IRS Form 720, known as the Quarterly Federal Excise Tax Return, is a filing requirement for businesses responsible for paying federal excise tax on certain goods, services, and activities. For the 2013 tax year, many companies were subject to excise taxes imposed on items such as gasoline, diesel fuel, aviation gasoline, indoor tanning services, medical devices, and environmental taxes linked to natural resources. Understanding who must file, the timing of the return, and the type of tax imposed is critical for compliance.

This form applies to businesses, corporations, and tax-exempt organizations that manufacture, import, or sell taxable fuel; provide taxable services; or engage in activities subject to special taxes. Each calendar quarter, taxpayers must report liability, claim eligible credits, and follow the instructions to determine the amount of federal tax paid. Companies engaged in farming purposes, off-highway business use, inland waterways activities, or heavy vehicle sales may also qualify for specific rules and exemptions. Filing the form correctly ensures payments are collected on time, prevents penalty notices, and supports accurate reporting of both local taxes and federal taxes.

For the first quarter and subsequent periods in the calendar year, Form 720 requires attention to dates, deposit schedules, and semimonthly period requirements. Taxpayers must be aware of nontaxable uses, refunds, or claims that can reduce liability. By following Internal Revenue Service (IRS) guidance and understanding the costs, rules, and responsibilities outlined in Form 720 2013 instructions, businesses can remain compliant, avoid penalties, and meet their obligations clearly and efficiently.

What’s New for Tax Year 2013?

Several vital updates were introduced in 2013 that changed how businesses filed Form 720 and calculated federal excise tax. These changes applied to companies reporting taxable fuel, environmental taxes, medical devices, and other special taxes. Understanding these adjustments helped taxpayers follow the correct tax rate and avoid filing errors.

• Vaccine excise tax expansion
  All seasonal influenza vaccines became subject to excise taxes imposed at $0.75 per dose, rather than just trivalent vaccines.
  
  
• Patient-Centered Outcomes Research Fee (PCORI)
  This new fee applies to health insurance issuers and self-insured health plans. The tax was determined at $2.00 per average covered life and was filed annually in the second calendar quarter.
  
  
• Air transportation taxes
  The domestic segment fee increased to $3.90 per segment, while the international facility fee rose to $17.20 per person for most flights and $8.60 for flights involving Alaska or Hawaii.
  
  
• Arrow shaft tax increase
  The tax imposed on arrow shafts rose to $0.48 per shaft, an increase from the prior year.
  
  
• Medical device excise tax
  Starting in 2013, a 2.3 percent tax rate was applied to the sale of taxable medical devices, impacting companies in the healthcare sector.
  
  
• Ozone-depleting chemicals and environmental taxes
  Rates increased on specific chemicals and petroleum products, requiring the use of Form 6627 to calculate liability.

These changes demonstrate how excise taxes evolve, requiring businesses and corporations to review instructions for each calendar year. For 2013, taxpayers needed to pay careful attention to updated rates and new rules to ensure compliance when completing Form 720.

Form 720 at a Glance

Form 720, the Quarterly Federal Excise Tax Return, is a filing requirement for taxpayers responsible for excise taxes imposed on certain goods, services, and activities. It ensures that the correct federal tax is reported and paid for each calendar quarter.

What Form 720 Covers?

• Environmental taxes on petroleum, ozone-depleting chemicals, and fuel use on inland waterways.
  
  
• Taxes on communications and transportation, including air travel and local telephone services.
  
  
• Fuel-related excise taxes on gasoline, diesel fuel, natural gas, and aviation gasoline.
  
  
• Manufacturers pay taxes on coal, tires, vaccines, heavy vehicles, and other special taxes.
  
  
• Other taxes include indoor tanning services, arrow shafts, and sport fishing equipment.
  
  

Who Must File?

• Any business, corporation, or tax-exempt organization liable for excise taxes listed in Parts I or II.
  
  
• Companies that manufacture, sell, or import taxable fuel, equipment, or vehicles.
  
  
• Service providers that bill customers for taxable activities such as transportation or communications.
  
  
• Businesses that qualify for special rules or exemptions must still file unless they submit a final return.

2013 Filing Deadlines

• First quarter: April 30, 2013.
  
  
• Second quarter: July 31, 2013.
  
  
• Third quarter: October 31, 2013.
  
  
• Fourth quarter: January 31, 2014.
  
  
• If the due date fell on a weekend or federal holiday, the next business day served as the deadline.

Form 720 provides the IRS with a detailed report of excise taxes imposed and federal tax paid. Every taxpayer subject to these rules must file consistently until a final return is accepted and processed.

Before You Start: Setup & Documents

Proper preparation helps taxpayers complete Form 720 accurately and avoid errors when reporting excise taxes accurately and correctly. Gathering the correct records and confirming account details ensures that the federal tax paid matches the liability determined for each calendar quarter.

Business and Identification Essentials

• Use the legal business name and current mailing address exactly as registered with the IRS.
  
  
• Provide a valid Employer Identification Number. If the business does not have an EIN, it must apply for one before filing.
  
  
• Corporations, companies, and tax-exempt organizations must use their official registration details when filing their tax returns.

Records You Will Need

• Maintain invoices, bills, and receipts for taxable fuels, including gasoline, diesel fuel, aviation gasoline, and natural gas.
  
  
• Collect documentation for environmental taxes, inland waterways use, and other taxes subject to Form 720.
  
  
• Keep reports for nontaxable uses, credits, or claims, such as farming purposes or off-highway business exemptions.
  
  
• Reconcile prior tax return filings, payments, and federal tax paid through electronic funds transfer.

Forms and Schedules to Have Ready

• Form 6627 for environmental taxes determined on petroleum products and ozone-depleting chemicals.
  
  
• Form 6197 for Gas Guzzler Taxes on Certain Vehicles.
  
  
• Schedule A for the semimonthly period liabilities.
  
  
• Schedule C for credits or refund claims based on nontaxable uses of taxable fuel.
  
  
• Schedule T for two-party fuel exchanges between companies.

By organizing these records and schedules in advance, the taxpayer can file the form on time, reduce processing costs, and avoid penalty notices from the IRS.

Step-by-Step: Completing Form 720

Filing Form 720 requires careful attention to each part of the return. The following steps outline how taxpayers can complete the form accurately and ensure that all excise taxes imposed are reported correctly.

Step 1: Complete the Header Information.

The taxpayer must provide the legal business name, current address, and Employer Identification Number. The correct calendar quarter ending date must be selected, such as the first quarter, which ends on March 31. If this is a final return, the “Final Return” box should be checked. Errors in this section can delay processing and affect the federal tax paid.

Step 2: Report Part I — Excise Taxes That Typically Require Deposits.

Part I covers excise taxes imposed on environmental taxes, communications, and transportation services. It also includes taxable fuel such as gasoline, diesel fuel, aviation gasoline, and natural gas. Manufacturers' taxes on coal, tires, vaccines, and medical devices must also be reported in this category. Each category is listed by IRS number, and liability must be determined using the correct tax rate.

Step 3: Report Part II — Other Excise Taxes.

Part II includes special taxes and other taxes that do not require semimonthly deposits. This section covers the Patient-Centered Outcomes Research Fee, indoor tanning services, sport fishing equipment, arrow shafts, and floor stocks. Businesses and corporations must file according to IRS instructions for each tax imposed during the calendar quarter.

Step 4: Complete Part III — Totals, Payments, and Overpayments.

This section calculates the total liability and determines whether additional federal tax is due or if a refund applies. Taxpayers must include credits, deposits, prior overpayments, and amounts determined from claims. All totals must match payments made by electronic funds transfer or other approved methods to prevent IRS notices or penalties.

Step 5: Attach Required Schedules.

Schedules must be attached according to the activities. Schedule A reports semimonthly period liability, Schedule C records credits or refund claims for nontaxable uses, and Schedule T covers two-party exchanges of taxable fuel. Form 6627 is required for environmental taxes, and Form 6197 is used for the gas guzzler tax. Proper schedules ensure that excise taxes are reported and the federal tax paid is accurate.

By following these steps, taxpayers can complete Form 720 in a structured way, reduce mistakes, and remain compliant with IRS rules for reporting excise taxes.

How to File: E-File vs. Paper

Businesses can file Form 720 either electronically or on paper. Electronic filing is strongly recommended because it provides faster processing and fewer errors, but paper filing remains available for those who prefer traditional methods.

E-Filing Advantages

• Electronic filing reduces mistakes because the IRS system automatically checks for common errors before submission.
  
  
• Taxpayers receive immediate confirmation that their return has been received and accepted by the IRS, providing peace of mind.
  
  
• E-filing allows payments to be made through electronic funds transfer, ensuring that real taxes are paid on time.
  
  
• Companies may use IRS-approved software or an authorized Electronic Return Originator to securely complete the filing process.

Paper Filing Basics

• Paper filing requires Form 720 to be typed or filled out in black ink to ensure readability by the IRS.
  
  
• All necessary schedules and forms must be attached, including payment vouchers if payment is made by check or money order.
  
  
• Returns must be mailed to the correct IRS address, which is determined by the taxpayer’s location and whether a payment is included.
  
  
• Private delivery services such as UPS or FedEx may be used to ensure the form arrives on or before the due date.

While both methods are acceptable, most businesses find that electronic filing is faster, more reliable, and reduces the risk of penalties or notices.

Paying Your Tax: EFTPS & Other Options

All taxpayers who owe excise taxes must use approved methods of payment. The IRS requires most businesses to make deposits electronically; however, several options are available for paying balances due.

EFTPS Requirements

• Federal law requires excise tax deposits to be made electronically using the Electronic Federal Tax Payment System.
  
  
• Businesses can schedule payments online or by phone and receive a confirmation number for recordkeeping purposes for each completed transaction.
  
  
• To be considered on time, deposits must be scheduled by 8:00 p.m. Eastern Time on the business day before the deadline.
  
  
• EFTPS enrollment is automatic after obtaining an Employer Identification Number, but businesses must activate their account before using it.

Alternative Payment Methods

• Businesses that e-file can choose to pay through electronic funds withdrawal, which deducts the amount directly from their bank account.
  
  
• Taxpayers who file on paper can pay by check or money order, provided they include the Form 720-V payment voucher with their submission.
  
  
• Credit and debit card payments are also available through IRS-approved processors; however, these methods typically involve additional processing fees.

Applying Payments Correctly

• Payments must always be linked to the correct calendar quarter to avoid misapplied credits or penalty notices.
  
  
• When using EFTPS, taxpayers should select “Form 720” and the proper tax period when submitting a payment.
  
  
• Precise recordkeeping ensures that the federal tax paid matches the reported liability on the tax return.

Deposit Rules & Semimonthly Schedule

Many excise taxes must be deposited during semimonthly periods rather than being paid in full with the quarterly return. Following the deposit schedule helps businesses remain compliant and avoid penalties.

Who Must Deposit?

• Taxpayers with excise tax liability greater than $2,500 for the quarter are required to make deposits using EFTPS.
  
  
• Businesses with liabilities under this threshold may pay the full amount with their quarterly return, but must still file Form 720.

Semimonthly Periods and Due Dates

• Each calendar month is divided into two semimonthly periods: the 1st through the 15th and the 16th through the end of the month.
  
  
• Deposits for the first period must be made by the 29th of the same month.
  
  
• Deposits for the second period must be made by the 14th of the following month.
  
  
• Deposits are considered on time if they are scheduled in EFTPS by 8:00 p.m. Eastern Time on the business day before the due date.

Alternative and Collected Method Taxes

• Specific excise taxes, such as those on air transportation and communications services, are imposed when the bill is issued to the customer, not when payment is received.
  
  
• Businesses must carefully review IRS rules to ensure these liabilities are reported in the correct period.

Safe Harbor and Seasonal Rules

• Safe harbor provisions enable certain taxpayers to base their deposits on prior periods, thereby avoiding underpayment penalties, provided they meet the IRS's requirements.
  
  
• Seasonal rules may apply to businesses with irregular excise tax liabilities, such as those with heavy sales only in certain quarters.

By following the semimonthly schedule and using EFTPS correctly, taxpayers can ensure their deposits are accurate, timely, and fully compliant with IRS regulations.

Special Situations

Some businesses face unique filing circumstances when preparing Form 720. These include periods with no activity, permanent closures, or reactivating after inactivity. Understanding these rules helps taxpayers avoid penalties and ensure accurate reporting.

Zero-Activity (Dormant) Quarters

• A business must continue to file Form 720 each calendar quarter, even if no excise taxes are due.
  
  
• The taxpayer should enter zero in all applicable lines and still sign and submit the form by the due date.
  
  
• Filing is required until the IRS receives a final return indicating that the excise tax account is closed.

Final Return

• A final return must be filed when a business permanently ceases operations, which creates excise tax liability.
  
  
• The taxpayer should check the “Final Return” box on the form and ensure all liabilities through the last calendar quarter are reported and paid.
  
  
• Filing a final return prevents future penalty notices for missed filings.

Reactivating After Dormancy

• Businesses that restart taxable activities after a dormant period must resume filing Form 720 for the applicable calendar quarter.
  
  
• There is no need to amend prior zero-activity returns unless an error was made.
  
  
• Records should clearly show the date when taxable activities resumed to support liability determinations.

These special rules help ensure that businesses remain compliant whether they are active, temporarily inactive, or permanently closed.

First-Time Filer Tips & Recordkeeping

Filing Form 720 for the first time can feel overwhelming. By following a clear checklist and maintaining organized records, new taxpayers can simplify the process and reduce errors.

Getting Set Up

• Apply for an Employer Identification Number if one has not been issued.
  
  
• Enroll in the Electronic Federal Tax Payment System to meet deposit requirements.
  
  
• Set up a filing calendar with reminders for each quarter’s due date.

Record Retention Requirements

• Keep detailed calculations for each tax imposed, including quantities, rates, and invoices.
  
  
• Retain deposit confirmations, Form 720 copies, and supporting schedules.
  
  
• Records should be maintained for at least four years from the date the tax return is filed or the tax is paid, whichever is later.

Quality-Control Pass

• Double-check that the correct tax rate is applied to all excise taxes imposed.
  
  
• Ensure that all schedules required, such as Schedule A or Form 6627, are attached.
  
  
• Review the taxpayer’s name, EIN, and quarter ending date to prevent processing delays.

Good preparation and recordkeeping support accurate filings and help businesses respond to any IRS questions or notices.

Common Mistakes & How to Avoid Them

Errors on Form 720 are common, but most can be prevented with careful review. Avoiding these mistakes ensures that the federal tax paid aligns with the liability and reduces the likelihood of penalties.

Filing and Reporting Errors

• Some businesses fail to file quarterly returns when no excise taxes are due. Filing is still required until a final return is submitted.
  
  
• Taxpayers may also use outdated tax rates instead of reviewing the current year’s instructions.
  
  
• Missing schedules, such as Schedule A for semimonthly liabilities or Form 6627 for environmental taxes, can result in incomplete filings.

Deposit and Payment Pitfalls

• Late deposits occur when taxpayers misunderstand the semimonthly period due dates.
  
  
• Some businesses still attempt to use obsolete paper coupons, but only electronic funds transfer is accepted.
  
  
• Using the incorrect tax period in EFTPS can result in unnecessary notices and penalties, leading to incorrectly applied payments.

Math and Schedule A Issues

• Rounding errors occur when taxpayers fail to round to the nearest dollar as required by the rules.
  
  
• Some taxpayers reduce liability by making deposits, which are not allowed on Schedule A.
  
  
• Liability must be reported in the semimonthly period in which it was incurred, not when payment was made.

By understanding these common issues and adhering closely to IRS rules, businesses can avoid costly mistakes and maintain their filings in good standing.

Frequently Asked Questions

What is the Form 720 2013, and who is required to file this form?

The Form 720 2013 instructions explain how taxpayers, including corporations and tax-exempt organizations, must report excise taxes imposed on taxable fuel, services, equipment, and other goods. Any business that manufactures, sells, or provides activities subject to federal excise tax must file each calendar quarter. The IRS requires reporting even when the liability is limited, unless a final return is filed.

How are environmental taxes and other special taxes reported?

Environmental taxes apply to natural resources, such as ozone-depleting chemicals and petroleum products, while special taxes include those on indoor tanning and fishing equipment. These excise taxes imposed must be reported on Form 720 according to the rules and tax rate determined by law. Taxpayers may also need to attach Form 6627 to accurately calculate their liability and ensure that the correct federal tax is reported to the IRS.

What methods are used to pay federal excise tax?

The IRS requires most excise taxes to be deposited by electronic funds transfer through EFTPS. Payments must be scheduled by 8:00 p.m. Eastern Time on the business day before the due date. Businesses may also pay balances with checks, money orders, or credit cards. Ensuring the correct calendar quarter, form, and account information prevents notices or penalties when federal tax is collected.

Can companies claim credits or refunds for nontaxable uses of fuel?

Yes, businesses can file Schedule C with Form 720 to claim a credit or refund when taxable fuel such as gasoline, diesel fuel, aviation gasoline, or natural gas is used for farming purposes, off-highway business, or other nontaxable uses. Claims must include documentation, and IRS rules determine amounts. Credits reduce overall liability and ensure federal tax paid matches actual consumption.

What are the deposit rules for excise taxes during a semimonthly period?

If excise taxes imposed exceed $2,500 in a calendar quarter, deposits must be made during each semimonthly period. These cover the 1st–15th and 16th–end of each month. Deposits are due by the 29th or 14th of the following month, depending on the period. Taxpayers must follow the IRS's instructions carefully, as failing to make timely deposits may result in a penalty or a notice of underpayment.

Are heavy vehicles, inland waterways use, and local taxes subject to excise tax?

Yes, excise taxes imposed apply to the sale of heavy vehicles, the use of fuel on inland waterways, and, in some cases, local taxes tied to transportation services. The IRS determines the tax imposed and may vary in terms of percentage, cost, or specific fees. Businesses and corporations must review instructions for each calendar year to confirm which activities are eligible, subject to special rules, or exempt under law.

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