Posted: Thursday, March 17, 2011 9:00 AM
Tax officials say Idaho does little to fight misuse
By JAY PATRICK
For the Capital Press
BOISE -- A bill targeting farmers and ranchers who some legislators believe are cheating the tax man has been pulled off the table in an Idaho House committee.
Rep. Bill Killen, D-Boise, told fellow members of the House Transportation and Defense Committee at the capitol last week that his proposal to eliminate dyed diesel should be shelved indefinitely. The bill, which never had a hearing, aimed to do away with dyed-red diesel fuel, which is not taxed the 25 cents that clear diesel is, and make it so farmers and ranchers would have to apply for a refund on tax paid on purchases of clear diesel.
Killen agreed with Rep. Marv Hagedorn, R-Meridian, to hold off on the bill and work up some alternative proposals. However, Killen said he'd bring the same bill back next year if the amount of dyed diesel purchased jumps as fuel prices rise going into summer. In the past, dyed sales have risen as prices increase. Killen said the Tax Commission does not have the staff to deal with handling remittances right now.
"If we see a giant spike again, I'll bring a similar bill next year to get the job done," he said.
Dyed diesel is reserved for use in off-road vehicles, including tractors and hay wagons. Estimates on how much the state is losing range from $3 million to $15 million per year. The state collects about $70 million per year on diesel sales.
Idaho Farm Bureau spokesman John Thompson said farmers are not abusing the system on a widespread basis.
"The problem isn't that a lot of farmers are stealing," he said. "It's just more paperwork."
Sen. Chuck Winder, R-Boise, said he considered bringing a bill like Killen's at the start of the session, but didn't because he found needed support wasn't there.
"It's violating public trust. There's fairness and equity issues here," Winder said.
Idaho takes few steps to curb illegal use of dyed fuel, unlike neighboring states.
Montana and Washington test for dyed fuel during safety inspections, said Dan John, tax policy manager with the Idaho Tax Commission. Utah, Nevada and Oregon also have testing programs.
Thompson said he's heard that in California, authorities have shown up at livestock auctions and rodeos and randomly dipped the tanks of pickups in the parking lot.
In Idaho, dyed diesel use basically runs on the honor system.
"It's just never been done here," said Dan John, tax policy manager with the state Tax Commission, of testing tanks. But if it did happen here, it needs to be enforced by someone other than the taxing authorities, he said.
"It's difficult to enforce. You really need to have a law enforcement ability to be able to make stops and dip tank," he said.
In some states, state police can enforce dyed diesel laws. Winder said he doesn't want to see that happen here.
"We don't want to put law enforcement officers in situations where they're confronting the public," he said.
People who are caught using dyed diesel in highway vehicles in Idaho are usually turned in by a neighbor or someone else known to the offender, John said.
To curb illegal use of dyed diesel, Winder sponsored the legislation establishing the state's fines: $250 for the first offense, $500 for the second, and $1,000 for each offense thereafter. For comparison, Nevada's fines are $2,500 for the first offense, $5,000 for the second within four years, and up to $10,000 for a subsequent offense.