The Internal Revenue Service (IRS) has issued its publication on excise taxes (IRS Publication 510) which, among other things, summarizes the tax the IRS imposes on the sale or use of: chemicals that deplete the ozone-layer (ozone-depleting chemicals, ODCs); and imported products containing or manufactured with ODCs (e.g. dusting sprays, television receivers, certain microwave ovens, foam sofas and mattresses, etc).
The IRS explains that Form 6627 is used to calculate the environmental tax on ODCs, imported products containing or manufactured with ODCs, etc. This figure is then entered and reported on Form 720, to which Form 6627 must be attached. (In addition to providing information on environmental taxes (i.e. ODC taxes), IRS Publication 510 also provides information on communications and air transportation taxes, fuel taxes, heavy truck taxes, etc.)
Taxable ODCs IRS Form 6627 states that the following ODCs are taxable :
Post-1989 ODCs: CFC-11, CFC-12, CFC 113, CFC-114, CFC-115, Halon-1211, Halon-1301, and Halon-2402.
Post-1990 ODCs: Carbon tetrachloride, methyl chloroform, CFC-13, CFC-111, CFC- 112, and CFC-211 through CFC-217.
Tax on ODCs Generally Imposed when ODC is First Used or Sold.
IRS Publication 510 states that this tax is imposed on an ODC when it is first used or sold by its manufacturer or importer, and also notes that the manufacturer or importer is liable for the tax. (See IRS Form 6627 for information on how manufacturers and importers can elect certain alternative treatment for mixtures containing one or more ODCs.)
Exemptions to Tax on ODCs.
According to the IRS, the following may be exempt from the ODC tax:
ODCs used or sold for use as propellants in metered-dose inhalers; Material may not be reproduced in whole or in part for use outside subscribing location.
ODCS diverted or recovered in the U.S. as part of a recycling process (and not as part of the original manufacturing or production process);
Recycled Halon-1301 or recycled Halon-2402 imported from a country that has signed the Montreal Protocol on Substances that Deplete the Ozone Layer;
ODCs sold for export (generally, if certain requirements are met); and
ODCs sold for use or used as feedstock.
(See IRS Publication 510 for details on these exemptions and on claiming a credit or refund (without interest) of tax paid on ODCs for certain of the above exempted situations.)
Taxable Imported Products
In IRS Publication 510, the IRS explains that an imported product containing or manufactured with ODCs is subject to a tax if it is entered into the U.S. for consumption, use, or warehousing. According to the IRS, the product must also be listed in the IRS’ Imported Products Table. The Imported Products Table has been removed from IRS Publication 510’s Appendix A and is now contained in 26 CFR 52.4682-3(f)(6). For most of the products on the Imported Products Table, the applicable HTS number, the type of ODC in the product, and the ODC weight are provided. Products on this table include ( partial list, see IRS list for complete details ):
- Anti-static sprays
- Microwave ovens
- Cleaning solvents
- Facsimile machines
- Dusting sprays
- Electronic circuit board coolants
- Television receivers
- Insect or wasp sprays
- Propellants and refrigerants
- Bicycles with seat foamed with ODCs
- Refrigerators, freezers, etc.
- Foam sofas and mattresses
- Dehumidifiers Electronic games and electronic components thereof
- Fire extinguishers charged with ODCs Optical fibers
- Electronic typewriters & word processors
- Telephone sets
- Electronic calculators
- Printed circuits
- Laptops, notebooks & pocket computers
- Physical or chemical analysis instruments
- Keyboards Avionics
According to the IRS, a product is included on the Imported Products Table even if it is manufactured with or contains a different ODC than the one specified in the table.
The Imported Products Table is divided into three sections:
Part I includes products that are mixtures containing ODCs;
Part II includes products in which ODCs are used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components;
Part III includes products that are not imported taxable products.
The IRS also states that an importer or manufacturer of a product may request that the IRS add a product and its ODC weight to the table, and may also request the IRS remove a product from the table, or change or specify the ODC weight of a product. Imported taxable products generally taxed when sold or used by the importer. The IRS states that imported taxable products are generally taxed when they are first sold or used by the importer, and the importer is liable for this tax.
However, IRS Form 6627 states that the importer may elect to treat the entry of products in to the U.S. as the use of such products. This election applies to all products held by the importer when the election becomes effective. It also applies to all products the importer enters into the U.S. after the election becomes effective. According to the IRS, if an election applies to an imported taxable product, the tax is imposed on the product on the date of entry. (The IRS notes that this election may only be revoked with the consent of the IRS.) According to the IRS, the tax is based on the actual (exact) weight of each ODC used as a material in manufacturing the product. However, the IRS states that if the actual weight cannot be determined and the Imported Products Table does not list an OCD weight for the product, the rate of tax is 1% of the entry value of the product. (The IRS also imposes a “floor stocks tax” 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. See Publications 510 and 6627 for details.)