The oil spill liability tax (OSLT) expired on December 31, 2018, and therefore was not required for the 2019 calendar year. Effective January 1, 2020, the law reinstated the oil spill excise tax imposed on crude oil and imported petroleum products. The cost of the OSLT is calculated at a rate of $0.09 per barrel (approximately $0.00214 per gallon) of crude oil products (including natural gasoline used as denaturant).
How is the OSLT usually filed?
This excise tax is filed quarterly with IRS Forms 6627 and 720, but deposits are required for each semimonthly period in which the tax liability is incurred. The amount of this deposit must not be less than 95% of the amount of net tax liability incurred during the semimonthly period, unless an appropriate safe harbor applies.
Understanding the Safe Harbor
Under the safe harbor provision, you are considered to have complied with the semi-monthly deposit requirement if you filed a Form 720 during the “look-back quarter” corresponding with the semi-monthly period in question and meet certain requirements. The requirements that must be met are included on page 9 and 10 of IRS 18-21. In this case, the “look-back quarter” is the second preceding calendar quarter (e.g. Q1 for Q3).
The first filing for the re-imposed tax is due April 30, 2020 and needs to be filed quarterly. The OSLT is currently set to expire December 31, 2020.
If you are concerned about compliance with the proper payment and filing of the OSLT, you are invited to contact us for additional guidance and assistance.