Form 6627 - Instructions Simplified

1. Form 6627 instructions explain how to report environmental excise taxes related to petroleum, chemicals, imported substances, and ozone-depleting chemicals.
2. Form 6627 is not filed independently and must always be submitted as an attachment to IRS Form 720.
3. The form calculates tax liability based on the quantity, fixed IRS tax rates, and total tax liability for each of the six defined parts of the Form.
4. Each of the six parts of the Form corresponds with several IRS numbers established in Form 720 to categorize taxes accurately.
5. Proper completion ensures compliance with federal laws funding environmental protection and oil spill response programs.

What Is the Purpose of Form 6627?

When Form 6627 is properly filed, you will satisfy the requirements of the federal laws that provide funds to support the oil spill response program, as well as environmental protection programs.

Some of the main goals of Form 6627 include:

• The funding of oil spill remediation and prevention programs
• The support of Superfund Environmental Response Activities
• Regulating the use and import of hazardous or toxic chemicals.
• Establishing Environmental Accountability Within The Industries.

The taxes reported cover:

• Petroleum and crude oil products
• Chemicals and chemical substances
• Imported chemical substances
• Ozone-depleting chemicals (ODCs) and related products

Form 720 has a listing of all the tax categories and their associated IRS reference numbers; Form 6627 shows in detail how to calculate each of the tax categories listed in Form 720 for the Environmental Excise Tax.

How Form 6627 Is Structured

Before reviewing individual tax categories, it is important to understand the form’s layout.

Core structure:

• Column A: Quantity of the taxable substance
• Column B: IRS-specified tax rate
• Column C: Total tax (Column A × Column B)

The form is divided into six distinct parts, each addressing a specific environmental tax.

Part I: Tax imposed on Crude Oil and Petroleum Products

Federal oil spill and Superfund taxes on petroleum products are covered in this section.

Covers taxes on:

• Crude oil received at U.S. refineries
• Crude oil taxed prior to refinery receipt
• Domestically used crude oil before tax implementation
• Imported petroleum products

Current Rates (2024-2025):

The tax consists of a total tax of $0.26 per barrel (Hazardous Substance Superfund tax of $0.17 per barrel; Oil Spill Liability Fund tax of $0.09 per barrel (IRS Nos. 16, 18, 21, 53)) on crude oil and its applicable imported products. Those rates are prorated for fractional barrels (i.e., one barrel = 42 gallons).

Applicable Form 720 IRS Numbers:

• IRS No. 53 – Domestic petroleum Superfund tax
• IRS No. 18 – Domestic petroleum Oil Spill tax
• IRS No. 16 – Imported petroleum Superfund tax
• IRS No. 21 – Imported petroleum Oil Spill tax

Part II: Tax on Chemicals Other Than ODCs

Internal Revenue Code Section 4661 excise taxes are covered in this section.

Key highlights:

• Applies to 43 listed chemicals
• Tax rates range from $0.44 to $9.87 per ton
• Rates vary based on chemical classification

Applicable Form 720 IRS Number:

• IRS No. 54 – Chemicals (other than ODCs)

Part III: Tax on Imported Chemical Substances

Imported materials made up of taxable compounds are covered by this section.

Tax applies when:

• Taxable chemicals make up 20% or more of the total substance weight
• The substance is listed or deemed taxable under IRS guidelines

Recent Addition:

Polyoxymethylene (effective October 1, 2024) is now taxable as an imported substance under IRS guidelines (refund claims possible from July 1, 2022).

Applicable Form 720 IRS Number:

• IRS No. 17 – Imported chemical substances

Part IV: Tax on Ozone-Depleting Chemicals (ODCs)

Substances that are known to harm the ozone layer are included in this section.

Common ODCs include:

• Chlorofluorocarbons (CFCs)
• Hydrochlorofluorocarbons (HCFCs)
• Halons
• Carbon tetrachloride
• Methyl chloroform

Example Rate (2025):

CFC-11 at $18.85 per pound (rates increase annually for post-1989 ODCs).

Applicable Form 720 IRS Number:

• IRS No. 98 – Ozone-depleting chemicals

Part V: Tax on Imported Products Containing ODCs

Products made with ODCs and imported into the United States are subject to this regulation.

Tax calculation is based on

• Quantity of ODC used in manufacturing
• IRS-assigned tax rate per chemical

Applicable Form 720 IRS Number

• IRS No. 19 – ODC tax on imported products

Part VI: Tax on Floor Stocks of ODCs

This last section relates to ODCs that have been stored and are accessible.

Tax applies if ODCs are

• Stored on production floors
• Readily accessible for manufacturing or servicing

Thresholds for Tax (Jan 1 inventory)

• ≥400 pounds for most ODCs (e.g., CFCs, HCFCs, carbon tetrachloride)
• ≥50 pounds for halons
• ≥1,000 pounds for methyl chloroform

Tax uses lower "floor stocks" rates (e.g., $0.45/pound for CFC-11).

Applicable Form 720 IRS Number

• IRS No. 20 – Floor Stocks Tax on ODCs

Tips for Filing

• Download the current Environmental Excise Tax Report Form 6627, as the tax rate can change each year.
• To make sure you apply the right calculations on the tax report, carefully read the IRS guidelines included with Form 6627.
• Ensure that you match the appropriate IRS identification number to the relevant Form 720 category.
• Errors in declaring the quantity will impact your tax obligations, so be sure to double-check the quantities reported.
• If you consider electronic filing, you can reduce the chance of errors when filing the Environmental Excise Tax Report Form 6627.

Using an electronic filing solution will make filing the tax report easier and eliminate calculation errors.

Wrap-Up

This guide provides a thorough understanding of how Environmental Excise Taxes are prepared, computed, and reported. Businesses can fulfill their regulatory responsibilities and contribute to the funding of vital Environmental Protection activities by comprehending how Form 6627 and Form 720 function together.

Request a free product demo today and simplify your environmental excise tax filing with efile720 expert assistance.

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FAQs

1. What are Form 6627 instructions used for?
The Form 6627 instructions guide calculating and reporting environmental excise taxes on petroleum, chemicals, and ozone-depleting substances.

2. Is Form 6627 filed separately with the IRS?
Form 6627 must always be attached to Form 720 (the IRS return for quarterly excise tax) when you file your quarterly excise tax return.

3. Which taxes are reported using Form 6627?
Taxpayers use Form 6627 to report all taxes associated with the production or importation of petroleum, chemicals, or ozone-depleting substances.

4. Who is required to file Form 6627?
Any manufacturer, importer, or producer of petroleum, chemicals, or other taxable substances is required to file Form 6627.

5. Can Form 6627 be filed electronically?
Eligible taxpayers may electronically file Form 6627 in conjunction with Form 720 through an approved electronic filing service.