b'Marketer Member NewsRules & RegulationsAVOIDING IRS LIABILITYFor Sale of Dyed Fuel to Private School Bus Operatorsdyed fuel for a taxable use, energy marketers are not expected to actively police customer activity, looking for evidence of misuse. Instead, it is what you know that could get you in trouble. Under Section 6715 of the IRS Code, liability attaches to any party in the distribution chain who knows or should have reason to know that the dyed fuel in question was used for a taxable use. It does not matter who owns the fuel at the time of the violation or which party bears the risk of loss if price of the fuel increases. Liability attaches to all parties in the distribution chain, unless a valid defense can be raised. The penalty for violation underSection 6715 is $10 per gallon plus the 24.4 cpg federal excise tax. Suspension or revocation of the ultimate vendors 637 Know whethercertificate may also occur.To avoid liability, energy marketers must have a defense againstyou can affordthe knows or has reason to know standard. The best way to establish a defense is to obtain an affidavit from the school bus operator stating clearly that the dyed fuel purchased will not beto follow theused when school buses are engaged in private for-hire charter service. The affidavit should also include a statement that the operator maintains a separate supply of clear fuel available forcompetitionuse when operating as a private company engaging in private, for hire charter services. The affidavit should be renewed annu-ally. As both a courtesy and insurance against possible misuse, marketers should explain to operators that switching back andEdgePetrol providesforth between clear and dyed fuel in the tank of a school bus could lead to a violation if any visible evidence of dye remainsreal-time weighted andwhen being used for private, for hire charter service. IRS agents are known to test fuel in tanks of school busses parked at casinosblended margin toand other large non-school venues looking for visible evidence of dye. In addition, a statement on the product transfer documentindependent retailersaccompanying each sale, that dyed fuel cannot be used in pri-vate, for hire charter services would also make a strong defense against liability for energy marketers. Now that state legislatures are increasingly turning to gamblingFind out moreas a source of new revenue, there are more opportunities for private school bus owners to switch between dyed and clear fuel as a way to expand their businesses. Marketers should actively make themselves aware of how the dyed diesel fuel they deliverEdgePetrol.comto charter operators will be used. Both the affidavit and the PTD917.689.6444language should be sufficient in most cases for marketers to escape any liability for an operators misuse of dyed fuel.SWPMA News / Fall 2022'