Businesses involved in the sale, use, or distribution of fuel may need to file IRS Form 720 to report and pay the fuel excise tax. Why is this important? What steps should be taken to ensure correction and compliance in filling it out?
Every taxpayer wants to remain compliant and avoid penalties. The intricacies of fuel excise taxes will be explained throughout this guide in a way that even the less experienced will understand.
What does Form 720 do and why is it so important?
If you plan to report and pay your excise taxes on fuel alongside other goods and services, such as disposable communication devices and aviation services, then you’ll need Form 720. A business that is involved in the sale, import, or use of fuel must File a return using this form on a quarterly basis to report and pay fuel excise taxes.
Not filing correctly might lead to penalties, interest charges, and even IRS audits and Nope! Nobody deserves that. So, let’s ensure you get everything right!
Check out – Form 720 Instructions
Who is required to file Fuel Excise Taxes?
Even though not every business has to worry about this, those who fall under certain categories would invariably need to complete Form 720.
- Manufacturers and importers of fuel
- Financing businesses that sell or distribute taxable fuel
- Fuel terminal and storage facility operatorsAirlines,
- Trucking and Shipping Companies
- Government agencies that operate with taxable fuel
If you have any doubts about whether your business meets the requirements, a tax expert or the IRS regulations on excise taxes can most certainly assist you solve the issue.
What fuels are subject to tax?
Different fuels are indeed taxed at varying rates. But here is a brief summary of the factual information:
- Gasoline – the primary fuel for vehicle engines.
- Diesel & Kerosene – Used in trucks, train provided, some other industrial machinery provided.
- Aviation Fuel – Airlines simply cannot use for the taxation fuel.
- Alternative Fuels – Propane, natural gas (CNG/LNG), Ethanol, Biodiesel etc.
In case you’re using off-road fuels whether it’s for farming, government vehicle purposes, or any other purposes that meet the criteria for exemption, you may be eligible for refunds or credits. Don’t worry, we’ll go into detail about that later.
Alternative Fuel Vehicle Refueling Property Credit
Along With Form 720, How are Excise Taxes on Fuels Paid?
Though it appears complex, completing Form 720 isn’t very difficult. Just follow these steps:
1 GATHER THE DATA
Make sure you have the following items ready:
- The particulars of your business (EIN, business name, address)
- Fuel purchase fuel sale records
- Documents for exempt fuel use (if any)
2 FILL OUT PART ONE OF FORM 720
- Identify the type and quantify the amount used.
- Compute your excise tax liability as per IRS rates.
3 What’s your refund? Part II is for Fuel Tax Credits
Enter any overpayment made or other exemptions to dollar amount.
4 Submit the form and pay the tax
Once completed, file the return electronically or mail it to the IRS.
Due Dates: You must file these dates 30 April, 31 July, 31 October, 31 January
4 Noticeable Errors That Lead To Problems
- Reporting improper fuel volumes – Contact the information for double checking.
- Claiming missed credits – Obtain a refund if eligible.
- Missing the deadline – Set reminders to avoid fines and fees.
- Not saving documents – You need these documents incase the IRS requests evidence.
Is It Possible to Get a Refund for an Overpaid Fuel Excise Tax?
Certainly! If you happen to overpay taxes, or use fuel in a non-taxable way, you may seek a refund through:
Form 8849 – Claim for Refund of Excise Taxes
Schedule 1 of Form 720 – For certain exemptions
Refunds apply to:
Fuel for farming (Agricultural use)
Vehicles owned by Nonprofit Organizations and the government
Fuel meant for overseas sales
Completing the fuel excise taxes on form 720 will not be an impossible task. The important thing is to take note of the deadlines and keep everything organized, including your business credits and exemptions.
Reach out to an authority for help if needed, such as an approved e-filing service, or a tax professional.
Disclaimer: The information provided in this blog post is for general informational purposes only. While we strive to keep the content accurate and up to date, we do not guarantee its completeness, reliability, or accuracy. Any actions you take based on this information are strictly at your own risk. We are not responsible for any losses, damages, or inconveniences that may arise from the use of this blog. For professional advice, please consult a qualified expert.
