Tax Relief That Isn’t: Governor Reynolds’ Proclamation on Sales/Use Taxes on Dyed Diesel

On October 5, 2026, Governor Kim Reynolds signed a proclamation to temporarily suspend state penalties and taxes for the sale and use of dyed diesel to transport certain agricultural products on public roads in Iowa. The proclamation was expanded on October 7, 2026. The proclamation takes effect immediately and continues through February 4, 2027.  While this proclamation is couched as tax relief for Iowans, in actuality, it just delays payment of tax due on dyed diesel while increasing compliance burdens. 

According to guidance from the Iowa Department of Revenue, while the proclamation is in effect, dyed diesel may be purchased free of sales tax for use in motor vehicles to transport certain agricultural products on public roads in Iowa. 

After the proclamation expires on February 4, 2027, users owe 6% use tax on the total gallonage of untaxed dyed diesel used to transport specified agricultural products on public roads in Iowa during the proclamation. Users should retain records—including fuel receipts, invoices, and driving logs—showing the gallonage of dyed diesel used during the proclamation and its purchase price.  After the proclamation expires, purchasers of dyed diesel who used the dyed diesel to transport certain agricultural products on public roads in Iowa are then required to file use tax returns to remit use tax due on the dyed diesel that was previously purchased exempt from sales tax.

So, Governor Reynolds’ proclamation is nothing more than a delay in tax due. The proclamation also increases tax compliance burdens on people who transport agricultural products on public roads in Iowa.  Simply put, Governor Reynolds’ proclamation is a gimmick that only has the appearance of helping individuals deal with the high cost of diesel.