26 U.S.C. § 4082 — Exemptions for diesel fuel and kerosene

(a) General rule. The tax imposed by section 4081 does not apply to diesel fuel^* and kerosene if (1) the Secretary^* determines that the fuel is destined for a “nontaxable use”; (2) the fuel is indelibly dyed by mechanical injection as required by regulations issued by the Secretary; and (3) the fuel meets any marking requirements prescribed by the Secretary. The regulations must allow a person to choose a dye color approved by the Secretary or choose from a list of approved dye colors that the Secretary publishes.

(b) Nontaxable use. For this section, “nontaxable use” means (1) any use exempt from the tax imposed by section 4041(a)(1), except an exemption resulting from a prior imposition of tax; (2) any use in a train; and (3) any use described in section 4041(a)(1)(C)(iii)(II). “Nontaxable use” does not include using kerosene in an aircraft. It also does not include any use described in section 6421(e)(2)(C). This section does not otherwise define those quoted terms.

(c) Exception to dyeing requirements. The dyeing requirement in subsection (a)(2) does not apply to diesel fuel or kerosene that (1) is removed, entered, or sold in a State for ultimate sale or use in an area of that State during a period when the area is exempt from fuel-dyeing requirements under section 211(i) of the Clean Air Act, as that provision existed on the date this subsection was enacted, because the Environmental Protection Agency Administrator granted an exemption under paragraph (4) of that subsection; and (2) is used in a way certified under regulations issued by the Secretary.

(d) Additional exceptions to dyeing requirements for kerosene. (1) Use for non-fuel feedstock purposes. The dyeing requirement in subsection (a)(2) does not apply to kerosene (A) received by pipeline or vessel for use by the recipient in manufacturing or producing any substance other than gasoline^*, diesel fuel, or the special fuels referred to in section 4041; or (B) to the extent regulations provide, removed or entered (i) for that use by the person removing or entering it, or (ii) for resale by that person for that use by the buyer. This exception applies only if the person receiving, removing, or entering the kerosene and any such buyer are registered under section 4101 for the tax imposed by section 4081. (2) Wholesale distributors. To the extent regulations provide, the dyeing requirement in subsection (a)(2) does not apply to kerosene received by a wholesale kerosene distributor if the distributor (A) is registered under section 4101 for the tax imposed by section 4081 on kerosene; and (B) sells kerosene only to ultimate vendors described in section 6427(l)(5)(B) with respect to kerosene.

(e) Kerosene removed into an aircraft. For kerosene other than kerosene subject to tax under section 4043, if the kerosene is exempt from the tax imposed by section 4041(c), other than because of a prior imposition of tax, and is removed directly from a refinery or terminal into an aircraft’s fuel tank, then (1) the tax rate under section 4081(a)(2)(A)(iii) is zero; and (2) if the aircraft is used in foreign trade or trade between the United States and any of its possessions, the increase in that rate under section 4081(a)(2)(B) is zero. For this subsection, a removal described in section 4081(a)(3)(A) is treated as a removal from a terminal only if the terminal is in a secure area of an airport.

(f) Exception for Leaking Underground Storage Tank Trust Fund^* financing rate. (1) In general. Subsection (a) does not apply to the tax imposed under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate. (2) Exception for export, etc. Paragraph (1) does not apply to fuel if the Secretary determines that the fuel is destined for export or for use by the buyer as supplies for vessels, within the meaning of section 4221(d)(3), used in foreign trade or trade between the United States and any of its possessions.

(g) Regulations. The Secretary must issue regulations necessary to carry out this section. These regulations must include rules requiring conspicuous labels on retail diesel fuel and kerosene pumps and other delivery facilities, so people know which fuel is available only for nontaxable uses.

(h) Cross-reference. For the tax on train and certain bus uses of fuel purchased tax-free, see section 4041(a)(1) and (d)(3).