Environmental Taxes at a Glance
Form 6627 is generally used to calculate these environmental taxes, while the resulting liability is reported on the appropriate line of Form 720.
| Environmental Tax | Generally Applies To | IRS No. |
|---|---|---|
| Domestic petroleum Superfund tax | Certain domestic crude oil | 53 |
| Imported petroleum products | Certain imported petroleum products | 16 |
| Taxable chemicals | Certain chemicals sold or used | 54 |
| Imported chemical substances | Certain substances sold or used by importers | 17 |
| Ozone-depleting chemicals | Taxable ODCs | 98 |
| Imported products using ODCs | Certain products manufactured using ODCs | 19 |
| ODC floor stocks | Certain ODC inventories | 20 |
What Are Environmental Taxes?
For Form 720 purposes, environmental taxes are federal excise taxes imposed on certain petroleum, chemicals, imported chemical substances, ozone-depleting chemicals, and related products or inventories.
These taxes do not apply to every business that affects the environment. Liability depends on the specific product or substance, the transaction involved, and whether the business manufactures, produces, imports, sells, or uses the taxable item.
Who May Be Responsible for Environmental Excise Taxes?
Depending on the tax category, environmental excise tax requirements may affect:
- Petroleum importers
- Refinery operators
- Certain users of crude oil
- Manufacturers and producers of taxable chemicals
- Importers of taxable chemicals
- Importers of taxable chemical substances
- Manufacturers or importers of ODCs
- Importers of products manufactured using ODCs
- Businesses holding certain ODC floor stocks
A business operating in one of these industries does not automatically owe environmental tax. The applicable IRS rules, product, quantity, transaction, and use determine whether tax is due.
What Is Form 6627?
Form 6627, Environmental Taxes, is used to calculate certain federal environmental excise taxes reported on Form 720.
The form includes sections covering:
- Petroleum
- Taxable chemicals
- Imported chemical substances
- Ozone-depleting chemicals
- Imported products manufactured using ODCs
- ODC floor stocks
Because rates, taxable substances, and other requirements can change, businesses should use the current Form 6627 and IRS instructions when calculating environmental tax.
Form 6627 vs. Form 720
Form 6627 and Form 720 have different purposes.
| Form | Purpose |
|---|---|
| Form 6627 | Calculates applicable environmental excise taxes |
| Form 720 | Reports federal excise tax liability to the IRS |
In simple terms, Form 6627 calculates the environmental tax, and Form 720 reports the resulting tax liability. When required, Form 6627 is attached to Form 720.
Types of Environmental Taxes
Petroleum Superfund Tax
The Hazardous Substance Superfund financing tax can apply to certain domestic crude oil and imported petroleum products.
For domestic crude oil, liability can arise when crude oil is received at a U.S. refinery or used before the tax has otherwise been imposed. Tax can also apply to certain petroleum products entering the United States for consumption, use, or warehousing.
- Domestic crude oil is generally reported under IRS No. 53
- Imported petroleum products are generally reported under IRS No. 16
- Rates can change, so confirm the current Form 6627 instructions before filing
Superfund Tax on Taxable Chemicals
Federal excise tax can apply to the sale or use of specified taxable chemicals by manufacturers, producers, and importers.
The IRS identifies taxable chemicals and their applicable rates. Different chemicals can have different per-ton tax rates.
- Calculated using Form 6627
- Reported on Form 720 under IRS No. 54
- Confirm the chemical is on the current IRS taxable-chemical list before calculating the tax
Tax on Imported Chemical Substances
A separate environmental excise tax can apply when an importer sells or uses a taxable imported chemical substance.
Imported chemical substances are a separate category from taxable chemicals. IRS rules determine which imported substances are taxable and how the tax is calculated.
- Calculated on Form 6627
- Reported on Form 720 under IRS No. 17
- Review current IRS guidance, since the list of taxable imported substances can change
Ozone-Depleting Chemicals
Federal environmental excise tax can apply to specified ozone-depleting chemicals (ODCs).
- Certain CFCs
- Halons
- Carbon tetrachloride
- Methyl chloroform
- Other chemicals identified by the IRS
The amount of tax depends on factors such as the type and quantity of chemical and its applicable ozone-depletion factor. ODC tax is calculated using Form 6627 and reported under IRS No. 98. Businesses should use current IRS instructions when determining the applicable ODC tax rate.
Imported Products Manufactured Using ODCs
Environmental excise tax may apply to certain imported products manufactured or produced using ozone-depleting chemicals. An imported finished product can potentially be subject to environmental tax even though the product itself is not an ODC.
- Type and quantity of ODC used during manufacturing
- Number of imported products
- Another calculation method permitted by the IRS
The applicable tax is calculated on Form 6627 and reported under IRS No. 19.
ODC Floor Stocks Tax
An ODC floor stocks tax may apply to certain ozone-depleting chemicals held for sale or use in further manufacturing by a person other than the manufacturer or importer.
Specific quantity thresholds, exclusions, and other IRS rules apply.
- Calculated on Form 6627
- Reported on Form 720 under IRS No. 20
- Businesses holding ODC inventory should confirm whether it's subject to the floor stocks tax before filing
How Are Environmental Taxes Calculated?
Environmental taxes do not use one universal calculation. The method depends on the tax category.
- Petroleum taxes generally depend on the taxable number of barrels and the applicable rate.
- Taxable chemical taxes generally use the taxable quantity and the IRS rate assigned to the particular chemical.
- Imported chemical substance taxes depend on the substance and the calculation method allowed under IRS rules.
- ODC taxes generally depend on the quantity and type of ozone-depleting chemical and its applicable rate.
- Imported products manufactured using ODCs may require information about the imported product and the ODCs used during manufacturing.
- ODC floor stocks tax generally depends on the amount of taxable ODC inventory and the applicable rate.
Businesses should verify current IRS rates, taxable-substance lists, and instructions before completing Form 6627.
When Are Environmental Taxes Reported?
Environmental excise tax liabilities are generally reported quarterly on Form 720.
| Quarter | General Form 720 Due Date |
|---|---|
| January–March | April 30 |
| April–June | July 31 |
| July–September | October 31 |
| October–December | January 31 of the following year |
If the due date falls on a Saturday, Sunday, or legal holiday, IRS rules generally move the deadline to the next business day.
Certain environmental taxes may have special payment, deposit, or reporting rules. Filers should review the current Form 720 and Form 6627 instructions for their applicable tax.
When your environmental tax calculation is ready, you can file the applicable Form 720 electronically with Excise720.
Environmental Tax Deposit Requirements
The Form 720 filing deadline and federal excise tax deposit deadline are not necessarily the same.
Certain environmental excise taxes may require deposits during the quarter. For example, applicable Superfund chemical excise taxes can be subject to federal excise tax deposit requirements.
Businesses should determine their deposit obligations separately from their quarterly Form 720 filing requirement and review current IRS instructions for deposit schedules, exceptions, and payment procedures.
How to Prepare for Environmental Tax Filing
Before completing Form 6627 and Form 720, identify the environmental tax category that applies and gather the necessary records. Useful information can include:
- Business name and EIN
- Filing quarter
- Applicable environmental tax category
- Correct IRS number
- Type of petroleum, chemical, substance, or ODC
- Taxable quantity
- Import or entry records
- Manufacturing or production records
- ODC inventory information
- Exemption or exception documentation
- Excise tax deposit records
Use the appropriate section of Form 6627 to calculate the environmental tax and transfer the resulting amount to the correct Form 720 line. Excise720 can be used to prepare and e-file Form 720 with applicable Form 6627 information online.
Common Environmental Tax Filing Mistakes
- Using an outdated tax rate: Environmental tax rates can change, so verify the rate applicable to the filing period.
- Using an outdated taxable-substance list: The IRS may update taxable imported chemical substances and related guidance.
- Confusing taxable chemicals with imported chemical substances: They are separate tax categories with different Form 720 IRS numbers.
- Selecting the wrong IRS number: Each environmental tax category must be reported under the appropriate IRS number.
- Missing Form 6627: When required, environmental tax calculations should be completed on Form 6627.
- Confusing filing and deposit requirements: Quarterly Form 720 deadlines and excise tax deposit obligations are separate.
- Overlooking ODC floor stocks: Businesses holding ODC inventory should determine whether floor stocks tax requirements apply.
Environmental Tax Filing Checklist
Before filing, confirm that you have:
- Identified the correct environmental tax category.
- Selected the correct IRS number.
- Used the current Form 6627 and instructions.
- Verified applicable tax rates.
- Checked current taxable chemical or substance lists.
- Reconciled taxable quantities with your records.
- Calculated the applicable tax on Form 6627.
- Transferred the liability to the correct Form 720 line.
- Reviewed applicable deposit requirements.
- Checked available exemptions or special rules.
- Retained supporting business and tax records.
Environmental Tax Filing Pricing
One flat price for any filing, any tax, any tax due — including environmental taxes reported on Form 720.
- Applies to any Form 720 filing, regardless of the tax or fee reported
- Covers applicable environmental tax categories, including petroleum, chemical, and ODC-related taxes
- No separate charge based on the number of IRS numbers reported
- Guided data entry, electronic filing, and filing status included
Frequently Asked Questions
What are environmental taxes?
Environmental taxes are federal excise taxes that can apply to:
- Certain petroleum
- Taxable chemicals
- Imported chemical substances
- Ozone-depleting chemicals (ODCs)
- ODC-related imported products
- ODC floor stocks
What is Form 6627?
Form 6627, Environmental Taxes, is used to calculate certain federal environmental excise taxes that are reported on Form 720.
Is Form 6627 filed with Form 720?
When Form 6627 is required, it is generally attached to Form 720 and the applicable tax is reported under the appropriate IRS number.
Who needs to file Form 6627?
Depending on the tax, Form 6627 may be required by:
- Manufacturers
- Producers
- Importers
- Refinery operators
- Certain crude-oil users
- Businesses dealing with ODCs
What is the Superfund chemical excise tax?
It is a federal excise tax that applies to certain taxable chemicals and imported chemical substances under applicable IRS rules.
What are taxable imported chemical substances?
They are imported substances designated as taxable under federal environmental excise tax rules. Importers should check the current IRS list.
What are ozone-depleting chemicals?
ODCs are specified chemicals, including certain CFCs and halons, that can be subject to federal environmental excise tax.
What is ODC floor stocks tax?
ODC floor stocks tax can apply to certain quantities of ozone-depleting chemicals held for sale or use in further manufacturing. IRS thresholds and exceptions apply.
Are environmental taxes filed quarterly?
Applicable environmental tax liabilities are generally reported quarterly on Form 720, although separate deposit or special reporting requirements may apply.
Can I file environmental taxes online?
Yes. Form 720 can be electronically filed. Excise720 supports online Form 720 filing with applicable Form 6627 environmental tax information.
File Environmental Taxes Online With Excise720
Environmental tax filing can require identifying the correct tax category and IRS number, calculating the liability on Form 6627, and reporting the amount on Form 720. Excise720 provides online Form 720 e-filing for applicable environmental taxes and supports Form 6627 as part of eligible filings.
You can enter the applicable tax information, prepare your Form 720 return, electronically submit it, and access filing status information online.