IRS Form 720 | Quarterly Federal Excise Tax Return

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Many items sold by manufacturers and retailers have federal excise taxes attached to them. Most of us aren’t aware of this, because unlike state sales taxes, they aren’t added on to the price at the point of sale. Rather, they are included in the seller’s price to the customer, and are thus transparent to the customer, and often to the seller as well. Nevertheless, the seller is considered by the federal government to have collected that excise tax, and is, in turn, expected to remit those collected taxes to the IRS. The purpose of the Form 720 is to notify the IRS of their liability to pay and to facilitate that payment.

How to Fill-in

The top part of Form 720 is for you firm’s identification, including your Employer Identification Number (EIN). Since this form must be filed quarterly, you will also indicate the last day of the quarter for which you are reporting.

Part I consists of a range of items for which there is federal excise taxes charged. The form contains instructions on how to calculate each of the various items. After you’ve completed them, you are directed to add the total of your liabilities and insert the result on Line 1 at the bottom of Part I. If the contents of Line one is nonzero, indicating that that you do have excise tax liability under Part I, the next step is to fill out Schedule A, which is part of Form 720.

Part II lists other instances of federal excise taxes. Again, there are instructions on how to compute them, and their sum is noted on Line 2 at the bottom of Part II.

Part III of Form 720 contain a line in which sum the results of Line 1 from Part I and Line 2 of Part II is recorded. The calculations in Part III take into account the result of Schedule C of Form 720, which is largely concerned with taxes paid on fuels. The results of Schedule C are noted on Line 4 of Part III. Adjustments are also made for prepayments. If you have a balance due, it is noted on Line 10; if you’ve made an overpayment, it is noted on Line 11. In either case you must sign at the bottom of Part III and return the form the IRS, with any payment due. If you pay by check or money order, also return Form 720-V, the payment voucher. This final step is unnecessary if you pay via electronic funds transfer (EFT).