This page provides general information on the purchase, use, storage, labelling and handling of tax-exempt coloured fuel in Ontario.

Coloured fuel

Coloured fuel, also called dyed diesel, is regular fuel with a special red dye added. This dye is added according to the Fuel Tax Act (Act) and its regulations.

Tax status and restrictions

You do not pay fuel tax on coloured fuel. It can only be used for purposes that are not taxable.

It is against the law to use coloured fuel in any motor vehicle that is licensed under the Highway Traffic Act, even if the motor vehicle is operated primarily for farming, construction, forestry or mining business.

Permitted uses

Coloured fuel is allowed only in certain circumstances and must not be used:

  • to power a licensed motor vehicle
  • to power a motor vehicle or boat that is mainly used for pleasure or recreation

Examples of allowable uses include:

  • 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
  • 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

Authorized fuel dyers

You must register with us as a dyer to colour fuel in Ontario. Only fuel suppliers designated as fuel tax collectors or distributors of special products may become registered dyers.

There are registered dyers who can dye biodiesel that has not been blended, mixed or combined with any other type or grade of fuel. These registered dyers are exempt from the fuel transportation requirements currently imposed on registered dyers.

Registered dyers colour fuel using only the dye we provide them, 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.

Selling or buying coloured fuel

You do not need our authorization to sell or buy coloured fuel. You can buy coloured fuel from most bulk fuel suppliers and through many retail dealers in Ontario.

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.

Storing coloured fuel

You must store coloured fuel in separate storage tanks that are clearly marked to indicate that coloured fuel is present to help ensure coloured fuel is not used by mistake.

We issue labels and tags to any person who owns or operates any equipment used to colour, store, transport or deliver coloured fuel to identify fuel as coloured.

You must place each identifying label or tag in a location where it is clearly visible under normal operating conditions.

Mixing coloured fuel with any other fuel

You must not mix or combine coloured fuel with any other type or grade of fuel unless we authorize you to do so. Any person who blends coloured fuel with any other product without our authorization is guilty of an offence and if convicted, is liable to fines and possible imprisonment.

Similar fines or imprisonment may be imposed on any person who attempts to destroy or remove the dye or any component of the dye in any coloured fuel.

Coloured fuel from another jurisdiction

Fuel that has been coloured by any other jurisdiction is unauthorized fuel and subject to fuel tax at the same rate as clear fuel. You must not use unauthorized fuel in licensed motor vehicles.

Exceptions to fuel coloured in another jurisdiction

You can use fuel in Ontario that is coloured in Quebec as a coloured fuel. This is because of an Ontario-Quebec Reciprocal Dye Agreement.

As a further exception, we may authorize a registered dyer to colour fuel outside of Ontario under specific conditions.

Coloured fuel in remote Northern locations

We allow coloured fuel use for any purpose in remote Northern locations. Northern locations are any location situated north of the 51st parallel but excludes an 80 km radius of highways #618, #125, #599, #808 and Moosonee and Moose Factory.

Inspections

Ministry inspectors can conduct roadside tests on licensed motor vehicles to verify that only clear fuel is in fuel tanks.

In cases where coloured or unauthorized fuel is found in the fuel tank of a licensed vehicle, the operator of the motor vehicle may face 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 tax-exempt fuel is subject to prosecution.

Learn more about fines at: Ontario Court of Justice – Set Fines

In addition to fines, we may 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 who would have paid the 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 who would have paid the tax in Ontario. Payment of a fine, penalty, or both does not eliminate the liability for tax.

Colouring fuel destined for export from Canada

The Act authorizes colouring fuel destined for export from Canada.

The Minister of Finance (minister) may consent to manual blending of dye with fuel and to a higher concentration of dye to fuel than is normally permitted under the Act. As well, the minister may impose conditions and restrictions when granting this consent. Refer to subsections 4.18(4.1), (4.2) and (4.3) of the Act for greater detail.

With respect to the colouring of fuel destined for export from Canada as referred to in subsections 4.18(4.1) and (4.2) of the Act, this webpage constitutes the prior written consent, and the conditions and restrictions of consent, of the minister for all registered dyers until withdrawn or replaced by an updated webpage or notice to registered dyers.

The Consent and the Conditions and Restrictions of Consent are as follows:

  1. This consent and the conditions and restrictions of consent relate only to fuel destined for export from Canada.
  2. This consent and the conditions and restrictions remain valid until registered dyers are notified by a notice in writing or by an Ontario Tax Bulletin of the withdrawal of this consent or of changes in the conditions or restrictions on registered dyers.
  3. Registered dyers are permitted to mix dye with clear fuel in concentrations greater than the 170 to 190 parts per million, as established by the minister for fuel for use in Ontario, if the fuel is coloured for the purposes of export from Canada.
  4. Registered dyers are permitted to manually blend dye with fuel without further ministry approval. An officer of the ministry need not be present.
  5. Registered dyers shall report with their monthly return the quantity of fuel that has been coloured during the prior month for export from Canada and the quantity of dye used to colour such fuel.
  6. Registered dyers shall pay to the minister the cost of the dye referred to in clause (e) in accordance with subsection 4.18(4.3) of the Act. Payment shall be accounted for in the monthly collector return. The ministry shall advise registered dyers of the cost of the dye, which may vary from time to time based on the ministry's supply contracts.
  7. The payment for the dye for each month shall be determined by a registered dyer by multiplying the quantity of dye used in that month in litres by the current cost of dye (or the price per litre then in effect) and shall be entered in line 14 of the Generic Fuel Collector Summary Form – Diesel Related Products. Registered dyers should attach details regarding the adjustment to the return.
  8. Registered dyers shall not use in Ontario or Quebec, nor sell for use in Ontario or Quebec, fuel coloured at concentrations outside the range of 170 to 190 parts per million.
  9. Please note that coloured fuel exported to Quebec is excluded from the above arrangements because Ontario and Quebec have a Reciprocal Dye Agreement which circumvents the need for the above provisions.
  10. Please note also that 1 litre containers are available for those registered dyers that might find this useful where it is necessary to add dye manually to fuel destined for export from Canada. Registered dyers may make arrangements with and payment directly to Oleo Energies Inc. for the packaging of dye in 1 litre containers and the transportation of such dye. In this instance the registered dyer will be paying Oleo Energies Inc. for the packaging and any transportation but will continue to be responsible to the minister for the payment of the dye.

Contact us

If this information does not completely address your particular situation, refer to the Fuel Tax Act and related regulations or contact:

Ministry of Finance
Account Management and Collection Branch
Fuel Tax Program
33 King Street West
PO Box 625
Oshawa ON L1H 8H9