Reminder: IRS Issues Hefty Fines for Failure to Display Nontaxable Use Dispenser Labels
EMA continues to hear from energy marketers who have received hefty fines for failure to display IRS nontaxable use warning labels on dispensers. The IRS requires all dyed diesel and dyed kerosene dispensers to have a specific label indicating that the fuel is for nontaxable use only.
Dispensers supplying undyed, untaxed kerosene sold from a blocked pump must also display an IRS nontaxable use warning label. The labeling requirement has been in place for diesel dyed diesel dispensers since 1993 and for dyed and clear kerosene dispensers since 1998.
IRS field agents continue to enforce the dispenser label requirement in all regions of the country. Under IRS regulations marketers who fail to post the required labels are presumed to know the fuel will not be used for a nontaxable use and responsible for paying the 24.3 cpg federal excise tax on the fuel (the back-up tax). In addition, the IRS will assess a penalty of $10 per gallon for every gallon of nontaxable fuel in the storage tank connected to the dispenser at the time of the violation.
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”
“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.
The IRS issues violations for any IRS required label that is missing, faded, ripped or obscured in any from the consumers view. Marketers should frequently inspect dyed diesel fuel, dyed kerosene and clear untaxed kerosene dispensers to ensure the IRS label is properly placed and legible. Labels can be ordered online from most petroleum and c-store supply vendors.
EMA Staff Contact: Mark S. Morgan, Regulatory Counsel firstname.lastname@example.org.