b'Marketer Member NewsIRS DYED FUEL ENFORCEMENT INSPECTIONS Your Rights and Responsibilities continuedthe fuel tank of a company owned vehicle; the sulfur content ofNotice of Violationthe fuel does not comply with EPA sulfur limits; pumps dispens- Notice of violations resulting from a ing clear tax-free kerosene are not properly configured to preventretail inspection are issued by U.S. fueling into the tank of a motor vehicle; the retailer does not haveMail. The notice will describe the a valid IRS 637 UP registration letter allowing the sale of tax freeviolation(s) found during the inspec-clear kerosene for a blocked pump; the retailer refuses the fieldtion and include a proposed penalty. agent entry and access to facility and records. The notice package also includes; Letter Penalties 3145 Dyed Fuel Penalty 30-day Letter; two If any violations are found, the fieldcopies of Form 12013, Report of Proposed PenaltyIRC 6720A; agent will calculate the penalty forForm 12009, Request for an Informal Conference and Appeal Re-each based on whether the retailerview; Notice 1215, What to do if You Disagree with the Penalty; knows or has reason to know theyand Publication 1, Your Rights as a Taxpayer.are violating IRS requirements. TheIf a retailer disagrees with the penalty, an informal administra-determination is based on businesstive conference can be requested within 30-days of receipt ofrecords examined and physical evi- Letter 3145, Dyed Fuel Penalty 30-day Letter. If no agreement dence found during the inspection. Thisis reached at the informal conference, a formal administrative standard of proof is so low that a missing appeal can be requested by submitting Letter 3142, Dyed Fuel dispenser label alone could result in a violationPenalty Case to Appeals. More often than not, an agreement is notice and penalty. Under federal law, a penalty of $1,000 or $10hammered out during the informal conference, making a formal for each gallon of dyed fuel involved in the violation (whicheveradministrative appeal unnecessary.is greater) is levied for the following offenses: Any seller of dyed fuel who knows or has reason to know thatRefusal of Entry the fuel will be used for other than a nontaxable use. Any owner who refuses to admitAny person who holds for use or uses dyed fuel for a use otheran agent of the Treasury Depart- than a nontaxable use and knows or has reason to know thement relating to entry of prem-fuel is dyed. ises related to the examinationAny person who willfully alters the composition or strength ofof federal motor fuel excise tax requirements, is subject to a fine dye in any dyed fuel. of $1,000 for each refusal.Any person who has knowledge that the dye composition orstrength of dye in any dyed fuel has been altered and sells thatConclusion fuel for a use that the person knows or has reason to know is not a nontaxable use. A violation of the dyed fuel regula-Typically, the IRS levies a penalty of $10 per gallon of dyed tions is considered tax evasion by fuel sold from the dispenser over a specified time period. The the IRS. The best way to avoid a $10 per gallon fine is also levied on the volume of dyed fuelhefty penalty of course is to stay present in the storage tank connected to the dispenser at the timein compliance with IRS dyed fuel the violation is discovered. Finally, the retailer will be required toregulations. This means conducting pay a back up tax of 24.4 cpg on the total volume of fuel subjectroutine inspection of diesel fuel and to the violation. kerosene pumps for the appropriate IRS labels, taking the necessary steps to ensure Violations of the EPA sulfur content limits for both clear anddyed and clear fuel are not accidently mixed, fully segregating dyed fuel will result in a maximum $10,000 fine for every saleULSD and LSD distillates and ensuring that the tax-free sale of made from the dispenser.clear kerosene is dispensed from a compliant blocked pump, or alternatively, locked and unlocked by an attendant after each sale. SWPMA News / Winter 202349'