This page provides general information on the purchase, use, storage, labelling and handling of tax‑exempt coloured fuel in Ontario.
What is coloured fuel?
Coloured fuel is fuel to which a specific type and quantity of red dye has been added in accordance with the Fuel Tax Act (Act) and regulations.
Coloured fuel is exempt from Ontario fuel tax and may only be used for non‑taxable purposes. Using coloured fuel in a motor vehicle that is licensed under the Highway Traffic Act is prohibited.
Coloured fuel may be used for any reason other than to generate power in a licensed motor vehicle or when a motor vehicle or vessel (ship, boat, barge or other watercraft) is operated principally for pleasure or recreation.
Examples of permitted coloured fuel use
- as fuel for heating, lighting or cooking
- generating electricity
- operating unlicensed construction, forestry, mining, farm and other business equipment
- testing or operating commercial marine vessels
- powering auxiliary equipment of a motor vehicle if the equipment has a separate fuel tank
- use by First Nations individuals and bands registered under the Indian Act (Canada) as long as the fuel is acquired on a reserve, and
- operating railway equipment, provided that the operator is registered with the Ministry of Finance (ministry) and pays fuel tax on all fuel used in its railway operations.
What is a licensed motor vehicle?
A licensed motor vehicle is any motor vehicle to which a number plate is attached as required under the Highway Traffic Act.
It is prohibited to use coloured fuel in a licensed motor vehicle, even if the motor vehicle is operated primarily in connection with a farming, construction, forestry, or mining business.
Who is authorized to colour fuel?
In order to colour fuel in Ontario, a person must be registered with the Minister of Finance (minister) as a dyer. Only fuel suppliers designated as a fuel tax collector or as a distributor of special products are eligible to become registered dyers.
Registered dyers colour fuel using only the dye provided by the minister, in the manner and using the equipment, methods and procedures specified in the Act and regulations.
It is a serious offence to colour fuel in Ontario without proper authorization.
Where is coloured fuel sold?
It is not necessary to obtain ministry authorization in order to sell coloured fuel. Coloured fuel may be purchased from most bulk fuel suppliers and through many rural retail dealers in Ontario.
While no special permits or authorizations are required under the Act to purchase or sell coloured fuel, it is an offence to place, or cause to be placed, coloured fuel in the fuel tank of a licensed vehicle, or sell coloured fuel knowing it will be used for taxable purposes.
How is coloured fuel to be stored?
To help ensure coloured fuel is not used by mistake, it must be stored in separate storage facilities that are clearly marked to indicate that coloured fuel is present.
For the purposes of identifying fuel as coloured, the ministry issues labels and tags which are to be used by any person who owns or operates any equipment used to colour, store, transport or deliver coloured fuel.
Each identifying label or tag must be placed in a location where it is clearly visible under normal operating conditions.
Can coloured fuel be mixed with any other fuel?
Coloured fuel must not be mixed or combined with any other type or grade of fuel unless authorized by the minister to do so. Any person who blends coloured fuel with any other product without ministry authorization is guilty of an offence and if convicted, is liable to fines and possible imprisonment.
Similar sanctions may be imposed on any person who attempts to destroy or remove the dye or any component of the dye in any coloured fuel.
Is fuel coloured in another jurisdiction also tax-exempt?
Fuel that has been coloured by any other jurisdiction is considered to be unauthorized fuel and subject to fuel tax at the same rate as clear fuel. The Fuel Tax Act prohibits the use of unauthorized fuel in a licensed motor vehicle in Ontario.
Exceptions to fuel coloured in another jurisdiction
An Ontario‑Quebec Reciprocal Dye Agreement allows for fuel that may be coloured in Quebec to be used in Ontario as a coloured fuel.
As a further exception, the minister may authorize a registered dyer to colour fuel outside of Ontario under specific conditions.
Coloured fuel in remote northern locations
It has been the practice of the ministry to permit coloured fuel use for any purpose in remote Northern locations. This includes any location situated north of the 51st parallel but excludes an eighty kilometre radius of Highways #618, #125, #599, #808 and Moosonee and Moose Factory.
Ministry inspectors are authorized to conduct roadside tests on licensed motor vehicles to verify that only clear fuel is in the fuel tank. In cases where coloured or unauthorized fuel is found in the fuel tank of a licensed vehicle, the operator of the motor vehicle may be liable to penalties and fines.
In addition to roadside tests, inspectors may also examine tank wagons, bulk fuel plants, retail stations, truck yards, farms, or any other location where business is carried on, to monitor compliance with legislation.
Penalties and fines
Anyone convicted of an offence relating to the improper use, storage, labelling, or handling of fuel in Ontario may be liable to pay a set fine for a Certificate of Offence issued under the Provincial Offences Act (POA) or as an offence under the Fuel Tax Act.
In addition to fines, the Act provides the minister with the authority to assess penalties for the improper use of coloured or unauthorized fuel that is equal to three times the tax that would be payable if the fuel were clear fuel sold to a purchaser (liable to pay tax) in Ontario.
Subsequent penalties are equal to ten times the tax that would be payable if the fuel were clear fuel sold to a purchaser (liable to pay tax) in Ontario. Payment of a fine, penalty, or both does not eliminate the liability for tax.
If this information does not completely address your particular situation, refer to the Fuel Tax Act and related regulations, visit our website at ontario.ca/finance or contact:
Ministry of Finance
Account Management & Collection Branch
Fuel Tax Program
33 King Street West
PO Box 625
Oshawa ON L1H 8H9
- Toll free: 1-866-ONT-TAXS (1-866-668-8297)
- Fax: 905-433-5680
- Teletypewriter (TTY): 1-800-263-7776