User loginNavigation |
Instructions for Form 720 (1/2008)Table of Contents
The first time you file Form 720, type or print your name, address (including the suite, room, or other unit number), and the quarter ending date (month and year). After that, the IRS will mail you a Package 720 with a preaddressed Form 720 every quarter. If your address changes, make the corrections on Form 720 and check the address change box above Part I of Form 720. If the EIN on the preaddressed Form 720 is wrong or you did not receive a preaddressed Form 720, enter the correct number. If you are a one-time filer, you may not need an EIN. See Gas guzzler tax on page 6. If you do not have an EIN, you may apply for one online. Go to the IRS website at www.irs.gov/businesses/small and click on the “Employer ID Numbers” link. You may also apply for an EIN by calling 1-800-829-4933 (hours of operation are Monday - Friday, 7:00 a.m. to 10:00 p.m. local time), or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. If you want to allow an employee of your business, a return preparer, or other third party to discuss your Form 720 with the IRS, check the “Yes” box in the Third Party Designee section of Form 720. Also, enter the designee's name, phone number, and any five digits that person chooses as his or her personal identification number (PIN). By checking the “Yes” box, you are authorizing the IRS to speak with the designee to answer any questions relating to the processing of or the information reported on
You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authority, see Publication 947, Practice Before the IRS and Power of Attorney. The authorization will automatically expire 1 year from the due date (without regard to extensions) for filing your Form 720. If you or your designee want to revoke this authorization, send a written statement of revocation to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999. See Publication 947 for more information. Use Form 6627, Environmental Taxes, to figure the environmental taxes on: Attach Form 6627 to Form 720. The tax rates for these taxes are shown on Form 6627. The person receiving the payment for communications services must collect and pay over the tax and file the return. Enter the amount of tax collected or considered collected for the quarter. The tax is 3% of amounts paid for local telephone service and teletypewriter exchange service. If tax is collected and paid over for nontaxable services from the communications tax, the collector or taxpayer may request a credit or refund as described below and in Notices 2006-50 and 2007-11.
Collectors. The collector may request a credit or refund only if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. These requirements also apply to nontaxable service refunds.
Form 720 taxpayers. Credits or refunds for nontaxable service that was billed after February 28, 2003, and before August 1, 2006, can be requested by taxpayers only on their 2006 federal income tax returns. Instructions to request the credit or refund are available with the 2006 income tax returns. Do not use Form 8849, Form 720, or Form 843 to make claims for nontaxable service; the IRS will not process these claims.
The person receiving the payment for air transportation services must collect and pay over the tax and file the return. Enter the amount of tax collected or considered collected for the quarter. The tax on transportation of persons by air is made up of the percentage tax and the domestic segment tax. Add the percentage tax and the domestic segment tax to get the total tax on transportation of persons by air.
Percentage tax. The percentage tax is 7.5% for amounts paid for taxable transportation of persons by air.
The tax is 6.25% of amounts paid for transportation of property by air. For amounts paid during 2008 the tax on international flights is:
A separate report is required to be filed by collecting agents of communications services (local and teletypewriter service) and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid.
Regular method taxpayers. For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported.
First taxpayer's report. If you are reporting gallons of taxable fuel that may again be subject to tax, you may need to file a first taxpayer's report. The report must contain all the information as shown in the Model Certificate B in the Appendix of Publication 510. The person who paid the first tax must:
Diesel fuel (IRS No. 60). If you are liable for the diesel fuel tax on removal at the terminal rack, report these gallons on line 60(a). If you are liable for the diesel fuel tax on events other than removal at the terminal rack, report these gallons on line 60(b). If you are liable for the diesel fuel tax because you have produced diesel fuel by blending biodiesel with taxed diesel fuel outside of the bulk transfer/terminal system, report these gallons of biodiesel on line 60(c). If you report gallons on line 60(c), do not report those gallons on line 60(b). Multiply the total number of gallons subject to tax on lines (a), (b), and (c) by $.244 and make one entry in the tax column. Also see Schedule T—Two-Party Exchange Information Reporting on page 9 if applicable.
Diesel-water fuel emulsion (IRS No. 104). If you are liable for the reduced rate (see below) of tax on a diesel-water fuel emulsion removal at the terminal rack or other taxable event, report these gallons on the line for IRS No. 104.
Requirements. All of the following requirements must be met to be eligible for the reduced rate: (a) the diesel-water fuel emulsion must contain at least 14% water, (b) the emulsion additive must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act, and (c) the taxpayer must be registered by the IRS. If these requirements are not met, you must report the sale, removal, or use of a diesel-water fuel emulsion as diesel fuel.
IRS Nos. 105, 107, 119, and 111. Tax is imposed at $.001 per gallon on removals, entries, and sales of gasoline, diesel fuel, and kerosene described as exempt transactions.
Kerosene (IRS No. 35). If you are liable for the kerosene tax on removal at the terminal rack, report these gallons on line 35(a). If you are liable for the kerosene tax on events other than removal at the terminal rack, report these gallons of kerosene on line 35(b). Multiply the total number of gallons subject to tax on lines (a) and (b) by $.244 and make one entry in the tax column. Also see Schedule T—Two-Party Exchange Information Reporting on page 9 if applicable.
Kerosene for use in aviation (IRS Nos. 69, 77, and 111). Generally, kerosene is taxed at $.244 per gallon.
Other fuels (IRS No. 79). You are liable for the tax on the fuels listed below when they are delivered into the fuel supply tank of a motor vehicle or motorboat (or trains for B-100). Use the following table to determine the tax for each gallon. Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 79. If more than one rate applies, leave the Rate column blank and attach a schedule showing the rates and number of gallons taxed at each rate.
Gasoline (IRS No. 62). If you are liable for the gasoline tax on removal at the terminal rack, report these gallons on line 62(a). If you are liable for the gasoline tax on events other than removal at the terminal rack, report these gallons on line 62(b). If you are liable for the gasoline tax because you have blended alcohol with taxed gasoline outside of the bulk transfer/terminal system, report these gallons of alcohol on line 62(c). If you report gallons on line 62(c), do not report those gallons on line 62(b). Multiply the total number of gallons subject to tax on lines (a), (b), and (c) by $.184. Combine the tax for lines (a), (b), and (c), and make one entry in the tax column. Also see Schedule T—Two-Party Exchange Information Reporting on page 9 if applicable.
Alternative fuel (IRS Nos. 112, 118, and 120-124). Alternative fuel is any liquid other than gas oil, fuel oil, or any product taxable under Internal Revenue Code section 4081. You are liable for tax on alternative fuel delivered into the fuel supply tank of a motor vehicle or motorboat, or on certain bulk sales. Report the tax on the line for the IRS No. listed in the following table.
The tax is 12% (.12) of the sales price on the first retail sale of each unit. The tax applies to:
The sales price of a vehicle includes the sales price of certain related parts and accessories sold on or in connection with the sale of the vehicle. Figure the tax for each vehicle sold and enter the total for the quarter on the line for IRS No. 33.
Gross vehicle weight. The gross vehicle weight means the maximum total weight of a loaded vehicle. Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. The seller's gross vehicle weight rating must be determined for excise tax purposes on the basis of the strength of the chassis frame and the axle capacity and placement. The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. See Regulations section 145.4051-1(e)(3) for more information. The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax.
www.irs.gov/pub/irs-irbs/irb05-14.pdf.
Transportation by water (IRS No. 29). A tax is imposed on the operator of commercial ships. The tax is $3 for each passenger on a commercial passenger ship that has berth or stateroom accommodations for at least 17 passengers if the trip is over 1 or more nights. A voyage extends “over 1 or more nights” if it lasts longer than 24 hours. The tax also applies to passengers on any commercial ship that transports passengers engaged in gambling aboard the ship beyond the territorial waters of the United States. Enter the number of passengers for the quarter on the line for IRS
No. 29.
Obligations not in registered form (IRS No. 31). For obligations issued during the quarter, enter the principal amount of the obligation multiplied by the number of calendar years (or portion thereof) during the period beginning on the issue date and ending on the maturity date on the line for IRS No. 31.
Underground mined coal (IRS Nos. 36 and 37). The tax on underground mined coal is the lower of $1.10 per ton or 4.4% (.044) of the sales price. Enter on the line for IRS No. 36 the number of tons of underground mined coal sold at $25 or more per ton. Enter on the line for IRS No. 37 the total sales price for all sales of underground mined coal sold at a selling price of less than $25 per ton.
Surface mined coal (IRS Nos. 38 and 39). The tax on surface mined coal is the lower of $.55 per ton or 4.4% (.044) of the sales price. Enter on the line for IRS No. 38
the number of tons of surface mined coal sold at $12.50 or more per ton. Enter on the line for IRS No. 39 the total sales price for all sales of surface mined coal sold at a selling price of less than $12.50 per ton.
Taxable tires (IRS Nos. 108, 109, and 113). A tax is imposed on taxable tires sold by the manufacturer, producer, or importer at the rate of $.0945 ($.04725 in the case of a biasply tire or super single tire) for each 10 pounds of the maximum rated load capacity over 3,500 pounds. Figure the tax for each tire sold in each category as shown in the following chart and enter the total for the quarter on the line for IRS No. 108, 109, or 113.
Gas guzzler tax (IRS No. 40). Use Form 6197, Gas Guzzler Tax, to figure the liability for this tax. Attach
Form 6197 to Form 720. The tax rates for the gas guzzler tax are shown on Form 6197.
One-time filing. If you import a gas guzzling automobile, you may be eligible to make a one-time filing of Form 720 and Form 6197 if you meet all of the following conditions.
Vaccine taxes (IRS No. 97). A tax is imposed on the sale or use of a vaccine manufactured, produced, or entered into the United States at $.75 per dose if it:
Policies issued by foreign insurers (IRS No. 30). Enter the amount of premiums paid during the quarter on policies issued by foreign insurers. Multiply the premiums paid by the rates listed on Form 720 and enter the total for the three types of insurance on the line for IRS No. 30.
Who must file. The person who pays the premium to the foreign insurer (or to any nonresident person such as a foreign broker) must pay the tax and file the return. Otherwise, any person who issued or sold the policy, or who is insured under the policy, is required to pay the tax and file the return.
Treaty-based return positions under section 6114. Foreign insurers and reinsurers who take the position that a treaty of the United States overrules, or otherwise modifies, an Internal Revenue law of the United States must disclose such position. This disclosure must be made once a year on a statement which must report the payments of premiums that are exempt from the excise tax on policies issued by foreign insurers for the previous calendar year. This statement is filed with the 1st quarter Form 720, which is due before May 1 of each year. You may be able to use Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), as a disclosure statement. At the top of Form 720, write “Section 6114 Treaty.” If you have no other transactions reportable on Form 720, complete Form 720 as follows.
Sport fishing equipment (other than fishing rods and fishing poles) (IRS No. 41). The tax on sport fishing equipment is 10% (.10) of the sales price. The tax is paid by the manufacturer, producer, or importer. Taxable articles include reels, fly fishing lines (and other lines not over 130 pounds test), fishing spears, spear guns, spear tips, terminal tackle, fishing supplies and accessories, and any parts or accessories sold on or in connection with these articles. See Publication 510 for a complete list of taxable articles. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 41.
Fishing rods and fishing poles (IRS No. 110). The tax on fishing rods and fishing poles (and component parts) taxed at a rate of 10% will have a maximum tax of $10 per article. The tax is paid by the manufacturer, producer, or importer. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 110.
Electric outboard motors (IRS No. 42). The tax on an electric outboard motor is 3% (.03) of the sales price. The tax is paid by the manufacturer, producer, or importer. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 42.
Fishing tackle boxes (IRS No. 114). The tax on fishing tackle boxes is 3% (.03) of the sales price. The tax is paid by the manufacturer, producer, or importer. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 114.
Bows, quivers, broadheads, and points (IRS No. 44). The tax on bows is 11% (.11) of the sales price. The tax is paid by the manufacturer, producer, or importer. It applies to bows having a peak draw weight of 30 pounds or more. The tax is also imposed on the sale of any part or accessory suitable for inclusion in or attachment to a taxable bow and any quiver, broadhead, or point suitable for use with arrows described below. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 44.
Arrow shafts (IRS No. 106). The tax on arrow shafts is $.43 per arrow shaft. The tax is paid by the manufacturer, producer, or importer of any arrow shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly meets either of the following conditions.
Inland waterways fuel use tax (IRS No. 64). If you are liable for the inland waterways fuel use tax, report the number of gallons subject to tax on the line for
IRS No. 64. Certain fuels must also be reported under IRS No. 125 (see below).
LUST tax on inland waterways fuel use (IRS No. 125). The leaking underground storage tank (LUST) tax must be paid on any liquid fuel used on inland waterways that is not subject to LUST tax under section 4041(d) or 4081. For example, gallons of Bunker C residual fuel oil must be reported under both IRS Nos. 64 and 125.
Alcohol sold as but not used as fuel (IRS No. 51). An excise tax is imposed if the alcohol fuel mixture credit or alcohol credit was claimed and any person later (a) uses a mixture or straight alcohol for a purpose other than fuel, (b) separates the alcohol from the mixture, or (c) mixes the straight alcohol. Use the following table to determine the tax for each gallon of alcohol. Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 51. If more than one rate applies, leave the Rate column blank and attach a schedule showing the rates and number of gallons taxed at each rate.
Biodiesel sold as but not used as fuel (IRS No. 117). An excise tax is imposed if the (a) biodiesel or renewable diesel mixture credit or (b) biodiesel or renewable diesel credit was claimed and any person later (a) uses a mixture or straight biodiesel or renewable diesel for a purpose other than as fuel, (b) separates the biodiesel or renewable diesel from the mixture, or (c) mixes the straight biodiesel or renewable diesel. The tax is $.50 per gallon of biodiesel, $1.00 per gallon of agri-biodiesel, and $1.00 per gallon of renewable diesel. An additional $.10 is added if the agri-biodiesel benefited from the small agri-biodiesel producer credit. Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 117. If more than one rate applies, leave the Rate column blank and attach a schedule showing the rates and number of gallons taxed at each rate.
Ozone-depleting chemicals floor stocks tax (IRS No. 20). Use Form 6627 to figure the liability for this tax. Enter the amount from Form 6627, Part IV, line 4, column (d) on the line for IRS No. 20. Attach Form 6627 to Form 720 that is due July 31 of each year. Deposit the payment by June 30 at an authorized financial institution. See How To Make Deposits below.
Line 4. Report on Form 720, line 4, the total claims from Schedule C, line 16. See the instructions for Schedule C-Claims on page 9.
Line 6. Include on line 6 the amount from line 11 of your previous return that you applied to this return and the amount from Form 720X, line 5b.
Note.Include on line 6 of your next return the amount from line 11 you want to have applied to that return.
Line 10. If line 3 is more than line 9, enter the difference in line 10. You do not have to pay if line 10 is under $1.00. You may pay the amount shown on line 10 by EFTPS, check or money order, or, if filing electronically, electronic funds withdrawal (direct debit). If you pay by EFTPS or direct debit, do not file Form 720-V, Payment Voucher.
Generally, semimonthly deposits of excise taxes are required. A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period). However, no deposit is required for the situations listed below. The taxes are payable with the return.
To avoid a penalty, make your deposits timely and do not mail your deposits directly to the IRS. Records of your deposits will be sent to the IRS for crediting to your accounts.
Electronic deposit requirement. You must make electronic deposits of all depository taxes (such as deposits for employment tax, excise tax, and corporate income tax) using the Electronic Federal Tax Payment System (EFTPS) in 2008 if:
Federal tax deposit coupons. If you are not making deposits by EFTPS, use Form 8109 to make the deposits at an authorized financial institution. See the instructions in the coupon book for additional information. If you do not have a coupon book, call 1-800-829-4933.
There are two methods for determining deposits: the regular method and the alternative method. The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. See Alternative method below. If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period.
Regular method. The deposit of tax for a semimonthly period is due by the 14th day following that period. Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday.
Alternative method (IRS Nos. 22, 26, 27, and 28). Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. The deposit of tax is due by the 3rd banking day after the 7th day of that period.
Example. The tax included in amounts billed or tickets sold for the period June 16-30, 2008, is considered collected from July 16-22, 2008, and must be deposited by
July 25, 2008. To use the alternative method, you must keep separate accounts of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year. The separate account for each month must reflect:
The net tax liability that is considered collected during the semimonthly period must be either:
Special rule for deposits of taxes in September 2008. If you are required to make deposits, see the chart below. The special rule does not apply to taxes not required to be deposited (see Payment of Taxes on page 7). See Regulations sections 40.6302(c)-2 and 40.6302(c)-3 for rules to figure the net tax liability for the deposits due in September.
Additional deposit of taxes in September 2008
Deposits of taxes for a semimonthly period must be at least 95% of the amount of net tax liability for that period, unless the safe harbor rule applies. See Safe Harbor Rule below. The net tax liability for a semimonthly period is the total liability for the period minus any claims allowed on Schedule C for the period. Net tax liability for a semimonthly period may be figured by dividing the net tax liability for the month by 2, provided this method of computation is used for all semimonthly periods in the calendar quarter.
The safe harbor rule applies separately to deposits under the regular method and the alternative method. Persons who filed Form 720 for the look-back quarter (the 2nd calendar quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly period in the current quarter is at least ⅙ (16.67%) of the net tax liability reported for the look-back quarter. For the semimonthly period for which the additional deposit is required (September 1-11 and 16-26 for EFTPS, or September 1-10 and 16-25 for non-EFTPS), the additional deposit must be at least 11/90 (12.23%), 10/90 (11.12%) for non-EFTPS, of the net tax liability reported for the look-back quarter. Also, the total deposit for that semimonthly period must be at least ⅙ (16.67%) of the net tax liability reported for the look-back quarter.
Exceptions. The safe harbor rule does not apply to:
Requirements to be met. For the safe harbor rule to apply, you must:
How to complete. Complete Schedule A to record net tax liabilities for Part I taxes for each semimonthly period in a quarter even if your net liability is under $2,500. The following table will help you determine which boxes to complete on Schedule A.
lines 1 and 2:
Additional rules. Report communications and air transportation taxes based on:
Example. The amounts billed for communications services from June 1-15, 2008, are considered collected during the period July 1-7, 2008, and are reported for the 3rd quarter of 2008 on Schedule A in box M, not the 2nd quarter of 2008.
Reporting tax liability under the special September rule. An additional reporting is required under the special September rule (for the period shown in the chart above) as follows:
In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following occur.
Information reporting. Schedule T—Two-Party Exchange Information Reporting is used to report gallons of taxable fuel:
Complete all information requested for each line, including month income tax year ends and period of claim. Enter the month as “MM.” Enter the period of claim as “MM/DD/YYYY - MM/DD/YYYY.” Your claim will be disallowed if you do not follow the required procedures or do not provide all the required information. Also, you are certifying to the applicable statement(s) on Schedule C when you make a claim. See Pub. 510 for more information.
Do not use Schedule C:
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||