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In business, Form 720 is the Quarterly Federal Excise Tax Return, an avenue used by the affected parties to report various federal excise taxes and pay them. One of the majorly dealt-with federal excise taxes in Form 720 is the environmental tax under Subtitle D of the Internal Revenue Code and Subtitle E. They are part of U.S. programs that intend to motivate environmentally responsible behavior and also finance federal environmental cleanup programs and initiatives.

Form 720 is mostly filed by manufacturing, producing, or importing companies using certain chemicals, ozone-depleting substances (ODS), or petroleum products.

Form 720, comprising environmental excise taxes, is mainly categorized into the following:

Tax on Petroleum—Affects crude oil and petroleum products imported into or produced within the United States.

Tax on Ozone-Depleting Chemicals (ODCs)—a tax applied to the sale or use of certain chemicals that harm the Earth’s ozone layer

Chemical Substance Tax—Reinstated under the Infrastructure Investment and Jobs Act (IIJA), it affects manufacturers, producers, and importers of the listed chemicals.

Each category has specific rules on taxable substances, liability thresholds, and reporting requirements, thus making it necessary for professional tax preparation.

Filing of the environmental part of Form 720 is not for all businesses. It should be filed by an organization that:

Imports taxable chemicals or petroleum products

Manufactures or sells ozone-depleting substances 

Uses or resells listed taxable chemicals in production

Distributes petroleum products to be sold within the U.S.

The most popular filers include chemical manufacturers, fuel distributors, oil refineries, and import-export businesses, among others. The IRS liability thresholds for excise taxes may apply even if the volume of imports or domestic production is actually quite small.

The IRS Form 720 quarterly forms are used for filing the environmental excise taxes. The due dates are:

April 30 for Q1 (Jan–Mar)

July 31 for Q2 (Apr–Jun)

October 31 for Q3 (Jul–Sep)

January 31 for Q4 (Oct–Dec)

The IRS mandates e-filing Form 720. Filing by mail can lead to penalties or interest for late submission or underpayment. Maintain accurate records of all chemical imports, sales, and usage for compliance with IRS regulations.

Increased attention to the environment and stricter enforcement by the IRS, and thus who needs to file environmental taxes on Form 720, are more important than ever. The companies involved in petroleum, chemicals, and ozone-depleting substances must all go proactive in understanding filing obligations.

Consult with tax professionals, adopt Form 720 e-file solutions, and keep meticulous records. This will not only help in avoiding penalties from the IRS but also encourage environmentally responsible practices.