Instructions For Form 720 - Quarterly Federal Excise Tax Return

Alcohol sold as but not used as fuel (IRS No. 51). An

You may pay the amount shown on line 10 using

excise tax is imposed if the alcohol fuel mixture credit or

EFTPS or by check or money order. If you pay using

alcohol credit was claimed and any person later: (a)

EFTPS, do not file Form 720-V, Payment Voucher.

uses a mixture or straight alcohol for a purpose other

If you do not deposit as required and, instead, pay

than fuel, (b) separates the alcohol from the mixture, or

the taxes with Form 720, you may be subject to a

penalty.

CAUTION

Use the following table to determine the tax for each

gallon of alcohol. Fill in the number of gallons and the

Payment of Taxes

appropriate rate in the Rate column on the line for IRS

Generally, semimonthly deposits of excise taxes are

No. 51. If more than one rate applies, leave the Rate

required. A semimonthly period is the first 15 days of a

column blank and attach a schedule showing the rates

month (the first semimonthly period) or the 16th through

and number of gallons taxed at each rate.

the last day of a month (the second semimonthly period).

THEN the tax rate

However, no deposit is required for the situations

IF the alcohol is...

AND...

per gallon is...

listed below. The taxes are payable with the return.

•

at least 190 proof

is ethanol

$ .51

The net liability for taxes listed in Part I (Form 720)

•

is methanol

.60

does not exceed $2,500 for the quarter.

•

benefited from the

.61

•

The gas guzzler tax is being paid on a one-time filing.

small ethanol

See Gas guzzler tax on page 5.

producer credit

•

The liability is for taxes listed in Part II (Form 720),

•

at least 150 proof but

is ethanol

$ .3778

except for the floor stocks tax that generally requires a

•

less than 190 proof

is methanol

.45

•

single deposit. See Floor Stocks Tax above.

benefited from the

.4778

small ethanol

How To Make Deposits

producer credit

To avoid a penalty, make your deposits timely and do not

Biodiesel sold as but not used as fuel (IRS No. 117).

mail your deposits directly to the IRS. Records of your

An excise tax is imposed if the (a) biodiesel or renewable

deposits will be sent to the IRS for crediting to your

diesel mixture credit or (b) biodiesel or renewable diesel

accounts.

credit was claimed and any person later: (a) uses a

Electronic deposit requirement. You must make

mixture or straight biodiesel or renewable diesel for a

electronic deposits of all depository taxes (such as

purpose other than as fuel, (b) separates the biodiesel or

deposits for employment tax, excise tax, and corporate

renewable diesel from the mixture, or (c) mixes the

income tax) using the Electronic Federal Tax Payment

straight biodiesel or renewable diesel.

System (EFTPS) in 2006 if:

•

The tax is $.50 per gallon of biodiesel, $1.00 per

The total deposits of such taxes in 2004 exceeded

gallon of agri-biodiesel, and $1.00 per gallon of

$200,000 or

•

renewable diesel. Fill in the number of gallons and the

You were required to use EFTPS in 2005.

appropriate rate in the Rate column on the line for IRS

If you are required to use EFTPS and use Form 8109,

No. 117. If more than one rate applies, leave the Rate

Federal Tax Deposit Coupon, instead, you may be

column blank and attach a schedule showing the rates

subject to a 10% penalty. If you are not required to use

and number of gallons taxed at each rate.

EFTPS, you may participate voluntarily. To get more

Floor Stocks Tax

information or to enroll in EFTPS, visit the EFTPS

website at or call 1-800-555-4477. Also

Ozone-depleting chemicals floor stocks tax (IRS No.

see Publication 966, The Secure Way to Pay Your

20). Use Form 6627 to figure the liability for this tax.

Federal Taxes.

Enter the amount from Form 6627, Part III, line 4, column

Depositing on time. For EFTPS deposits to be on

(d) on the line for IRS No. 20. Attach Form 6627 to Form

time, you must initiate the transaction at least one

720 that is due July 31 of each year. Deposit the

business day before the date the deposit is due.

payment by June 30 at an authorized financial institution.

See How To Make Deposits below.

Federal tax deposit coupons. If you are not making

deposits by EFTPS, use Form 8109 to make the deposits

Part III

at an authorized financial institution. See the instructions

in the coupon book for additional information. If you do

Line 4. Report on Form 720, line 4, the total claims from

not have a coupon book, call 1-800-829-4933.

Schedule C, line 15. See the instructions for Schedule

C– Claims on page 9.

You will automatically be enrolled in EFTPS when

TIP

you apply for an EIN. You will receive a separate

Line 6. Include on line 6 the amount from line 11 of your

mailing containing instructions for activating your

previous return that you applied to this return and the

EFTPS enrollment after you receive your EIN. You will

amount from Form 720X, line 5b.

still have the option to use FTD coupons, but see

Note. Include on line 6 of your next return the amount

Electronic deposit requirement above.

from line 11 you want to have applied to that return.

When To Make Deposits

If you owe other federal tax, interest, or penalty,

the overpayment on line 11 and line 7 will first be

There are two methods for determining deposits: the

applied to the unpaid amounts.

regular method and the alternative method.

CAUTION

Line 10. If line 3 is more than line 9, enter the difference

The regular method applies to all taxes in Part I of

in line 10. You do not have to pay if line 10 is under

Form 720 except for communications and air

$1.00.

transportation taxes if deposits are based on amounts

-7-

Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2006 Page 7

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