Dyed diesel fuel is subject to sales and use tax, unless the purchaser has an exemption. Farmers, nurserymen, and timber harvesters may purchase, exempt from sales tax, dyed diesel fuel for off-road agricultural use in farm machinery and timber harvesting equipment. The farmer must present their agricultural sales and use tax exemption certificate issued by the Department of Revenue in order to make the purchase tax exempt.
The dealer may maintain a copy of the exemption certificate on file instead of requiring the farmer to present an exemption certificate for each purchase. The dealer is still required to prepare and retain a sales invoice to document each transaction. Dealers who do not maintain sales invoices may be held liable for sales tax due on the undocumented sales of dyed diesel fuel.