IRS Field Inspectors Check Dispensers for Proper Labeling

Periodically, IRS agents perform targeted inspections of retail facilities for dispenser labeling violations. PMCI’s national association PMAA has advised that IRS inspections are ramping up nationally. The IRS requires labels for dyed diesel, dyed kerosene and untaxed clear kerosene dispensers. IRS fines for faded, incorrect or missing dispenser labels are significant. The labeling requirement has been in place for diesel dyed diesel dispensers since 1993 and for dyed and clear kerosene dispensers since 1998.

The following IRS labels must be posted on any retail dispenser or other delivery facility (skid tank, consumer dispensers at bulk plants or card locks) where dyed diesel fuel and/or dyed kerosene are dispensed for use by a purchaser/consumer:

“DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE” or

“DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE”

In addition, the following label must be posted on all blocked pumps that sell clear, untaxed kerosene:

"UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY"

The labels must be affixed to the dispenser in a conspicuous place within easy sight of the person dispensing the fuel either on the face of the dispenser (on both sides) or on the side of the dispenser just above the nozzle housing. Many petroleum equipment vendors sell IRS compliant labels online.

Heating Oil Dispensers: Some heating oil dealers provide heating oil dispensers at their bulk plant for residential customers who wish to buy smaller quantities of fuel for heating. The IRS regulations do not address heating oil dispensers specifically. However, since heating oil is a dyed fuel and capable of being dispensed in the fuel tank of an off-road vehicle, it is recommended that these dispensers be labeled with an IRS diesel label as well.