Red-dyed Diesel Tax Exemption in South Dakota: New Guidelines
South Dakota Department of Revenue Issues Guidance on Red-dyed Diesel Use
By Gage Peterson | Published: Oct. 8, 2026 at 5:20 PM GMT+2 | Updated: 2 hours ago
The South Dakota Department of Revenue (SDDR) is providing clarifications regarding the use of red-dyed diesel fuel, implementing restrictions that only agricultural producers with valid certificates can use it for on-road purposes.
According to a press release from SDDR, this policy aligns with other states' adaptations concerning red-dyed diesel. Until further federal guidance is received, non-agricultural users might still be responsible for federal taxes in January and other state/local taxes that could impact the tax benefits of using red-dyed diesel for non-agricultural uses.
Key Takeaways:
- Agricultural Only: Red-dyed diesel is exempt from tax for agricultural producers with valid exemptions.
- Tax Obligations: Non-agricultural users remain responsible for state sales tax and applicable municipal taxes on red-dyed diesel purchases unless explicitly exempted under SD law.
- Record Keeping: Users of red-dyed diesel for on-road use should maintain accurate fuel records to stay informed about future changes in guidance.
The SDDR emphasizes that while the State cannot waive taxes set by state law, sales tax does apply to non-agricultural users. In some cases, paying sales tax on red-dyed diesel might result in higher overall taxes compared to regular diesel.
Exemption Certificate:
The exemption certificate for agricultural use can be found here.
Contact Information:
For more information, please refer to the official SDDR website or contact their office directly.
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