Instructions For Form 720 - Quarterly Federal Excise Tax Return

The IRS may withdraw the right to make deposits of

a sale) where the delivering person and receiving person

tax using the safe harbor rule from any person not

are both taxable fuel registrants and all of the following

complying with these rules.

occur.

CAUTION

•

The transaction includes a transfer from the delivering

person, who holds the inventory position for the taxable fuel

in the terminal as reflected in the records of the terminal

Schedule A—Excise Tax Liability

operator.

•

The exchange transaction occurs before or at the same

How to complete. Complete Schedule A to record net tax

time as completion of removal across the rack by the

liabilities for Part I taxes for each semimonthly period in a

receiving person.

•

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

The terminal operator in its records treats the receiving

person as the person that removes the product across the

The following table will help you determine which boxes

terminal rack for purposes of reporting the transaction on

to complete on Schedule A.

Form 720-TO, Terminal Operator Report.

•

The transaction is the subject of a written contract.

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

the...

line...

tax liability in

Information reporting. Schedule T — Two-Party Exchange

boxes...

Information Reporting is used to report gallons of taxable

Regular method

A – G

fuel:

•

Alternative method

M – S

Received in a two-party exchange within a terminal.

These gallons must also be included on the appropriate line

on page 1 of Form 720, or

If you are reporting more than one type of tax on

•

Delivered in a two-party exchange contemporaneous with

lines 1 and 2:

a removal across the rack.

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

semimonthly period, and

Enter all gallons of fuel received or delivered in a

2. Enter the total in the applicable box.

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

Additional rules. Report communications and air

transportation taxes based on:

Schedule C—Claims

•

Actual collections on line 1, or

•

Complete all information requested for each line, including

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

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

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

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

considered collected during that period.

YYYY.” Your claim will be disallowed if you do not follow the

Example. The amounts billed for communications

required procedures or do not provide all the required

services from June 1 – 15, 2007, are considered collected

information. Also, you are certifying to the applicable

during the period July 1 – 7, 2007, and are reported for the

statement(s) on Schedule C when you make a claim. See

3rd quarter of 2007 on Schedule A in box M, not the 2nd

Pub. 510 for more information.

quarter of 2007.

You must include in gross income (income tax

Reporting tax liability under the special September rule.

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

An additional reporting is required under the special

took a deduction on the income tax return that

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

CAUTION

included the amount of the taxes and that deduction

follows:

reduced the income tax liability. See Publication 510 for

more information.

Regular method taxes

Enter the tax liability for the period

beginning September 16 and ending

Do not use Schedule C:

•

September 25/26 in box G, Special rule for

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

September.

Part II;

•

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

Alternative method taxes

Enter the tax included in amounts billed or

tickets sold during the period beginning

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

September 1 and ending September 10/11

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

in box S, Special rule for September box

and its separate schedules (see the Caution later);

•

on the 4th quarter return.

To make adjustments to liability reported on Forms 720

filed for prior quarters, use Form 720X; or

For the remaining days in the September period, report

•

To request an abatement or refund of interest under

the liability as follows:

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

abatement or refund of a penalty or addition to tax under

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

Regular method taxes

Enter the liability for the period beginning

September 26/27 and ending September

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

30 in box F.

Abatement. Also use Form 843 to request refund of the

penalty under section 6715 for misuse of dyed fuel.

Alternative method taxes

Enter the tax included in the amounts billed

or tickets sold for the period beginning

If you make a claim for alcohol, biodiesel or

September 11/12 and ending September

renewable diesel, or alternative fuel used to produce

15 in box M of the 4th quarter return.

Enter the tax included in amounts billed or

a mixture, a claim for refund or credit on Form 8849,

CAUTION

tickets sold during the period beginning

Form 4136, Form 6478, or Form 8864 can only be made

September 16 and ending September 30 in

after the sum of the alcohol fuel mixture credit, biodiesel or

box N of the 4th quarter return.

renewable diesel mixture credit, and alternative fuel mixture

credit is first applied to reduce your taxable fuel liability

reported on Form 720 for any particular quarter. See Pub.

Schedule T—Two-Party Exchange

510, Notice 2005-4, and Notice 2005-62 for more

information.

Information Reporting

Type of Use Table

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

delivering person, is liable for the tax imposed on the

The following table lists the nontaxable uses of fuels. You

removal of taxable fuel from the terminal at the terminal

must enter the number from the table in the Type of use

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

column as required.

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Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2007 Page 9

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