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Form 720 - Quarterly Federal Excise Tax

Form 720 is a Quarterly Excise Tax Return; it is used to report federal excise tax liability for assured products such as goods like gasoline and fuel. These excise taxes are included in the cost of product and charges on actions such as wagering or using trucks on highways.

Who Must File the Form 720?

Form 720 is filed when you own a business, which deals with goods and services. This is subject to excise tax; you need to prepare the Form 720 on a quarterly basis and report the tax to the IRS.The Form 720 Quarterly Federal Excise Tax attachments are used to:

  • Report the liability by the IRS.
  • Pay the excise taxes listed on the Form.

A business entity is liable to file federal excise taxes if the sold goods are listed on Form 720, Part I and II.

Part I excise taxable commodities include:

Petroleum spill taxes and ozone-depleting chemical tax; air transportation taxes and communications; fuel taxes for kerosene, gasoline and other gases; tire manufacturing taxes and coal.

Part II excise taxes are related to the sales of:

Sports fishing and archery, inland waterways fuel used tax and bio fuel sold but it does not include used as fuel.

When is Due Date for the Form 720?

Form 720, the federal excise taxes are filed every quarter when an individual offers a service or sells goods or products that has an excise tax component. The Form 720 is due for every quarter during the tax year. Please note, if the due date comes on the weekend or on a national holiday, it must be filed on the next business day.

Reporting Months Due Date
January April 30th
February April 30th
March April 30th
April July 31st
May July 31st
June July 31st
July Oct 31st
August Oct 31st
September Oct 31st
October Jan 31st
November Jan 31st
December Jan 31st

If you are not reporting for excise taxes in the any of the quarters, you must send a Form 720 as per the due date, with “0” on the appropriate line of the Form 720. If you are going to close your business permanently, then check on the “Final Return” on Form 720, indicating IRS that you would not be filing anymore.

Excise Tax Form 720 – Part I

There are multiple sections of the IRS excise tax form and it requires deep understanding about each of the sections for a smooth filing process. Detailed view of the various sections in IRS Form 720 Part I are as follows:

Environmental Tax: Dealers and sellers of the imported petroleum products, crude oil and ODC’s file this excise tax return.
Communication Tax: Users of local telephone services and teletypewriter exchange services are liable to file this Quarterly Federal Communication Tax.
Air Transportation Tax: Airline companies file the Air Transportation Tax by providing a consolidated report about the passengers and the objects handled through the flights. It also includes the reporting of the use of transportation facilities.
Fuel Tax: Fuel Tax engages in the use and sales of kerosene, gasoline, diesel and LNG.
Retail Tax: All the sellers and manufacturers of highway vehicles file Retail Tax. Highway vehicles include heavy trucks, buses and truck tractors.
Ship Passenger Tax: The Internal Revenue Service(IRS) enforces this tax on certain ship voyages. The person who is organizing the voyage must file this tax on an annual basis.
Foreign Insurance Tax: Foreign issuers imply issuing policies like casualty insurance and indemnity bonds.
Manufacturer Tax: The manufacturers and sellers of coal need to file this IRS excise tax. This tax involves one-time gas guzzler tax that is imposed on the imported vehicles and the vehicles driven by diesel fuel or gasoline with a minimum gross weight of 6,000 lbs.

Excise Tax Form 720 – Part II

Part II in the Form 720 includes arrow shafts, sports fishing equipment, fishing roles and poles; the use of fuel on inland waterways, sales of biodiesel, unused biodiesel and electric outboard motors. As a new addition to this section, “Patient-Centered Outcomes Research Fee” was added to the excise tax Form on Dec 6th, 2012.

LUST Tax : Leaking Underground Storage Tank Tax, commonly referred as LUST Tax, comes under Part II of the IRS Form 720. This LUST excise tax is 1% per gallon of the excise tax levied on all the taxable fuels that are sold in the United States. The LUST trust fund, which is responsible for handling any clean-ups and repair, is benefited by the tax amount received.
Indoor Tanning Tax : The Federal government created a new tax return which is applicable to establishments proving indoor tanning services in the year 2010. Note that this tax is not imposed on fitness facilities that offer tanning as an additional amenity and do not charge any additional fees. On the other hand, if you are an owner of a salon that offers tanning facilities, you need to file this excise tax every quarter on Part II. This tax is not relevant to licensed medical professionals like psychologists and dermatologists offering tanning services.

Form 720 – Schedules A, T and C

  • Schedule A (Excise Tax Liability) - This schedule aids an individual in listing deductions and includes various categories of expenses like dental and medical; theft losses, charity gifts and taxes.
  • Schedule T (Two-Party Exchange Information Reporting) - This schedule is also referred as Two-Party Exchange Information Reporting, and it is imposed on diesel fuel or gallons of taxable fuel used in the terminal or delivered within the terminal. This rule is applicable for other fuel usages such as Kerosene, Aviation and Gasoline.
  • Schedule C (Claims) - This schedule is used to report any loss or profit of the individual’s business or the profession and must file the Form 1040 in Schedule C. Wages and expenses, along with the income and deductions are enclosed by the individual.

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