Diesel fuel is very similar to heating oil which is used in central heating. In Europe, the United States, and Canada, taxes on diesel fuel are higher than on heating oil due to the fuel tax, and in those areas, heating oil is marked with fuel dyes and trace chemicals to prevent and detect tax fraud. Similarly, "untaxed" diesel (sometimes called "off road diesel") is available in the United States, which is available for use primarily in agricultural applications such as fuel for tractors, recreational and utility vehicles or other non-commercial vehicles that do not use public roads. Additionally, this fuel may have sulphur levels that exceed the limits for road use using the newer 2007 standards. This untaxed diesel is dyed red for identification purposes,[25] and should a person be found to be using this untaxed diesel fuel for a typically taxed purpose (such as "over-the-road", or driving use), the user can be fined US$10,000.

Red diesel fuel is only slightly different chemically from regular automotive diesel fuel, but there can be a significant difference in cost. The cheaper red diesel fuel could conceivably work in place of the more expensive automotive diesel fuel, but that would defeat the purpose of a fuel tax. In order to ensure that home heating oil, which is minimally taxed, is not used as diesel fuel, which can be heavily taxed, revenue agents require home heating oil to receive a special red dye. This liquid red dye can be detected in even the smallest samples taken for examination.

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