The mission of the Criminal Investigation Division is to deter intentional criminal conduct against the state tax laws administered by the Texas Comptroller of Public Accounts. This deterrence is achieved by detecting and investigating felony and misdemeanor tax-related crimes, and by informing the public of the results of case prosecution.
Spotlight on…Dyed Diesel Crime
Most gasoline and diesel fuel is purchased by businesses and private citizens for use on public highways. Texas’ motor fuels tax rate, as set by the Texas Legislature, is 20 cents per gallon. In fiscal 2013, the motor fuels tax was the state’s fourth-largest source of tax revenue, at $3.2 billion. Texas allocates most of this revenue to the state highway fund.
The motor fuel tax is paid early in the supply chain, by distributors who purchase fuel from terminal operators. Distributors pay the tax to the terminal operators who remit it to the Comptroller’s office. Distributors recover this cost by passing it along as part of the sales price to retailers, who in turn recover their cost by passing it along to consumers.
What is Dyed Diesel?
Texans who use motor fuels for purposes other than highway use, such as for agricultural machinery, do not have to pay the tax, since they are not contributing to wear and tear on public highways. Instead, they can purchase “dyed diesel,” so called because it is dyed red to be visibly distinguishable from taxed fuel, at a price that does not include the 20-cent tax.
State law requires that buyers of dyed diesel fuel be informed that the fuel can be used only for off-highway uses. They also must acquire a permit from the Comptroller’s office and must stipulate that they will consume all of the fuel, will not resell it and will not allow it to be delivered into a motor vehicle for public highway use. The total value of the dyed diesel tax exemption is about $260 million annually.
For some who have easy access to dyed diesel, however, saving 20 cents a gallon by using dyed diesel on the highways can be tempting, though it is illegal. Such conduct in effect deprives the state of revenue from the taxable sale that should have occurred - revenue needed for vital public purposes.
Enforcing Diesel Law
Due to the high number of locations where dyed diesel can be accessed, the risk of improper use is great and presents a significant threat to state motor fuel tax revenue. For this reason, state law gives the Comptroller a number of legal tools to ensure compliance, including the right to conduct traffic stops to sample fuel in vehicle tanks. These stops sometimes occur as part of a “blitz” in one area. The Comptroller’s administrative authority, moreover, does not require probable cause to believe a crime is occurring in order to make a traffic stop.
Yet our office sometimes does receive tips indicating that such crimes are occurring. “We receive tips from all sorts of individuals, from corporate security officers at businesses that buy dyed diesel, to concerned citizens, and even from ex-girlfriends exposing criminal behavior,” says Lt. Justin Scott of the agency’s Criminal Investigation Division. “Although the suspect is in some cases the permitted buyer, it is more often a buyer’s employee, or a stranger stealing the fuel for personal highway use or resale.”
Dyed diesel violations can lead to a variety of consequences depending on the facts involved. These can include the loss of motor fuel permits, seizure and sale of vehicles used in the transportation of motor fuel to avoid payment of taxes or seizure of the fuel itself. If the misconduct constitutes a criminal offense, a suspect may be arrested and prosecuted.
Dyed diesel crimes range from misdemeanors to second-degree felonies, and yes, prison sentences are possible.
“Two defendants were sentenced to prison in 2011 for dyed diesel-related crime, one to 10 years and the other to 7 years in prison,” says CID Chief Martin Cano. “Another defendant received 20 years in prison in 2012. We want to get the word out that individuals found committing this crime can face some tough consequences.”