What To Know About the Chemical Excise Tax

And How It Affects the Manufacturing Industries

The Internal Revenue Service (IRS) has re-instated a previous chemical tax after a hiatus for over 25 years. This ‘new’ chemical tax has amendments including updated tax rates on chemicals and chemical substances. The taxable items are broken up as “taxable chemicals” and “taxable substances”.

When does the Chemical Excise Tax go into effect?

As of July 1^st, 2022 the Chemical Excise Tax is in full effect. The first return is due by October 31^st, 2022 for the calendar quarter that ends on September 30^th, 2022.

What is the tax rate?

The tax rate varies based on the type of chemical or substance. The rates range from as low as $0.44 per ton up to $9.74 per ton.

Which chemicals are included in the Chemical Excise Tax?

The IRS has compiled a list of “taxable chemicals” and “taxable chemical substances” that are to be taxed, which is subject to change. The “taxable substances” is considered as a substance that is comprised of more than 20% of one of the taxable chemicals, by weight or volume.

Scroll to the bottom for full list of chemicals and substances.

Who is responsible for paying the tax?

As stated by the IRS, “the manufacturer, producer, or importer of the taxable chemical is responsible for reporting and paying the section 4661 tax to the IRS. For taxable substances, the importer of the taxable substance is responsible for reporting and paying the section 4671 tax to the IRS.”

The taxes are to be reporting quarterly and payments be semimonthly. Those responsible for paying these chemical taxes must report them on IRS Form 720 and Form 6627.

How does this affect manufacturing industries?

Many chemicals in the excise tax are commonly used in many products throughout various industries, including foundry and parts cleaning applications. As this tax takes effect, price increases are likely from the manufacturers and importers of these products.

This tax affects such a wide range of chemicals that most industries will be affected. If you have any processes that use chemicals, you’ll be affected. Most of the affect as a use within your applications will come as prices increase long term from manufacturers and importers. Below are some specific items/processes that will be affected.

Foundry Industry

Some key items affected by this chemical tax will be sand binders, flux, adhesives, release agents, alloys, chromite sand, and more.

Parts Cleaning

Parts cleaning involves the use of various chemicals to aid in the cleaning of contaminants. Some of these chemicals may include the taxable items, driving a future increase in price on these items.

Contact our team and discuss potential proactive measures to prepare for this ‘new’ tax.

List of “taxable chemicals”:

Acetylene
Benzene
Butane
Butylene
Butadiene
Ethylene
Methane
Naphthalene
Propylene
Toluene
Xylene
Ammonia
Antimony
Antimony trioxide

Arsenic
Arsenic trioxide
Barium sulfide
Bromine
Cadmium
Chlorine
Chromium
Chromite
Potassium dichromate
Sodium dichromate
Cobalt
Cupric sulfate
Cupric oxide

How does this affect manufacturing industries?

Many chemicals in the excise tax are commonly used in many products throughout various industries, including foundry and parts cleaning applications. As this tax takes effect, price increases are likely from the manufacturers and importers of these products.

This tax affects such a wide range of chemicals that most industries will be affected. If you have any processes that use chemicals, you’ll be affected. Most of the affect as a use within your applications will come as prices increase long term from manufacturers and importers. Below are some specific items/processes that will be affected.

Foundry Industry

Some key items affected by this chemical tax will be sand binders, flux, adhesives, release agents, alloys, chromite sand, and more.

Parts Cleaning

Parts cleaning involves the use of various chemicals to aid in the cleaning of contaminants. Some of these chemicals may include the taxable items, driving a future increase in price on these items.

Contact our team and discuss potential proactive measures to prepare for this ‘new’ tax.

How does this affect manufacturing industries?

Many chemicals in the excise tax are commonly used in many products throughout various industries, including foundry and parts cleaning applications. As this tax takes effect, price increases are likely from the manufacturers and importers of these products.

This tax affects such a wide range of chemicals that most industries will be affected. If you have any processes that use chemicals, you’ll be affected. Most of the affect as a use within your applications will come as prices increase long term from manufacturers and importers. Below are some specific items/processes that will be affected.

Foundry Industry

Some key items affected by this chemical tax will be sand binders, flux, adhesives, release agents, alloys, chromite sand, and more.

Parts Cleaning

Parts cleaning involves the use of various chemicals to aid in the cleaning of contaminants. Some of these chemicals may include the taxable items, driving a future increase in price on these items.

Contact our team and discuss potential proactive measures to prepare for this ‘new’ tax.