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Form 6627, Environmental Taxes

The form 6627 is an attachment to Form 720 and used to figure the quarterly excise taxes under environmental tax on:

  • Petroleum
  • Ozone-depleting chemicals (ODCs)
  • Imported products that used ODCs as materials in the manufacture or production of the product, and
  • The floor stocks tax on ODCs

Environmental taxes are imposed on crude oil and petroleum products (oil spill liability), the sale or use of ozone-depleting chemicals (ODCs), and imported products containing or manufactured with ODCs. In addition, a floor stocks tax is imposed on ODCs held on January 1 by any person (other than the manufacturer or importer of the ODCs) for sale or for use in further manufacture.

Oil Spill Liability Tax

The oil spill liability tax is reported on Form 6627, Environmental Taxes, and Form 720, Quarterly Federal Excise Tax Return. The oil spill liability tax rate is $.08 per barrel and generally applies to crude oil received at a U.S. refinery and to petroleum products entered into the United States for consumption, use, or warehousing. The excise tax also applies to certain uses and the exportation of domestic crude oil.

Crude oil includes crude oil condensates and natural gasoline. Petroleum products include crude oil, refined and residual oil, and other liquid hydrocarbon refinery products. Excise Tax is imposed on crude oil when it is received at a United Sates refinery. The operator of the refinery is liable for the tax.

Excise Tax is imposed on domestic crude oil used or exported before it is received at a United States refinery. However, the use of crude oil for extracting oil or natural gas on the premises where such crude oil was produced is not taxable. The user or exporter is liable for the tax.

Excise Tax is imposed on petroleum products when they enter the United States for consumption, use, or warehousing. The person entering the petroleum product into the country is liable for the tax, including the tax on imported crude oil, even if it is subsequently received at a U.S. refinery.

Excise Tax is imposed only once on any imported petroleum product. Thus, the operator of a U.S. refinery that receives imported crude oil must establish that the petroleum tax has already been imposed on such crude oil in order not to be liable for the tax.

ODCs (Ozone-Depleting Chemicals)

Excise Tax is imposed on an ODC when it is first used or sold by its manufacturer or importer. The manufacturer or importer is liable for the tax.

You use an ODC if you put it into service in a trade or business or for the production of income. Also, an ODC is used if you use it in the making of an article, including incorporation into the article, chemical transformation, or release into the air. The loss, destruction, packaging, repackaging, or warehousing of ODCs is not a use of the ODC.

The creation of a mixture containing an ODC is treated as a taxable use of the ODC contained in the mixture. An ODC is contained in a mixture only if the chemical identity of the ODC is not changed. Generally, tax is imposed when the mixture is created and not on its sale or use. However, you can choose to have the tax imposed on its sale while reporting excise taxes on ODC online using TaxExcise.com attaching Form 6627.

The creation of a mixture for export or for use as a feedstock is not a taxable use of the ODCs contained in the mixture.

Exceptions

The following may be exempt from the tax on ODCs.

  • Metered-dose inhalers.
  • Recycled ODCs.
  • Exported ODCs.
  • ODCs used as feedstock.

Credits or refunds

A credit or refund (without interest) of tax paid on ODCs may be claimed if a taxed ODC is:

  • Used as a propellant in a metered-dose inhaler (the person who used the ODC as a propellant may file a claim),
  • Exported (the manufacturer may file a claim), or
  • Used as a feedstock (the person who used the ODC may file a claim).

Imported Taxable Products

An imported product containing or manufactured with ODCs is subject to tax if it is entered into the United States for consumption, use, or warehousing and is listed in the Imported Products Table. The Imported Products Table is listed in Regulations section 52.4682-3(f)(6).

The excise tax is based on the weight of the ODCs used in the manufacture of the product. Use the following methods to figure the ODC weight.

  • The actual (exact) weight of each ODC used as a material in manufacturing the product.
  • If the actual weight cannot be determined, the ODC weight listed for the product in the Imported Products Table.

However, if you cannot determine the actual weight and the table does not list an ODC weight for the product, the rate of tax is 1% of the entry value of the product.

Taxable event: Tax is imposed on an imported taxable product when the product is first sold or used by its importer. The importer is liable for the tax.

Use of imported products: You use an imported product if you put it into service in a trade or business or for the production of income or use it in the making of an article, including incorporation into the article. The loss, destruction, packaging, repackaging, warehousing, or repair of an imported product is not a use of that product.

Floor Stocks Tax

Tax is imposed on any ODC held (other than by the manufacturer or importer of the ODC) on January 1 for sale or use in further manufacturing. The person holding title (as determined under local law) to the ODC is liable for the tax, whether or not delivery has been made.

These chemicals are taxable without regard to the type or size of storage container in which the ODCs are held. The tax may apply to an ODC whether it is in a 14-ounce can or a 30-pound tank.

You are liable for the floor stocks tax if you hold any of the following on January 1.

  • At least 400 pounds of ODCs other than halons or methyl chloroform,
  • At least 50 pounds of halons, or
  • At least 1,000 pounds of methyl chloroform.

If you are liable for the federal environmental excise tax, prepare an inventory on January 1 of the taxable ODCs held on that date for sale or for use in further manufacturing. You must pay this floor stocks tax by June 30 of each year. Report the tax on Form 6627 and Part II of Form 720 for the second calendar quarter.

ODCs not subject to floor stocks tax:

The floor stocks tax is not imposed on any of the following ODCs.
1. ODCs mixed with other ingredients that contribute to achieving the purpose for which the mixture will be used, unless the mixture contains only ODCs and one or more stabilizers.
2. ODCs contained in a manufactured article in which the ODCs will be used for their intended purpose without being released from the article.
3. ODCs that have been reclaimed or recycled.
4. ODCs sold in a qualifying sale for:
    a. Use as a feedstock,
    b. Export, or
    c. Use as a propellant in a metered-dose inhaler
For more information on the Environmental Taxes reported on Form 720 check out here.

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