Instructions For Form 720 - Quarterly Federal Excise Tax Return

increased rate of tax had been in effect for that look-back

For the remaining days in the September period,

quarter;

report the liability as follows:

•

Any quarter if liability includes any tax not in effect

throughout the look-back quarter; or

•

Regular method taxes

Enter the liability for the period beginning

For deposits under the alternative method, any quarter

September 26/27 and ending September

if liability includes any tax not in effect throughout the

30 in box F.

look-back quarter and the month preceding the look-back

Alternative method taxes

Enter the tax included in the amounts billed

quarter.

or tickets sold for the period beginning

Requirements to be met. For the safe harbor rule to

September 11/12 and ending September

15 in box M of the 4th quarter return.

apply, you must:

•

Enter the tax included in amounts billed or

Make each deposit timely at an authorized financial

tickets sold during the period beginning

institution and

September 16 and ending September 30 in

•

Pay any underpayment for the current quarter by the

box N of the 4th quarter return.

due date of the return.

If you meet the requirements and use the safe harbor

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

Schedule T—Two-Party Exchange

The IRS may withdraw the right to make deposits

Information Reporting

of tax using the safe harbor rule from any person

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

not complying with these rules.

CAUTION

delivering person, is liable for the tax imposed on the

removal of taxable fuel from the terminal at the terminal

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

Schedule A—Excise Tax Liability

than a sale) where the delivering person and receiving

person are both taxable fuel registrants and all of the

How to complete. Complete Schedule A to record net

following occur.

•

tax liabilities for Part I taxes for each semimonthly period

The transaction includes a transfer from the delivering

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

person, who holds the inventory position for the taxable

fuel in the terminal as reflected in the records of the

The following table will help you determine which

terminal operator.

boxes to complete on Schedule A.

•

The exchange transaction occurs before or at the

AND enter the net

same time as completion of removal across the rack by

IF you are reporting under THEN you report on tax liability in

the receiving person.

•

the...

line...

boxes...

The terminal operator in its records treats the receiving

Regular method

A – G

person as the person that removes the product across

Alternative method

M – S

the terminal rack for purposes of reporting the transaction

on Form 720-TO, Terminal Operator Report.

•

If you are reporting more than one type of tax on

The transaction is the subject of a written contract.

lines 1 and 2:

Information reporting. Schedule T — Two-Party

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

Exchange Information Reporting, is used to report

semimonthly period and

gallons of taxable fuel:

•

2. Enter the total in the applicable box.

Received in a two-party exchange within a terminal.

These gallons must also be included on the appropriate

Additional rules. Report communications and air

line on page 1 of Form 720, or

•

transportation taxes based on:

Delivered in a two-party exchange contemporaneous

•

Actual collections on line 1.

with a removal across the rack.

•

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

Enter all gallons of fuel received or delivered in a

tax to report for a semimonthly period is the net amount

two-party exchange within a terminal for the applicable

that is considered collected during that period.

fuel.

Example. The amounts billed for communications

services from June 1-15, 2006, are considered collected

during the period July 1-7, 2006, and are reported for the

Schedule C—Claims

3rd quarter of 2006 on Schedule A in box M, not the 2nd

quarter of 2006.

Complete all information requested for each line,

including month income tax year ends and period of

Reporting tax liability under the special September

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

rule. An additional reporting is required under the

as “MM/DD/YYYY”. Your claim will be disallowed if you

special September rule (for the period shown in the chart

do not follow the required procedures or do not provide

above) as follows:

all the required information. Also, you are certifying to the

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

Regular method taxes

Enter the tax liability for the period

claim. See Pub. 510 for more information.

beginning September 16 and ending

September 25/26 in box G, Special rule for

You must include in gross income (income tax

September.

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

Alternative method taxes

Enter the tax included in amounts billed or

took a deduction on the income tax return that

CAUTION

tickets sold during the period beginning

included the amount of the taxes and that deduction

September 1 and ending September 10/11

reduced the income tax liability. See Publication 510 for

in box S, Special rule for September box

more information.

on the 4th quarter return.

-9-

Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2006 Page 9

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