Undyed Diesel Fuel — Publication 510

For conditions to an allowance of a credit or refund on exported dyed diesel fuel and dyed kerosene, see Exported taxable fuel , earlier.

Ultimate purchasers. The following are nontaxable uses of diesel fuel and kerosene (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser.

On a farm for farming purposes.
Off-highway business use.
Export.
In a qualified local bus.
In a school bus.
Other than as a fuel in a propulsion engine of a diesel-powered highway vehicle (such as home heating oil).
Exclusive use by a qualified blood collector organization.
In a highway vehicle owned by the United States that isn't used on a highway.
Exclusive use by a nonprofit educational organization.
Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by Registered Ultimate Vendors (Other Than State or Local Government Purchases) , later).
In a vehicle owned by an aircraft museum.
As a fuel in a propulsion engine of a diesel-powered train.

Sales by Registered Ultimate Vendors

The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only.

Undyed diesel fuel or undyed kerosene sold for the exclusive use by a state or local government (if credit card rules don't apply).
Undyed kerosene sold from a blocked pump.
Undyed diesel fuel or undyed kerosene used in certain intercity and local buses, only if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver.

Registered ultimate vendor (state use). This is a person that sells undyed diesel fuel or undyed kerosene to a state or local government for its exclusive use (including essential government use by an Indian tribal government). The diesel fuel or kerosene must be purchased by the state without the use of a credit card, issued to the state by the credit card issuer, in order for the ultimate vendor to make the claim. The ultimate vendor must be registered by the IRS. See Registration Requirements, earlier.

Registered ultimate vendor (blocked pump). This is an ultimate vendor that sells undyed kerosene from a blocked pump.

A credit or refund may be allowable to a registered ultimate vendor (blocked pump) if the vendor sold to a buyer undyed kerosene from a blocked pump for use other than as a fuel in a diesel-powered highway vehicle and the vendor had no reason to believe the kerosene wouldn’t be used in that manner.

Blocked pump. A blocked pump is a fuel pump that meets all the following requirements.

It's used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use.
It's at a fixed location.
It's identified with a legible and conspicuous notice stating, UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY .
It meets either of the following conditions.

a. It can't reasonably be used to dis pense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train.

b. It's locked by the vendor after each

sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train.

Registered ultimate vendor (certain inter- city and local buses). This is an ultimate vendor that sells undyed diesel fuel or undyed kerosene to the ultimate purchaser for use in certain intercity and local buses.

The registered ultimate vendor may make the claim if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver. A sample waiver is included as Model Waiver N in the Appendix. The registered ultimate vendor must have the waiver at the time the credit or payment is claimed.

Publication 510 (12-2025) Chapter 2 Fuel Tax Credits and Refunds 15

Exclusive use by a nonprofit educational organization.
Exclusive use by a state, political subdivision of a state, or the District of Columbia.
In an aircraft or vehicle owned by an aircraft museum.

Blender claims. The claim rate for undyed diesel fuel taxed at $0.244 and used to produce a diesel-water fuel emulsion is $0.046 per gallon of diesel fuel so used. The blender must be registered by the IRS in order to make the claim. The blender must attach a statement to the claim certifying that:

The diesel-water fuel emulsion contains at least 14% water,
The emulsion additive is registered by a U.S. manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003,
Undyed diesel fuel taxed at $0.244 was used to produce the diesel-water fuel emulsion, and
The diesel-water fuel emulsion was used or sold for use in the blender's trade or business.