Instructions For Form 720 - Quarterly Federal Excise Tax Return (Page 10 of 18) in pdf

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Pay any underpayment for the current quarter by the due

date of the return.

Schedule T—Two-Party Exchange

If you meet the requirements and use the safe harbor

Information Reporting

rule, check the box on line 5 of Form 720.

In a two-party exchange, the receiving person, not the

The IRS may withdraw the right to make deposits of

delivering person, is liable for the tax imposed on the

tax using the safe harbor rule from any person not

removal of taxable fuel from the terminal at the terminal

complying with these rules.

rack. A two-party exchange means a transaction (other than

CAUTION

a sale) where the delivering person and receiving person

are both taxable fuel registrants and all of the following

occur.

Schedule A—Excise Tax Liability

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The transaction includes a transfer from the delivering

person, who holds the inventory position for the taxable fuel

How to complete. Complete Schedule A to record net tax

in the terminal as reflected in the records of the terminal

liabilities for Part I taxes for each semimonthly period in a

operator.

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quarter even if your net liability is under $2,500.

The exchange transaction occurs before or at the same

time as completion of removal across the rack by the

The following table will help you determine which boxes

receiving person.

to complete on Schedule A.

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The terminal operator in its records treats the receiving

person as the person that removes the product across the

IF you are reporting under THEN you report on AND enter the net

the...

line...

tax liability in

terminal rack for purposes of reporting the transaction on

boxes...

Form 720-TO, Terminal Operator Report.

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The transaction is the subject of a written contract.

Regular method

A – G

Alternative method

M – S

Information reporting. Schedule T — Two-Party Exchange

Information Reporting is used to report gallons of taxable

If you are reporting more than one type of tax on

fuel:

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lines 1 and 2:

Received in a two-party exchange within a terminal.

1. Add the net tax liability for each tax for each

These gallons must also be included on the appropriate line

semimonthly period, and

on page 1 of Form 720, or

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2. Enter the total in the applicable box.

Delivered in a two-party exchange contemporaneous with

a removal across the rack.

Additional rules. Report communications and air

Enter all gallons of fuel received or delivered in a

transportation taxes based on:

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two-party exchange within a terminal for the applicable fuel.

Actual collections on line 1, or

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Amounts billed or tickets sold on line 2. The amount of tax

to report for a semimonthly period is the net amount that is

considered collected during that period.

Schedule C—Claims

Example. The amounts billed for communications

Complete all information requested for each line, including

services from June 1 – 15, 2009, are considered collected

month income tax year ends and period of claim. Enter the

during the period July 1 – 7, 2009, and are reported for the

month as “MM.” Enter the period of claim as “MM/DD/YYYY

3rd quarter of 2009 on Schedule A in box M, not the 2nd

– MM/DD/YYYY.” Your claim will be disallowed if you do not

quarter of 2009.

follow the required procedures or do not provide all the

required information. Also, you are certifying to the

Reporting tax liability under the special September rule.

applicable statement(s) on Schedule C when you make a

An additional reporting is required under the special

claim. See Pub. 510 for more information.

September rule (for the period shown in the chart above) as

follows:

You must include in gross income (income tax

return) the amount from line 4 of Form 720 if you

Regular method taxes

Enter the tax liability for the period beginning

took a deduction on the income tax return that

CAUTION

September 16 and ending September 25/26

included the amount of the taxes and that deduction

in box G, Special rule for September.

reduced the income tax liability. See Pub. 510 for more

Alternative method taxes

Enter the tax included in amounts billed or

information.

tickets sold during the period beginning

September 1 and ending September 10/11 in

Do not use Schedule C:

box S, Special rule for September box on the

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If you are not reporting a liability on Form 720, in Part I or

4th quarter return.

Part II;

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For the remaining days in the September period, report

To claim amounts that you took or will take as a credit on

the liability as follows:

Form 4136, Credit for Federal Tax Paid on Fuels, or as a

refund on Form 8849, Claim for Refund of Excise Taxes,

and its separate schedules (see the Caution below);

Regular method taxes

Enter the liability for the period beginning

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To make adjustments to liability reported on Forms 720

September 26/27 and ending September 30

filed for prior quarters, use Form 720X; or

in box F.

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To request an abatement or refund of interest under

Alternative method taxes

Enter the tax included in the amounts billed or

tickets sold for the period beginning

section 6404(e) (due to IRS errors or delays) or an

September 11/12 and ending September 15

abatement or refund of a penalty or addition to tax under

in box M of the 4th quarter return. Enter the

section 6404(f) (due to erroneous IRS written advice).

tax included in amounts billed or tickets sold

Instead, use Form 843, Claim for Refund and Request for

during the period beginning September 16

Abatement. Also use Form 843 to request refund of the

and ending September 30 in box N of the 4th

penalty under section 6715 for misuse of dyed fuel.

quarter return.

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Instructions For Form 720 - Quarterly Federal Excise Tax Return Page 10

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