end-use customers should be documented with an Iowa Sales Tax Exemption Certificate signed by your end-use customer. A sales tax exemption certificate can be found here.

By using this approach, FUELIowa members are not placed in a position of having to decipher between dyed diesel fuel gallons consumed by an end-user between on-road use and off-road use and the end-user is responsible for documenting and remitting the state sales tax owed after February 4, 2027.