Sanders Signs Order Allowing Dyed Diesel in Qualifying Farm, Logging Vehicles

LITTLE ROCK, Ark. — Gov. Sarah Huckabee Sanders signed an executive order Tuesday temporarily suspending specified state taxes and penalties for qualifying farmers and timber harvesters who use dyed diesel fuel in highway vehicles.

Executive Order 26-15 declares a statewide emergency related to rising diesel prices. The relief takes effect Sept. 30 and runs through Oct. 30, 2026, unless amended or extended.

Dyed diesel is generally reserved for off-road use and is taxed differently from undyed highway diesel. The order allows eligible agricultural and forestry businesses to use fuel already stored on their farms or work sites in qualifying highway vehicles without the additional state taxes and penalties specified in the order.

The exemption has several limits. Vehicles must be registered in Arkansas, owned and operated by an agricultural or forestry business, and primarily used to carry out that business’s functions.

Vehicles also must fall within Class 2, 3, 4, 5, 6 or 8 under Arkansas’ vehicle registration law. Vehicles licensed under the International Fuel Tax Agreement are excluded.

The order suspends penalties for both using dyed diesel in eligible vehicles and mixing it with undyed diesel in their fuel tanks. It directs state agencies not to assess the additional taxes and penalties under the two cited statutes for conduct covered by the order during its effective period.

Under the provisions cited in the order, improper use of dyed diesel can ordinarily result in additional tax and a $10-per-gallon penalty calculated on the full capacity of a vehicle’s fuel tanks. Mixing dyed and undyed fuel can also trigger additional tax and a $10-per-gallon penalty on the fuel.

The state action does not itself grant federal penalty relief. Sanders directed the secretary of the Arkansas Department of Finance and Administration to request dyed diesel penalty relief from the Internal Revenue Service within three business days of the order’s effective date.

For purposes of the order, qualifying agricultural businesses produce food, fiber, grass sod, nursery products or livestock in commercially marketable quantities. They must demonstrate that activity through recent tax filings reporting farming income or, for newer operations, a business plan showing sufficient land, financing and other resources.

The order defines forestry operations as timber harvesting, beginning when a tree is cut and continuing through loading the tree or its parts in the field for transport.

Sanders cited fuel costs substantially above the assumptions used in the University of Arkansas Cooperative Extension Service’s 2026 crop budgets. Those budgets assumed diesel would cost $2.46 per gallon, less than half the price currently prevailing in Arkansas, according to the order.

The order says crop harvesting and delivery regularly extend into November, while forestry operations run year-round.