President Donald Trump signed an executive order on Oct. 5 allowing for highway use of tax-free dyed diesel. This order defers the federal diesel tax, but it doesn’t eliminate the tax entirely without further legislative action.
Using red-dye diesel for on-road purposes and deferring the tax became legal in Illinois on Oct. 6, when Gov. J.B. Pritzker signed Executive Order 2026-08, specifically for agricultural use.
Trump’s executive order alone did not make red-dye diesel legal for on-road use in Illinois because the state had not yet authorized it. Trump’s order did not limit the use of red-dye diesel to ag use; it left that decision up for state discretion.
“You’re still going to owe the road-use tax on that off-road fuel. You’re just allowed to pay it on Jan. 1,” said Matt Wells, vice president of the Mid-West Truckers Association.
If farmers defer taxes, they’ll still owe almost $1 in taxes per gallon of dye diesel used on roads, Wells said. The federal tax is 24.4 cents, plus the state motor fuel tax of 55.8 cents, and Wells anticipates the state will collect what he calls the “backdoor sales tax” on motor fuel of 18 cents.
“The only way [these taxes] will be forgiven is if there is congressional action and the president signs it, and there is legislative action at the state and the governor signs it,” Wells said.
While off-road red-dye diesel usually isn’t taxed, farmers who use it for on-road purposes are still required to track usage and pay taxes on it, Wells noted. He emphasized that although the state and federal government won’t fine farmers for not paying taxes at the point of use, these orders assert that tax obligations remain when off-road diesel is used on public roads.
Wells also noted that since many farmers’ bulk fuel orders won’t be paid until December or January anyway, using dyed diesel may not save money; instead, it shifts the tax to a later date.
Farm groups weigh in
Rodney Knittel, Illinois Farm Bureau associate director of transportation and infrastructure, said IFB is waiting on guidance from the IRS or the Illinois Department of Revenue for how the tax will be handled and when it’s due.
“I think it’s important that our farmers know that the tax, both the federal and, potentially, depending on what state you’re in, it could be due after Jan. 1,” Knittel said.
Wells said there’s a gray area in that the Illinois Department of Revenue and IRS have not established a clear process for how farmers will track and report their on-road use of red-dye diesel.
Additionally, clear rules have not been established regarding what diesel sellers are liable for, such as if they’ll be liable for fines and penalties if they put off-road diesel in a clear tank, Wells noted.
“At this point, we advise tremendous caution in using off-road diesel for on-road use,” Wells said, explaining that if a farmer puts red-dye diesel in their semi on Dec. 30, it’s not legal on roads starting Jan. 1. If a farmer gets pulled over, the repercussions are unclear at this time.
Knittel said if farmers use red-dye diesel on the road, an exit strategy is important.
“What’s the exit strategy in terms of getting it clean so that you’re compliant once the executive order is done?” he said.
Both Knittel and Wells explained that it can take seven to eight full tanks of on-road diesel to rinse the red dye out of a truck’s system.
Another gray area? Crossing state lines. Wells explained that as long as a farmer is following the rules set by their state, they more than likely will be fine. He said the problem arises after the executive order expires, and in what enforcement will look like starting Jan. 1.
Given these uncertainties and gray areas, some industry leaders are urging caution and looking for answers.
Illinois Soybean Growers Chairman Bryan Severs thanked Pritzker but said he ultimately is looking for more guidance.
“Illinois Soybean Growers thanks Gov. Pritzker and his administration for taking the issue of high diesel prices seriously,” Severs said. “We look forward to receiving additional guidance on this issue.”
Wells provided direct advice: “Bottom line, unless you really need to, don’t do it. It’s not worth it.”
Mark Bunselmeyer, president of the Illinois Corn Growers Association and a farmer in Maroa, Ill., had similar advice: “While the answers to both state and federal implementation questions are worked out, Illinois farmers should continue using taxed, on-road diesel in registered highway vehicles to avoid potential penalties that remain unknown.”