Instructions For Form 720 - Quarterly Federal Excise Tax Return

•

For deposits under the alternative method, any quarter if

Alternative method taxes

Enter the tax included in the amounts billed or

liability includes any tax not in effect throughout the

tickets sold for the period beginning

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

September 11/12 and ending September 15

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

quarter.

tax included in amounts billed or tickets sold

during the period beginning September 16

Requirements to be met. For the safe harbor rule to

and ending September 30 in box N of the 4th

apply, you must:

quarter return.

•

Make each deposit timely at an authorized financial

institution, and

•

Pay any underpayment for the current quarter by the due

Schedule T—Two-Party Exchange

date of the return.

Information Reporting

If you meet the requirements and use the safe harbor

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

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

delivering person, is liable for the tax imposed on the

removal of taxable fuel from the terminal at the terminal

The IRS may withdraw the right to make deposits of

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

tax using the safe harbor rule from any person not

a sale) where the delivering person and receiving person

complying with these rules.

CAUTION

are both taxable fuel registrants and all of the following

occur.

•

The transaction includes a transfer from the delivering

Schedule A—Excise Tax Liability

person, who holds the inventory position for the taxable fuel

in the terminal as reflected in the records of the terminal

operator.

How to complete. Complete Schedule A to record net tax

•

The exchange transaction occurs before or at the same

liabilities for Part I taxes for each semimonthly period in a

time as completion of removal across the rack by the

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

receiving person.

•

The terminal operator in its records treats the receiving

The following table will help you determine which boxes

person as the person that removes the product across the

to complete on Schedule A.

terminal rack for purposes of reporting the transaction on

Form 720-TO, Terminal Operator Report.

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

•

The transaction is the subject of a written contract.

the...

line...

tax liability in

boxes...

Information reporting. Schedule T — Two-Party Exchange

Regular method

A – G

Information Reporting is used to report gallons of taxable

Alternative method

M – S

fuel:

•

Received in a two-party exchange within a terminal.

These gallons must also be included on the appropriate line

If you are reporting more than one type of tax on

on page 1 of Form 720, or

lines 1 and 2:

•

Delivered in a two-party exchange contemporaneous with

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

a removal across the rack.

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

•

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

Complete all information requested for each line, including

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

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

considered collected during that period.

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

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

Example. The amounts billed for communications

follow the required procedures or do not provide all the

services from June 1 – 15, 2008, are considered collected

required information. Also, you are certifying to the

during the period July 1 – 7, 2008, and are reported for the

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

3rd quarter of 2008 on Schedule A in box M, not the 2nd

claim. See Pub. 510 for more information.

quarter of 2008.

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

CAUTION

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

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

Do not use Schedule C:

September 16 and ending September 25/26

•

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

in box G, Special rule for September.

Part II;

Alternative method taxes

Enter the tax included in amounts billed or

•

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

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 in

box S, Special rule for September box on the

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

4th quarter return.

and its separate schedules (see the Caution below);

•

To make adjustments to liability reported on Forms 720

For the remaining days in the September period, report

filed for prior quarters, use Form 720X; or

•

the liability as follows:

To request an abatement or refund of interest under

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

abatement or refund of a penalty or addition to tax under

Regular method taxes

Enter the liability for the period beginning

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

September 26/27 and ending September 30

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

in box F.

-9-

Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2008 Page 9

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