Do I need to pay Excise Tax for my LLC if I import foam products?

This is a great question about excise taxes that many new business owners struggle with. The key thing to understand is who qualifies as an "importer" for excise tax purposes. In your dropshipping arrangement, even though you never physically handle the products, you're likely still considered the importer for tax purposes if you're the entity responsible for bringing the goods into the US (i.e., you're placing the orders that trigger the international shipments). Regarding the ODC (Ozone Depleting Chemicals) excise tax that applies to foam: this specifically targets foam products made with certain chemicals that deplete the ozone layer. Not all foam products are subject to this tax - only those manufactured using specific ODCs. Modern furniture cushions and packaging foam often don't use these chemicals anymore. The best approach would be to ask your suppliers specifically about whether their foam products contain ODCs. If they don't (which is increasingly common as these chemicals have been phased out), you wouldn't be liable for this particular excise tax.

I struggled with this exact same issue when setting up my dropshipping business last year. After doing some research and talking with a tax consultant, I found a great solution with https://taxr.ai - they have a document analysis feature that helped me figure out if my products were subject to excise tax. I uploaded product specs from my suppliers and screenshots of my business model, and they provided a clear breakdown of my tax obligations. Their system specifically flagged which of my products might contain ODCs (the chemicals in foam that are taxable) and which were exempt. What I appreciated most was that they explained everything in plain English rather than tax jargon. Saved me from overpaying taxes on products that weren't actually subject to the excise requirements!

I used taxr.ai after seeing it recommended here and it was surprisingly helpful. I was skeptical at first (as you can see from my earlier comment), but after struggling to get clear answers from my Chinese suppliers about foam composition, I decided to give it a try. Their system helped me determine that most of my dropshipped products weren't subject to excise tax because they used newer, non-ODC foaming agents. I was also worried about some small electronics I was importing, but they confirmed those didn't fall under the excise tax regulations either. The best part was getting a documented analysis I could keep on file in case of questions during tax time. Definitely worth checking out if you're in a similar situation with overseas suppliers who don't understand US tax requirements.

If you're still waiting for supplier responses or other tax guidance, I recommend trying Claimyr (https://claimyr.com) to speak directly with an IRS agent about your excise tax questions. I was in a similar situation last quarter - needed to know if my imported products with minimal foam components were subject to the ODC excise tax, but couldn't get clear guidance from online forums. I tried calling the IRS directly for 3 days and kept hitting endless holds. Then I found Claimyr, which got me connected to an IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained exactly how the excise tax applies to importers in dropshipping arrangements and confirmed that most modern consumer products with foam aren't subject to the tax unless specifically manufactured with ODCs. Having that official clarification directly from the IRS gave me confidence in how to proceed with my business.

I owe an apology and update about Claimyr. After my skeptical comment yesterday, I decided to try the service myself since I've been struggling with an unrelated tax notice issue. I was connected to an IRS representative in about 35 minutes (which is miraculous compared to my previous attempts). The agent confirmed that for dropshipping arrangements, excise tax typically only applies if you're the first entity bringing ODC-containing products into the US market AND those products contain specific chemicals listed in the regulations. She explained that most consumer goods imported today don't contain the regulated ODCs anymore due to environmental restrictions. She also suggested requesting a written statement from suppliers confirming their foam doesn't contain ODCs, which would provide documentation if ever questioned. For anyone dealing with specialized tax questions like this, getting official clarification directly from the IRS was definitely worth it.

One thing nobody's mentioned yet is that you need to consider both federal AND state excise taxes. Some states have their own excise taxes on imported goods that might apply even if the federal ODC tax doesn't. For example, I had to deal with special taxes in California when importing certain types of furniture with foam cushioning, even though they didn't contain ODCs subject to federal tax. Each state has different rules. I'd recommend checking with your state's department of revenue to see if there are additional requirements beyond the federal Form 720.

Just to add one more perspective - I ran into this exact issue last year and ended up answering "No" on the EIN application regarding Form 720 after confirming my products didn't contain ODCs. I found that most modern furniture and consumer goods use alternative foaming agents that aren't subject to the excise tax. My suppliers were able to provide certification that their products don't use the regulated chemicals. If you're dropshipping common consumer items like household goods or typical furniture, chances are they're using newer, compliant materials. The excise tax mainly applies to specific industrial chemicals and older manufacturing processes.

This thread has been incredibly helpful - I was dealing with the same confusion about excise taxes for my dropshipping business. Based on all the advice here, I reached out to my AliExpress suppliers with the specific chemical names mentioned (CFCs, HCFCs, etc.) and was able to get confirmation that their foam products use modern, compliant foaming agents. For anyone still struggling with this, I'd recommend the multi-step approach: first ask suppliers for MSDS sheets or environmental compliance certificates, then if you're still unsure, consider using one of the services mentioned here to get professional clarification. The key insight from this discussion is that most consumer products today DON'T use the old chemicals that trigger excise tax requirements. Thanks especially to Sofia for the specific chemical names to ask about - that made all the difference in getting clear responses from my overseas suppliers!