One way some businesses are cutting fuel costs is through the use of red dye fuel. Red dye fuel is exactly the same in chemical make-up as clear fuel, but a red tint has been added to it that signifies its exemption from the excise tax. Red dye fuel is then sold at a lower price, specifically for use in heating or farm equipment and other unlicensed off-road machinery not used on highways, such as lawn tractors and skid-steers, which helps farmers and others who frequently use this equipment better control fuel expenses.

This is not a solution for all fuel needs, as many rental operators and their customers are discovering. Red dye fuel is intended only for unlicensed vehicles. Its use in licensed cars, trucks or other equipment and machines meant for driving on roads and highways is illegal. Breach of this law is considered tax evasion and has serious consequences. Even a small amount of red dye fuel contaminates the entire tank, which is then subject to fines and other penalties.

Compliance with red dye laws can be a tricky issue for rental companies. If a rental business is found to have licensed equipment used on highways with red dye fuel in the tank, the store is fined and other penalties can be imposed, depending on how many offenses the store has had.

Fines differ by state, but often reach into the thousands of dollars for a single tinted tank. To recover those costs, a rental store might go back to the customer, but the renter may not be aware of the laws regarding red dye fuel. In addition, if tanks are not checked by the rental store regularly, the last person to rent the equipment may not be the person who purchased the red dye fuel.

Once red dye has been introduced into a fuel tank, subsequent fuel in that tank will have traces of the dye and will therefore be considered in violation of the law until the tank is completely flushed with clear fuel. In addition, topping off a 100-gal. tank with a few gallons of red dye fuel will tint the entire tank, making all 100 gal. subject to fines that are often issued on a per-gallon basis.

Ted Cook, owner of Ventura Rental Center in Ventura, Calif., and the American Rental Association (ARA) president, has had some experience with this issue in his own rental business.

To read the rest of Sarah Peterson’s article from the January issue of Rental Management magazine, click here.

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