Motor Fuels Tax Minute, Episode 1

On this inaugural episode of the Weaver Motor Fuels Tax Minute, we share details on the Superfund chemical excise tax. The recently passed Infrastructure Investment and Jobs Act reinstated Superfund excise taxes effective July 1, 2022, doubled the applicable tax rates, and expanded the reach of the tax.

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Detailed Transcription of Weaver’s Motor Fuels Tax Minute, Episode 1

00:00:25

Emilda: Today we’re going to talk about some fun stuff: Superfund chemical excise tax. It sounds super fun, right?

We know that the IRS reinstated the Superfund excise tax effective July 1, 2022 and with that, there’s been a lot of buzz around the Superfund tax. Today we’d like to touch base on some positive notes on Superfund tax as well as a couple of things that are still out on verdict, which we still haven’t received information on.

As we talk about this, we’re also going to discuss the FAQs that the IRS published on June 24th. I think that was a great direction for the oil and gas industry, we received some answers to questions that we had but there’s still some pending registration items that we still don’t have a lot of answers to.

00:01:22

Leanne: There was a lot of great information in the FAQs that the IRS put out, but a couple of big outstanding registration questions relate to what happens with regard to the tax ability of transactions while a registration is pending and also who can actually obtain a registration if they’re transacting in intermediate hydrocarbon streams or inventory exchanges.

On the first question, regarding pending registration, I did have a telephone call with the IRS who told me that applicants with pending registrations will not be able to transact tax-free until those applications are fully processed. That means if they’re in the middle of a trading between other entities that have obtained a registration, there would have to be tax imposed on those transactions, which of course, complicates the entire transaction in terms of passing the tax along, claiming an exemption or refund — and we don’t have any clear guidance on how that might work.

When it comes to transactions involving multiple parties and who can be registered, the statute states that it would only be importers or manufacturers of taxable chemicals and substances. The issue that arises is if you’ve got an importer or manufacturer selling to a wholesale distributor, selling to somebody else who is also an importer and manufacturer, if the two on either end are able to be registered as a G registrant and transact and intermediate hydrocarbon streams and inventory exchanges tax-free, what happens to the person in the middle? That’s a question we still have outstanding with the IRS as to how strictly the statute is going to be interpreted on that issue of importers and manufacturers. And if it is being strictly interpreted, again, what is the process for credits and registrations?

So those are our outstanding questions. I’m going to turn it back to Emilda for a little bit of good news when it comes to the reporting.

00:03:18

Emilda: When it comes to the reporting, we have a good 6627 form now, Leanne. I think there are some rights out there, that answer some questions. But, there are still some concerns with some of the substance taxes — not all the rates are out there for all 151 substances.

The good thing is that the 6627 form has been updated, it’s out there. The 720 form is still yet to be seen. I think there are also exemption certificates being drafted by the oil and gas industry and I think we’re seeing those in the market right now. There’s some good movement in that direction. I think there are still some outstanding taxability questions and, like you said, there are some 637 registrations that are pending.

I think there are some good takeaways: the 720 is still pending but they’re working on it and the 6627 form is updated with some rates. I think going to be a learning process for Q3 2022 and I think that we’ll see more development here in the next two weeks or so.

00:04:41

Leanne: Yes, I agree. We are on day 11 of reinstatement of the tax and, hopefully, as time goes on, we will get answers to those questions.

That was our motor fuel minute for today. We will provide a motor fuel minute video weekly with useful information on the latest news in the motor fuel industry.