South Dakota Farmers Union asks governor and lawmakers to approve a state fuel tax holiday

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As further complications arose Thursday around actions meant to ease the burden of high diesel prices, the South Dakota Farmers Union asked the governor and state lawmakers to call a special legislative session to approve a state fuel tax holiday.

“The governor says this all the time, that agriculture is king, and you hear it from legislators as well,” said South Dakota Farmers Union President Doug Sombke. “So, then let’s treat it as such, and let’s make sure that we take care of it as such.”

The organization is asking the governor and lawmakers to approve legislation that would temporarily reduce the state tax on gasoline and diesel from 28 cents to 1 cent per gallon. Requiring at least 1 cent of tax would allow for tracking of the amount of highway funding lost to the tax holiday so lawmakers could replace it later, the Farmers Union said, possibly with reserve funds.

The Farmers Union said legislation should also temporarily allow the use of federally tax-exempt, offroad, red-dyed diesel in highway vehicles, while shielding people from state fuel tax penalties, retroactive audits or enforcement actions, and providing clear direction for law enforcement agencies to suspend enforcement.

The Governor’s Office, in a response to South Dakota Searchlight questions, said in a written statement that “all options are on the table, and we will continue to do what we can to support farmers and taxpayers during this turbulent time.”

Chance of dyed diesel lingering in tanks makes some farmers hesitant to accept Trump’s help

Sombke’s request comes after the state Department of Revenue on Thursday clarified the state’s response to President Donald Trump’s Monday executive order. Trump’s order is intended to allow broader use of dyed diesel, which is only legal for offroad use in machinery such as farm equipment.

Red-dyed diesel is the same as regular diesel apart from the dye added to help with enforcement. Trump’s order suspends penalties for unauthorized uses through the end of the year.

South Dakota Gov. Larry Rhoden responded Tuesday by directing the state Department of Public Safety to “prioritize commercial motor vehicle inspections that present a threat to public safety and not attempt to identify the use of dyed diesel fuel on highways and public roads” while the federal order is in effect.

“By taking this action, we will provide meaningful relief to South Dakota farmers,” Rhoden said in a news release Tuesday, and “allow all taxpayers to realize meaningful savings from using dyed diesel.”

But dyed diesel is delivered in bulk to permitted users such as farmers and is not readily available to the general public. Additionally, some farmers are concerned about being fined for trace amounts of the dye left in their vehicle fuel tanks after Trump’s order expires.

The state’s Department of Revenue said Thursday that although dyed diesel is federally tax exempt, which saves approved users 24.4 cents per gallon, it’s only exempt from state and local taxes when it’s used for approved agricultural purposes. Thus, anybody else who buys dyed diesel should be paying state and local taxes on it, and those taxes could “reduce or eliminate any tax benefits” from federal tax relief.

Based on that legal reality, the department said in a news release, “only agricultural producers with a valid agricultural exemption certificate should fuel with red dyed diesel for on-road use at this time.”

Rhoden cannot suspend state taxes himself, because they’re established in state law. That’s why Sombke’s organization is calling for a special session of the Legislature. A special session can be called by the governor, or lawmakers can petition for it with two-thirds support from both the House and Senate.

In a letter to Rhoden and legislative leaders, the Farmers Union said that because of all the complications surrounding the actions with dyed diesel in South Dakota, “citizens, commercial operators, and agricultural producers are placed in an unfair and precarious situation.”

Gas and diesel prices have risen sharply since the beginning of Trump’s war in Iran, which has disrupted global fuel supply chains. In at least four other states — Georgia, Indiana, Ohio and Utah — leaders have moved to temporarily suspend or reduce the state tax on gasoline.