South Dakota Restricted Red Dyed Diesel Use

South Dakota drivers must now confirm their eligibility for red dyed diesel or face potential tax obligations.

Updated on Oct. 8, 2026 in Trucks

South Dakota Restricted Red Dyed Diesel Use

Live Poll

Should states restrict the use of lower-taxed dyed diesel to only agricultural producers?

The South Dakota Department of Revenue has issued new guidance limiting the use of red dyed diesel to agricultural producers who hold a valid exemption certificate. This change ensures compliance with state tax laws regarding motor fuel usage across the state.

Why it matters

This shift aligns state practices with complex federal and state regulations, directly impacting how residents and businesses manage fuel costs and potential tax liabilities. Non-agricultural users may face new federal tax obligations starting in early 2027.

Eligible agricultural producers must present a completed exemption certificate to purchase fuel, which sellers are required to keep on record. This follows guidelines cited under South Dakota Codified Law 10-45-19 and 10-45-1.

The players

South Dakota Department of Revenue

The state agency responsible for administering tax laws and fuel regulations in South Dakota.

South Dakota Highway Patrol

The state law enforcement agency that has been directed to cease traffic stops specifically for dyed diesel inspections.

The details

Under the new policy, only those meeting the agricultural definition may legally use red dyed diesel on-road. Sellers must now verify and retain valid exemption certificates from customers at the point of sale to ensure proper tax compliance. While state-level inspections for this fuel are restricted, non-agricultural users remain subject to state sales and municipal taxes, with potential federal tax liabilities emerging in the coming year.

October 8, 2026: Department of Revenue guidance takes effect.
January 2027: Potential federal tax obligations arise for non-agricultural users.

The Home Front

This policy update clarifies the intersection of state agricultural exemptions and broader motor fuel tax enforcement. It reflects a growing effort to align regional tax collection with evolving state and federal standards for off-road fuel usage.

If you operate a vehicle using dyed diesel, verify your eligibility and ensure you maintain the required exemption documentation for your records. Check the state website to confirm your producer status to avoid any unexpected tax liabilities next year.

The takeaway

The state has tightened requirements to ensure only qualifying agricultural producers utilize tax-exempt red dyed diesel. Keep your valid exemption certificate on file and stay informed on potential federal tax changes coming this January.