EMA Regulatory Alert

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.

Thursday, October 15, 2026 – The IRS announced Wednesday evening that it will not impose federal penalties when dyed diesel fuel is sold for highway use or used in diesel-powered vehicles on public highways nationwide. The announcement implements President Trump’s October 5, 2026, Executive Order 14435, “Emergency Tax Relief on Diesel Fuel.” The IRS announcement states that its penalty relief is retroactive to October 1, 2026, and remains in effect through December 31, 2026. The October 1 date comes from the IRS announcement; the Executive Order itself specifies an October 5 start date. Forthcoming payment-deferral guidance under Internal Revenue Code § 7508A may track the Executive Order’s October 5 date, in which case, fuel sold between October 1 and 4 would be free of penalties but would not eligible for any payment deferral. Penalties, Inspections and Recordkeeping Ordinarily, dyed diesel fuel is exempt from federal excise tax because it is intended for exempt uses, such as farming and in off-highway machinery. Federal law generally imposes tax when dyed diesel is sold for highway use or used in a diesel-powered on-highway vehicle. The retailer that sells dyed diesel for highway use is generally liable for the tax; where the fuel is not purchased at retail, such as fuel drawn from a farm storage tank, the vehicle operator is liable. During the relief period, the IRS states that it will not impose penalties related to the federal excise tax on dyed diesel fuel sold for highway use or used in highway vehicles. This includes penalties for failure to make required semimonthly tax deposits and failure to maintain adequate records. The Service also announced that it will suspend its ordinary collection and enforcement procedures during the relief period, that IRS Fuel Compliance Officers will be reassigned to other responsibilities, and that no federal inspections of on-road dyed-fuel use will occur. Sellers and distributors are not required to investigate or document the ultimate end use of dyed diesel fuel sold during this period. The announcement also states that taxpayers need not maintain records necessary to substantiate their eligibility for this relief. That statement concerns eligibility for this particular relief and should not be read as a general suspension of other business, tax, or recordkeeping obligations. The Tax Has Not Yet Been Waived The announcement does not eliminate the underlying federal excise tax liability. The IRS anticipates issuing additional guidance addressing postponement of payments under Internal Revenue Code § 7508A for taxes imposed under § 4041; that postponement is not yet in effect. No forgiveness has been granted. The IRS states only that it will explore avenues to eliminate the obligation to pay deferred amounts, and permanent forgiveness will likely require legislation. The announcement also does not address interest on any tax that remains due. Forthcoming guidance is expected to explain how the relief applies to Form 720, Quarterly Federal Excise Tax Return, and other relevant forms. The fourth-quarter Form 720 is due January 31, 2027. Until additional guidance is issued, marketers should not assume that the underlying federal diesel tax has been forgiven or that related payment and filing obligations have been eliminated. State Taxes and Enforcement The relief applies only to federal taxes and penalties. It does not prevent states from imposing their own taxes or penalties for highway use of dyed diesel fuel. Although many states have announced similar relief, state requirements vary. EMA members should consult the applicable state agencies regarding the availability and scope of state-level relief. EPA Requirements and the End of the Relief Period The IRS relief is not an EPA fuel waiver. Prior IRS dyed-fuel waivers were limited to fuel meeting the 15-ppm sulfur standard, and dyed product sold for highway use should continue to meet the ultra-low sulfur diesel (ULSD) standard. Texas is the exception. EPA's October 5, 2026, emergency waiver suspends the ULSD and Texas Low Emission Diesel (TxLED) requirements for eligible engines through October 24, 2026. Higher-sulfur product must be segregated and carry EPA's misfueling warning. Federal penalties resume January 1, 2027. Because red dye can remain in vehicle tanks and retail storage for weeks, marketers should plan the transition back to clear product. What Members Should Consider Keep records anyway. Although the IRS will not require records to substantiate eligibility for the relief, marketers should continue tracking gallons of dyed diesel sold to highway vehicles, by date and location. If the deferred tax ultimately comes due, those records will be the best defense against an IRS estimate of liability. Make a deliberate pricing decision. Retailers that do not collect the 24.4-cent federal tax at the pump now may find it difficult to recover from customers later. Identify who is liable. The announcement does not define “retail.” For cardlock sales, bulk deliveries into fleet tanks, and mobile fueling, it may be unclear whether the seller or the operator owes the tax. Review contracts. Branded supply agreements, fleet card product codes, and insurance policies may restrict or affect the sale of dyed product through highway dispensers. EMA will continue to monitor Treasury and IRS guidance, particularly regarding payment postponement, potential tax forgiveness, and the treatment of federal excise tax returns and deposits. Click here to read the IRS news release.

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Monday, September 14, 2026 – EMA is pleased to report a significant regulatory victory for the fuel distribution industry. The Pipeline and Hazardous Materials Safety Administration (PHMSA) has issued a final administrative determination concluding that the Hazardous Materials Transportation Act (HMTA) and the Hazardous Materials Regulations (HMR) preempt state common law tort claims concerning the marking, employee training, loading and unloading operations, and hazardous materials classification of gasoline transported by cargo tank motor vehicles (CTMVs). EMA actively participated in this proceeding and the final determination vindicates the position EMA advocated on behalf of the fuel marketing industry. Background Earlier this year, EMA submitted formal comments to PHMSA supporting Exxon Mobil Corporation's petition for a preemption determination under HMTA. The petition arose from state tort litigation seeking to impose obligations on gasoline marketers — including additional benzene-specific warning labels, carrier-level employee training duties, loading equipment redesign, and product reclassification — that went beyond what the HMR requires. EMA was explicitly recognized by the agency among a broad coalition supporting preemption that included the American Petroleum Institute, U.S. Chamber of Commerce, Western States Petroleum Association, and 17 State Attorneys General. EMA argued that allowing state tort claims to function as de facto regulatory requirements would fracture the uniform federal framework that protects both safety and interstate commerce, creating a patchwork of conflicting obligations. EMA's comments specifically highlighted the operational consequences for small and mid-sized fuel distributors — including compliance cost escalation, disruption to interstate fuel resiliency, and the procedural irregularity of imposing regulatory duties through tort litigation rather than notice-and-comment rulemaking. PHMSA's Ruling and Analysis In a nutshell, PHMSA determined that the HTMA and HMR fully preempt State common law tort claims, reaffirming that 49 U.S.C. 5125(a) and (b) contain independent bases for preemption. PHMSA's notice included a topic-by-topic analysis addressing each claim category: Container Marking and Shipping Papers. PHMSA found that state common law duties requiring benzene-specific cancer warnings on gasoline containers and shipping papers are preempted. The HMR already provides an exhaustive, globally harmonized hazard communication system under 49 CFR Part 172. State-specific supplementary warnings are not "substantively the same" as HMR requirements and would undermine the uniform, immediately recognizable hazard indicators that first responders rely on. Employee Training . PHMSA found that state tort duties imposing training obligations beyond the HMR's standardized framework — including duties directed at employees of third-party carriers — present an obstacle to the Federal training scheme under 49 CFR Part 172, Subpart H. The agency noted that a patchwork of state-specific training regimes would burden national carriers that routinely cross state lines. Notably, PHMSA also emphasized that requiring a fuel company to train third-party drivers is in direct conflict with the HMR's well-established definitions of hazmat employer and hazmat employee. Loading and Unloading Equipment Design. PHMSA confirmed that loading arm design and operational specifications applicable to bulk gasoline facilities are captured by the HMR. State tort judgments finding federally compliant loading equipment "defective" would effectively impose new, localized design requirements — constituting non-federal requirements concerning the designing and fabricating of packaging components that are not substantively the same as the HMR. The agency reasoned that “forcing operators to retrofit loading equipment to satisfy disparate State jury verdicts presents a substantial obstacle to the safe, uniform transportation of gasoline in interstate commerce.” Hazardous Material Classification. PHMSA held that any state common law duty that would require gasoline to be treated as something other than a Class 3 flammable liquid — effectively compelling product redesign to eliminate benzene — would constitute an impermissible re-classification that directly conflicts with the HMR's internationally harmonized classification scheme. Judicial Review is Possible Any party aggrieved by PHMSA's determination may file a petition for reconsideration within 20 days of Federal Register publication, or seek judicial review in an appropriate United States Court of Appeals within 60 days. EMA will monitor any challenge and keep members informed of further developments. "This determination is a win for every fuel marketer in America. Uniform federal standards exist for a reason — they keep drivers safe, supply chains moving, and small businesses out of an impossible maze of conflicting state requirements. PHMSA got this right," stated EMA President Rob Underwood.