Section 40-17-2, Code of Alabama 1975, provides that a licensed distributor may take a credit or request a refund on undyed motor fuel sold for off-road agricultural purposes on the farm; however, a licensed distributor may only sell undyed motor fuel for off-road agricultural purposes tax-free "if no dyed motor fuel is available from the agricultural users supplier." A ruling issued by the Department of Revenue's Administrative Law Judge on May 27, 1998 stated that if dyed fuel was available from the supplier, the distributor could not sell undyed motor fuel tax-free to their agricultural users. Therefore, if dyed fuel can be obtained by the licensed distributor at the terminal or terminals from which the distributor purchases diesel fuel then dyed fuel is available.
A licensed distributor can only sell undyed tax-free motor fuel for off-road agricultural purposes on the farm if that licensed distributor cannot purchase dyed motor fuel from his supplier(s). If a licensed distributor sells undyed motor fuel for off-road agricultural purposes and dyed fuel is available, then the undyed motor fuel must be sold tax-paid.
If you have any questions concerning this matter, please contact this office at the following address or telephone number: