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Coloured fuel

Coloured fuel, also known as dyed diesel, is diesel or similar fuel that has been dyed red for tax free use in Ontario or another province or U.S. state. Coloured fuel helps to prevent tax evasion by identifying fuel on which Ontario fuel tax has not been paid.

Prohibited use

Coloured fuel must not be used to fuel a licensed motor vehicle, even if the motor vehicle is operated primarily for farming, construction, forestry or mining.

Permitted use

Coloured fuel may be used to power auxiliary equipment such as refrigeration units from a fuel tank that does not power the motor vehicle. Coloured fuel may only be used for this purpose if it is stored in a separate tank that is not connected with the tank containing fuel to power the motor vehicle.

If the fuel used to power the auxiliary equipment/reefer unit comes from the same tank used to power the motor vehicle you must use clear diesel. You may be eligible to claim a tax refund on clear fuel used for this purpose, if the fuel comes from the same tank used to power the motor vehicle.

Tax refund for a power take-off

Ontario's fuel tax

The revenue from Ontario's fuel tax helps fund health care, education, transportation projects and other government programs. Tax evasion hurts us all. Honest businesses are put at a competitive disadvantage by those that don't pay their share of fuel tax.

What to look for

You are responsible for the proper fueling of your vehicle. Any presence of red dye in the fuel disqualifies that product from use in a licensed motor vehicle.

Mixing coloured fuel with clear fuel will not produce a larger volume of usable product. Instead, it will make the entire quantity unsuitable for use in a licensed motor vehicle, leaving the operator subject to the penalties under the Fuel Tax Act.

If you discover coloured fuel in your vehicle, notify us immediately. You may also want to contact the person or business that supplied the fuel to have your fuel tank(s) drained and the fuel replaced. The coloured fuel should be drained immediately, or you may be subject to penalties.

Be sure to dispose of the fuel in accordance with all applicable environmental laws.

Pump labels

We issue labels and tags for display on any tank for storing, or pump that dispenses, coloured fuel. Such tanks and pumps should never be used to fuel a licensed vehicle.

Penalties for improper use

Anyone committing an offence relating to the improper use of coloured fuel in Ontario is liable to a fine on first offence of $465.

Fines of up to $1,000,000 and/or imprisonment for up to two years are possible for other offences under the Fuel Tax Act, such as tampering with coloured fuel or seals and labels.

Offenders will also be audited and may be assessed tax, penalties and interest. Assessed penalties for the improper use of dyed diesel or tampering with coloured fuel may be as severe as 13 times the tax. Keep all your fuel receipts.

Fuel inspections

Provincial fuel tax inspectors are authorized to examine the fuel used in licensed motor vehicles, and to stop and detain vehicles for this purpose. Any person who refuses to allow an inspection may be fined up to $1,000 for each refusal.

Take precautions

Know your supplier

Be cautious of suppliers with unusually low prices. This may be a sign of tax evasion.

If you become aware of someone selling coloured fuel for use in a licensed motor vehicle report any information you have to us.

Keep your receipts

We may audit anyone who buys fuel and assess any tax, penalty and interest owing. You must be able to prove you paid tax on all your purchases. Keep receipts that include:

  • the name of the product
  • the quantity purchased
  • the price
  • where, when and from whom it was purchased

Receipts for bulk fuel purchases must also include:

  • the purchaser's name and address
  • the amount of fuel tax paid

Receipts and other records must be kept for 7 years.

Voluntary disclosure

We will allow you to voluntarily disclose your tax situation and not be prosecuted for tax violations, under certain conditions.

Voluntary disclosure

Who to contact

For further information, to report accidental contamination, or to make a voluntary disclosure, please contact:

Ministry of Finance
Compliance Branch
33 King Street West
PO Box 625
Oshawa ON L1H 8H9

Tel: 1-866-ONT-TAXS (668-8297)