IRS Form 6627 Guide: Reporting Environmental Excise Tax

Introduction: What is IRS Form 6627?

IRS Form 6627, titled Environmental Taxes, is an excise tax schedule governed by the Internal Revenue Service (IRS). It is used to compute and report federal environmental taxes on specific substances that can harm the environment or pose hazardous risks.

Form 6627 is not a standalone return. Instead, it serves as an attachment to Form 720 (Quarterly Federal Excise Tax Return), where total liabilities calculated on Form 6627 are transferred and paid.

Purpose of the Form

The United States government levies environmental excise taxes to support dedicated environmental cleanup funds, including the Hazardous Substance Superfund and the Oil Spill Liability Trust Fund. These taxes ensure that industries manufacturing, refining, or importing hazardous materials contribute directly to the cost of environmental protection and remediation.

Form 6627 provides a structured worksheet to calculate the exact tax liabilities for crude oil, petroleum products, specific hazardous chemicals, imported chemical substances, and ozone-depleting chemicals (ODCs). It ensures accurate, line-by-line accounting before final figures are reported on Form 720.

Who Needs to File This Form?

Filing Form 6627 is required for businesses and operators involved in the production, refining, importation, or holding of taxable environmental substances. You must file if you are:

• A refinery operator receiving domestic crude oil or a person using or exporting crude oil before the tax has been imposed.
• An importer entering crude oil or refined petroleum products into the United States for consumption, use, or warehousing.
• A manufacturer, producer, or importer who sells or uses any of the 42 designated Superfund taxable chemicals.
• An importer who sells or uses taxable imported chemical substances that contain qualifying percentages of taxable chemicals.
• A manufacturer or importer who sells or uses ozone-depleting chemicals (ODCs) or imported products manufactured with ODCs.
• A dealer or warehouse holding qualifying threshold quantities of floor stocks of ODCs on January 1.

Who Is Exempt or Not Required to File?

Certain businesses and transactions are exempt from environmental excise taxes and do not need to file Form 6627:

• Downstream Retailers: Businesses that purchase fully tax-paid fuels, chemicals, or ODCs from domestic suppliers without further refining or chemical modification.
• Qualified Tax-Free Exports: Sales of taxable chemicals or petroleum products for export, provided statutory certification and registration requirements are satisfied.
• Exempt Chemical Uses: Specific statutory exemptions, such as taxable chemicals used as feedstocks in the manufacturing of non-exempt products or used in fertilizer and animal feed production.
• Sub-Threshold Floor Stocks: Persons holding floor stocks of ODCs below the designated IRS pound thresholds on January 1.

When to File

Because Form 6627 is attached to Form 720, it follows the standard quarterly federal excise tax filing schedule:

• First Quarter (January 1 – March 31): Due April 30.
• Second Quarter (April 1 – June 30): Due July 31.
• Third Quarter (July 1 – September 30): Due October 31.
• Fourth Quarter (October 1 – December 31): Due January 31.

If any due date falls on a Saturday, Sunday, or legal holiday, the return is due on the next business day. Note that ODC floor stocks taxes are reported annually on the second-quarter Form 720 return due July 31.

Where and How to File

Form 6627 must always be submitted alongside Form 720. Filers have two main submission methods:

• Electronic Filing (Recommended): Filers can submit Form 720 and Form 6627 electronically through IRS-approved excise tax e-file providers. E-filing provides instant receipt confirmation and fewer calculation errors.
• Paper Filing: Completed paper copies of Form 6627, attached to Form 720, can be mailed directly to the IRS address as per instructions on Form 720.

Step-by-Step Instructions to Fill Form 6627

Form 6627 is organized into several distinct parts based on the type of substance being taxed. Complete only the parts that apply to your business activities during the tax quarter.

Part Number	Tax Category	Reporting Instructions
Part I	Tax on Petroleum	Enter the number of barrels of crude oil received at a U.S. refinery or petroleum products entered into the U.S. Multiply the barrels by the Superfund and Oil Spill rates, and transfer the totals to Form 720 (IRS Nos. 53, 16, 18, and 21).
Part II	Tax on Chemicals (Other than ODCs)	Locate the specific chemical among the 42 listed substances (such as ethylene, benzene, or chlorine). Enter the weight in tons, multiply by the statutory rate per ton, and transfer the sum to Form 720 (IRS No. 54).
Part III	Tax on Imported Chemical Substances	List the imported chemical substances, the quantity in tons, and the applicable tax rate. If using the default percentage method, calculate the tax based on customs value and transfer the total to Form 720 (IRS No. 17).
Part IV	Tax on Ozone-Depleting Chemicals (ODCs)	Enter the chemical name, the base tax rate, the ozone-depletion factor, and the number of pounds sold or used. Enter the total tax on Form 720 (IRS No. 98).
Part V	Tax on Imported Products Containing/Made with ODCs	Calculate the excise tax on imported merchandise containing or manufactured with ODCs using the exact chemical weight or table method. Transfer the total to Form 720 (IRS No. 19).
Part VI	Tax on Floor Stocks of ODCs	Report qualifying inventories of ODCs held on January 1 for sale or manufacturing. Enter the total tax on the second-quarter Form 720 (IRS No. 20).

Required Documents and Information Needed Before Filling

To accurately complete Form 6627, gather the following commercial and operational records before filing:

• Refinery receipt logs and barrel measurement sheets for crude oil processing.
• U.S. Customs and Border Protection (CBP) entry documentation for imported petroleum, chemicals, and ODC-containing products.
• Sales invoices and bills of lading verifying the tonnage or poundage of chemicals sold or used.
• Form 637 registration details if claiming authorized tax-free sales or intermediate chemical exemptions.
• Proof of semimonthly excise tax deposits made through the Electronic Federal Tax Payment System (EFTPS).

Common Mistakes to Avoid

Errors on Form 6627 can lead to balance mismatches on Form 720 and trigger IRS compliance notices. Watch out for these frequent mistakes:

• Mismatched Units of Measurement: Entering pounds instead of tons for Part II chemicals or confusing gallons with barrels in Part I.
• Failing to Transfer Figures to Form 720: Completing Form 6627 but forgetting to carry the final totals to the designated IRS Number lines on Form 720.
• Missing Semimonthly Deposit Rules: Assuming payment is only due quarterly. Many excise taxpayers must make semimonthly deposits throughout the quarter.
• Submitting Form 6627 Separately: Mailing Form 6627 alone without attaching it to an official Form 720 return.

Penalties for Non-Filing or Errors

Failure to report and pay environmental excise taxes can trigger substantial penalties under the Internal Revenue Code:

• Failure to File: A penalty of 5% of the unpaid tax per month (or partial month), up to a maximum of 25%.
• Failure to Pay: A penalty of 0.5% per month on the unpaid tax balance, up to a maximum of 25%.
• Failure to Deposit: Penalties ranging from 2% to 15% on late or underpaid semimonthly excise tax deposits.
• Interest: Compound interest is assessed on all unpaid taxes and penalties from the original due date until paid in full.

Related Forms or Schedules

When dealing with environmental excise taxes, several other IRS forms and schedules may be relevant:

• Form 720: Quarterly Federal Excise Tax Return (the main return to which Form 6627 must be attached).
• Form 720-X: Amended Quarterly Federal Excise Tax Return (used to correct errors on previously filed returns).
• Form 637: Application for Registration for Certain Excise Tax Activities.
• Form 8849: Claim for Refund of Excise Taxes (used to claim credits or refunds for overpaid excise taxes).

Frequently Asked Questions

1. Can I file Form 6627 on its own?

No. Form 6627 is a supporting schedule and must always be attached to your quarterly Form 720 submission.

2. What is the difference between Superfund chemical taxes and petroleum taxes?

Petroleum taxes apply per barrel of crude oil and petroleum products to fund the Superfund and Oil Spill Trust Funds. Superfund chemical taxes apply per ton to 42 specifically listed chemicals and certain imported chemical substances.

3. How do I make tax payments calculated on Form 6627?

Taxes calculated on Form 6627 are paid as part of your Form 720 excise tax balance, usually through electronic deposits using the Electronic Federal Tax Payment System (EFTPS).

4. Are exported chemicals subject to the Superfund tax?

Qualifying exports of taxable chemicals or petroleum products may be exempt from the tax, provided proper exemption certification and documentation rules are followed.

5. What are ODC floor stocks taxes?

The floor stocks tax is a one-time annual tax imposed on persons holding specified quantities of untaxed ozone-depleting chemicals in inventory on January 1 for sale or manufacturing.

Conclusion: Key Takeaways

IRS Form 6627 is a critical excise tax schedule for refineries, chemical manufacturers, and importers of hazardous or ozone-depleting substances. Maintaining accurate volume records in barrels, tons, and pounds is essential for calculating the correct liability. By attaching Form 6627 to Form 720 and filing before the quarterly deadlines, businesses ensure smooth compliance with federal environmental tax regulations.