Certain businesses must tell the IRS about the goods or services they sell, which come with a special tax attached every quarter. These excise taxes apply to motor fuel, airline travel, tobacco products, and indoor tanning services. The IRS uses Form 720 to report these taxes, also known as the Quarterly Federal Excise Tax Return. The form allows the federal government to track and collect revenue from industries tied to specific goods and services, helping fund highway and airport improvements, environmental cleanup projects, and other public programs.

If your company makes, sells, or imports taxable items—or provides services subject to federal excise tax—you’re probably required to file Form 720. Unlike income taxes, which look at your profits, excise taxes focus on a taxed product or activity. That means your responsibility doesn’t end with selling the item—you must also calculate, report, and send tax payments to the IRS every quarter. Missing a due date or misreporting a liability can lead to penalties or processing delays.

This article breaks down the instructions for Form 720 2023 step by step. You’ll find plain explanations of who must file, what changed this year, and how to complete each part of the form without confusion. Whether you manage a small distribution business or handle compliance for a larger company, this guide will help you prepare, file Form 720, and make your excise tax payments accurately and on time.

What Is Form 720 and Who Must File It

Form 720, officially titled the Quarterly Federal Excise Tax Return, is used by businesses to report and pay federal excise taxes to the Internal Revenue Service (IRS). These taxes apply to manufacturing, selling, or using certain goods and services. Unlike income taxes, which are based on total earnings, excise taxes focus on specific goods or activities—fuel, airline tickets, and indoor tanning services. The funds collected help support highway and airport improvements, environmental cleanup efforts, and other public programs managed by the federal government.

Filing Form 720 is required for companies that manufacture, produce, import, or sell items subject to excise tax or provide taxable services. The return is submitted quarterly, even when no tax is owed, if there was a filing requirement in the past. This helps the IRS verify compliance and ensure the correct amount of excise tax payments is remitted for taxable goods and services.

Types of Taxes Reported on Form 720

Form 720 covers multiple categories of federal excise taxes, each assigned to a specific section of the form:

• Environmental taxes: Applied to petroleum and chemical products that fund ecological cleanup programs.
  
  
• Fuel Taxes: Include levies on motor, diesel, kerosene, and aviation gasoline.
  
  
• Communications and Air Transportation Taxes cover local telephone services, airline tickets, and air cargo transportation.
  
  
• Manufacturers’ Taxes: Apply to selling taxable items such as tobacco, sport fishing equipment, heavy trucks, or medical devices.
  
  
• Indoor Tanning Services: Impose a 10% tax on payments for indoor tanning.
  
  

Checklist: Who Must File Form 720

Businesses should file Form 720 if any of the following apply:

• Manufacture, sell, or import taxed products such as fuel, tires, or tobacco.
  
  
• Provide services subject to excise tax, including air transportation or indoor tanning services.
  
  
• We’re responsible for collecting excise taxes in a prior quarter and have not filed a final return.
  
  
• Operate as a fuel terminal operator, distributor, or refinery in federal excise tax activities.
  
  
• They have no current excise tax liability but were previously required to file quarterly returns.

For official instructions and the latest version of the form, visit IRS Form 720.

Key Updates for Form 720 in 2023

Each year, the IRS updates Form 720 and its instructions to reflect changes in tax law. For the 2023 tax year, notable adjustments affect how businesses report and pay federal excise taxes. Every filer should understand these changes, which appear in the IRS Instructions for Form 720 (Rev. December 2023)

Sustainable Aviation Fuel (SAF) Credit

Under the Inflation Reduction Act, a Sustainable Aviation Fuel (SAF) Credit was introduced via Sections 40B and 6426(k). This credit applies to eligible fuel mixtures that meet carbon reduction criteria. When submitting their excise tax return, businesses can claim the credit on Schedule C, line 12d.

Superfund Tax Reinstatement

The expired Superfund Tax was reinstated and increased in 2023 under the same Act. It now applies to domestic crude oil (IRS No. 53) and imported petroleum products (IRS No. 16). The revenue supports environmental cleanup and remediation initiatives designed to address contamination.

Revised Fuel Definitions & Expired Provisions

Fuel definitions changed: Renewable diesel, kerosene, and liquefied hydrogen have new definitions and rules. In addition, some fuel taxes—such as on noncommercial aviation gasoline and certain kerosene uses—expired on December 31, 2023, unless extended by Congress. Being current on these changes helps avoid filing mistakes or incorrect excise tax payments.

For more detailed rules and rate tables, refer to IRS Publication 510, which complements guidance from Form 720.

Step-by-Step Instructions for Completing Form 720

Filing Form 720 correctly ensures that excise taxes are reported and paid to the IRS on time. The process requires careful attention to each section, as most excise taxes are calculated based on activity volume rather than total income. Completing the form properly helps taxpayers avoid penalties and maintain compliance with federal reporting requirements.

Step 1 – Gather Required Information

Before starting, gather the details needed to complete the return.
You’ll need the following information:

• Ensure that your business name, address, and Employer Identification Number (EIN) match exactly as they appear in IRS records.
  
  
• Determine the quarter ending date: March 31, June 30, September 30, or December 31.
  
  
• Include records of taxable transactions such as manufacturer sales, import sales, or services subject to excise tax.
  
  
• Collect documentation of all tax deposits made during the quarter to ensure accurate reporting.
  
  
• Attach any supporting schedules, such as Schedule C (for credits) or Form 6627 (for environmental taxes).

Organizing this information early helps prevent a delay in payment and reduces the risk of filing errors later.

Step 2 – Complete the Header Section

The header at the top of the IRS form requires your basic business information. Enter the business name and address exactly as they appear on your EIN registration. Include the quarter ending date in the format MM/YYYY. Check the “Address Change” box if the business has changed addresses. If this is your last filing because operations have ceased, select “Final Return.”

Remember, Form 720 must be filed quarterly even if no excise taxes are owed. When a legal holiday or weekend falls on the applicable deadline, the due date automatically shifts to the next business day.

Step 3 – Fill Out Part I: Environmental and Fuel Taxes

Part I covers environmental and fuel-related taxes. This section includes excise taxes on diesel fuel, gasoline, aviation gasoline, kerosene, and other energy products.
To complete this part:

• Find the IRS number that corresponds to the applicable tax.
  
  
• Enter the quantity of taxable units, such as gallons or pounds, under “Number of Units.”
  
  
• Multiply the unit quantity by the tax rate shown to determine the total tax due.
  
  
• Total the entries for all applicable lines and record the amount on “Total Part I.”

Attach Form 6627 if environmental taxes apply. The IRS uses these taxes to fund trust funds that support ecological restoration and cleanup projects.

Step 4 – Fill Out Part II: Communications and Air Transportation Taxes

Part II applies to businesses that charge for telephone services or air transportation.
Common examples include:

• Local telephone and teletypewriter exchange services
  
  
• Passenger air transportation within the U.S. or between the U.S. and international destinations
  
  
• Cargo or property transported by air.

The consumer generally pays these taxes, but the business collecting them must report and remit them to the IRS. This ensures the federal government charges are correctly recorded and applied.

Step 5 – Fill Out Part III: Summary and Payment

Part III summarizes the total amount of excise tax owed for the quarter. To complete this section, add the totals from Parts I and II to calculate the overall liability. After determining that total, subtract any deposits made during the same quarter to find the remaining balance due or identify any overpayment.

If the result shows an overpayment, the excess amount may be applied to the next quarter or refunded by the IRS. Reviewing every calculation carefully before submitting the form is essential to ensure accuracy. Any discrepancies, late deposits, or mathematical errors can cause delays in processing, lead to penalties, or require filing an amended return.

Step 6 – Review and Sign the Return

Before signing, review every section of the form for accuracy. Verify the totals, attached schedules, and supporting documentation. The returnee—the business owner, corporate officer, or general partner—must be signed by an authorized representative.

Once signed, submit the return electronically or by mail. Electronic filing through the IRS’s Modernized e-File system is recommended for quicker confirmation. Paper returns should be sent to the correct IRS address listed in the instructions.

Additional Tips for Accurate Filing

• Always use the most recent version of Form 720 available on the IRS website.
  
  
• File on or before the due date for each quarter—April 30, July 31, October 31, and January 31.
  
  
• Keep copies of returns and supporting documents for at least four years.
  
  
• To avoid overlap or conflict, compare your excise tax return with the state government’s reporting requirements.
  
  
• Remember that excise taxes differ from sales taxes; excise taxes apply to specific goods or services rather than general transactions.
  
  
• When preparing returns for all our clients, we recommend setting reminders at least a week before the due date to confirm deposit schedules and prevent missed filings.

The IRS uses excise tax revenues to fund infrastructure, public health, and environmental programs. These funds are vital for maintaining airports, roads, and energy systems nationwide. Completing and filing Form 720 correctly ensures that every import sale, service, and unit sale contributes to the programs that benefit businesses and consumers nationwide.

How to File Form 720

Businesses may file Form 720 either electronically or by mail. The IRS recommends electronic filing because it helps reduce errors and speeds up processing. Correct filing ensures that projects related to infrastructure, energy, and environmental programs managed by the Department of the Treasury are adequately funded. Regardless of the filing method, this form must be submitted every quarter.

E-Filing (IRS Modernized e-File System)

Filing electronically through the IRS Modernized e-File (MeF) system offers several advantages:

• Faster confirmation: Electronic submissions are acknowledged immediately, and proof of receipt is provided.
  
  
• Lower administrative cost: E-filing eliminates printing and postage expenses while streamlining data entry.
  
  
• Error prevention: The MeF system automatically checks for incomplete or inaccurate entries.
  
  
• Secure submission: Each transmission is encrypted and timestamped, protecting sensitive tax data.
  
  
• Reduced chance of delay: Electronic submissions help avoid a delay in payment caused by mail processing or manual review.

Businesses can e-file directly using approved software or through a tax professional authorized by the IRS. Ensure all payments and deposits are completed before the filing deadline to prevent penalties or interest charges.

Paper Filing Option

Paper filing remains available for businesses that prefer a physical submission. To file by mail:

• Download the current form: Obtain the latest IRS Form 720 and its instructions from the official IRS website.
  
  
• Complete accurately: Use black ink or type entries clearly, attaching any required schedules.
  
  
• Prepare the payment: Make checks or money orders payable to the United States Treasury. Always include Form 720-V, the payment voucher.
  
  
• Observe due dates: Returns are due on the last day of the month following the end of each quarter—April 30, July 31, October 31, and January 31.
  
  
• Mail to the correct address: Confirm the correct IRS mailing address by referring to the official instructions.
  
  
• Keep copies: Retain a copy of the filed return and proof of payment for your records.

Filing on time ensures that retailers, manufacturers, and importers comply with taxation requirements. Each purchase, price, and fee reported through Form 720 contributes money to essential federal initiatives. These funds support programs that benefit the consumer and strengthen the national economy through fair and accurate excise tax collection.

Making Payments and Deposits

After completing Form 720, the next step is submitting payment for any excise tax owed. The IRS requires most businesses to deposit electronically through the Electronic Federal Tax Payment System (EFTPS). This system ensures that payments are applied correctly and received on time, reducing the risk of penalties or late fees.

Electronic Federal Tax Payment System (EFTPS)

The EFTPS is the most reliable method for making federal excise tax payments. It is free to use, secure, and available 24 hours a day. Businesses can schedule payments in advance, view past transactions, and receive confirmation once funds are transferred.

To use the EFTPS:

• Enroll online: Visit EFTPS.gov to complete the enrollment process.
  
  
• Activate the account: A PIN will arrive by mail; activate it before scheduling any payments.
  
  
• Schedule deposits: Choose either one-time or recurring payment options.
  
  
• Confirm transfer: Always verify the payment status after submitting.

This system helps avoid delays in processing and allows businesses to maintain accuracy. 

Semi-Monthly Deposit Requirements

Some filers must make semi-monthly deposits when excise tax liability exceeds $2,500 a quarter. Deposits are generally due by:

• The 14th day of the month for the first half of the prior month’s activity.
  
  
• The 29th day of the month for the second half of the prior month’s activity.

If a due date falls on a weekend or legal holiday, deposits are due the next business day. Filing on time prevents penalties and protects your business’s compliance record.

Required Schedules and Attachments

Filing Form 720 correctly often requires including supporting schedules and forms. These attachments provide details about specific excise taxes, credits, and payments. Submitting all the necessary documents ensures your filing is complete and helps the IRS process your return without delays or additional requests for information.

Form 6627 – Environmental Taxes

Form 6627 calculates and reports environmental taxes listed in Part I of Form 720. These taxes apply to petroleum, chemicals, and ozone-depleting substances. Businesses must complete this form before transferring totals to Form 720.

• Purpose: To determine the amount of environmental excise tax owed.
  
  
• When to attach: Any time environmental taxes are reported under IRS Numbers 16, 17, 18, 19, 21, 53, 54, or 98.

Schedule C – Fuel Tax Credits

Schedule C allows filers to claim credits for fuel-related activities, including biodiesel, renewable diesel, and alternative fuel mixtures.

• Purpose: To reduce total excise tax liability when credits apply.
  
  
• When to attach: If claiming credits listed under Schedule C, such as the sustainable aviation fuel credit.

Form 720-V – Payment Voucher

Form 720-V must be included when paying by check or money order.

• Purpose: To ensure proper crediting of the payment to your business account.
  
  
• When to attach: Any time a payment is mailed with a paper return.

Other Possible Attachments

• Form 637: Required for businesses that must show proof of excise tax registration.
  
  
• Schedule T: Used for reporting two-party exchange information in fuel transactions.
  
  
• Supporting documents: Include calculations, summaries, or statements that clarify reported amounts.

Attach all schedules neatly and write the business name and EIN on each page. Complete documentation helps maintain accuracy, ensures compliance, and minimizes the risk of processing delays.

Common Errors and How to Avoid Them

Even small mistakes on Form 720 can cause processing delays or penalties. Reviewing your return carefully before submission helps ensure accuracy and compliance with IRS requirements.

Frequent Filing Errors

• Incorrect EIN or quarter ending date: Always confirm that the business name, address, and Employer Identification Number (EIN) match IRS records, and verify that the correct quarter is listed on the form.
  
  
• Math or rate errors: Double-check all calculations, especially tax rates and totals. Use updated rates from the latest IRS instructions to prevent overpayment or underpayment.
  
  
• Missing schedules or attachments: Include all required forms, such as Form 6627 or Schedule C, to support reported taxes and credits.
  
  
• Late deposits or filings: Missing a deposit or filing after the due date can lead to interest charges or penalties. Ensure deadlines are clearly marked and allocate time for any unforeseen issues.
  
  
• Misclassified fuel or services: Ensure that diesel fuel, gasoline, and other taxable products are reported under the correct IRS numbers.

Prevention Tips

Review each section before signing and ensure all attached pages are verified. Filing early gives you time to fix errors, avoid last-minute pressure, and comply with federal excise tax regulations.

Zero Activity and Final Return Guidance

Some businesses must file Form 720 even when no excise tax is owed for the quarter. The IRS requires continued filing until a final return is submitted, confirming that excise tax liability has permanently ended. Filing during inactive periods helps maintain compliance and prevents unnecessary penalties.

Zero Activity Filing

Businesses must still submit Form 720 when no taxable sales or services occurred during the quarter if they were previously required to file. Enter “0” for all applicable lines and write “None” on Part III, line 3. Sign and date the form as usual. This shows the IRS that the business remains active but had no transactions subject to excise tax.

Final Return Filing

A final return is filed when the business permanently closes, changes ownership, or stops activities that create excise tax liability. To indicate this, check the “Final Return” box on the form’s header section. Ensure all prior returns have been filed and all deposits made before submitting the last filing. Keeping accurate records for at least four years after filing protects your business in case of an IRS inquiry or audit.

Helpful Resources and First-Time Filer Tips

Filing Form 720 for the first time can feel overwhelming, especially for small businesses unfamiliar with federal excise tax requirements. The IRS offers several tools and publications to help new filers understand what to report, when to pay, and how to stay compliant.

Essential IRS Resources

• IRS Publication 510: This publication explains excise tax categories, applicable rates, and filing rules in detail. It is a valuable reference for anyone preparing quarterly returns.
• Form 720 Instructions: The official instructions provide step-by-step guidance for each form section, including examples and tax rate charts.
• EFTPS Website: The Electronic Federal Tax Payment System allows taxpayers to schedule payments securely and avoid missed deadlines.

Practical Tips for First-Time Filers

• Start early: Gather all records and supporting schedules before the end of the quarter to avoid errors or missed deposits.
  
  
• Maintain accurate records: Organize invoices, receipts, and tax deposit confirmations for at least four years.
  
  
• Set reminders: Mark the due date for each filing period—April 30, July 31, October 31, and January 31—to ensure timely submission.
  
  
• Consult a tax professional: For complex situations, professional guidance helps ensure compliance with excise tax rules and payment accuracy.

Following these practices helps new filers manage responsibilities confidently and meet all federal excise tax obligations without last-minute stress.

Frequently Asked Questions (FAQs)

What is an excise tax, and how does it differ from income tax?

An excise tax is a federal charge on specific goods, services, or activities such as fuel, air travel, or indoor tanning. Unlike income tax, which applies to total earnings, excise taxes are based on the sale or use of certain products. The funds collected often support environmental and transportation programs managed by the federal government.

Who must file a federal excise tax return?

Businesses manufacturing, importing, or selling taxable products must file a federal excise tax return each quarter. This includes fuel, tobacco, airline services, or indoor tanning companies. Filing ensures that taxes are correctly reported and paid to the IRS. Even businesses with no activity must file if previously required to report excise taxes.

How can I make excise tax payments to the IRS?

Most excise tax payments must be made electronically through the Electronic Federal Tax Payment System (EFTPS). This free, secure service allows taxpayers to schedule deposits, verify payments, and receive confirmation of receipt. Payments are due on set quarterly dates, and submitting them on time prevents penalties and interest from accruing on unpaid federal excise tax liabilities.

When should I file a federal excise tax return?

Form 720, the IRS form used for excise taxes, must be filed quarterly. The due dates are April 30, July 31, October 31, and January 31. The return is due the next business day if a due date falls on a weekend or holiday. Filing on time helps avoid penalties and maintains compliance with IRS regulations.