Instructions For Form 720 - Quarterly Federal Excise Tax Return

If you meet the requirements and use the safe harbor

Schedule T—Two-Party Exchange

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

Information Reporting

The IRS may withdraw the right to make deposits of

tax using the safe harbor rule from any person not

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

complying with these rules.

delivering person, is liable for the tax imposed on the

CAUTION

removal of taxable fuel from the terminal at the terminal

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

a sale) where the delivering person and receiving person

Schedule A—Excise Tax Liability

are both taxable fuel registrants and all of the following

occur.

•

How to complete. Complete Schedule A to record net tax

The transaction includes a transfer from the delivering

liabilities for Part I taxes for each semimonthly period in a

person, who holds the inventory position for the taxable fuel

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

in the terminal as reflected in the records of the terminal

operator.

The following table will help you determine which boxes

•

The exchange transaction occurs before or at the same

to complete on Schedule A.

time as completion of removal across the rack by the

receiving person.

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

•

The terminal operator in its records treats the receiving

the...

line...

tax liability in

boxes...

person as the person that removes the product across the

terminal rack for purposes of reporting the transaction on

Regular method

A – G

Form 720-TO, Terminal Operator Report.

Alternative method

M – S

•

The transaction is the subject of a written contract.

Information reporting. Schedule T — Two-Party Exchange

If you are reporting more than one type of tax on

Information Reporting is used to report gallons of taxable

lines 1 and 2:

fuel:

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

•

Received in a two-party exchange within a terminal.

semimonthly period, and

These gallons must also be included on the appropriate line

2. Enter the total in the applicable box.

on page 1 of Form 720, or

•

Delivered in a two-party exchange contemporaneous with

Additional rules. Report communications and air

a removal across the rack.

transportation taxes based on:

•

Actual collections on line 1, or

Enter all gallons of fuel received or delivered in a

•

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

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

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

services from June 1 – 15, 2010, are considered collected

Complete all information requested for each line, including

during the period July 1 – 7, 2010, and are reported for the

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

3rd quarter of 2010 on Schedule A in box M, not the 2nd

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

quarter of 2010.

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

follow the required procedures or do not provide all the

Reporting tax liability under the special September rule.

required information. Also, you are certifying to the

An additional reporting is required under the special

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

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

claim. See Pub. 510 for more information.

follows:

You must include in gross income (income tax

Regular method taxes

Enter the tax liability for the period beginning

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

September 16 and ending September 25/26

took a deduction on the income tax return that

CAUTION

in box G, Special rule for September.

included the amount of the taxes and that deduction

Alternative method taxes

Enter the tax included in amounts billed or

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

tickets sold during the period beginning

information.

September 1 and ending September 10/11 in

box S, Special rule for September box on the

Do not use Schedule C:

4th quarter return.

•

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

Part II;

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

•

September 26/27 and ending September 30

To make adjustments to liability reported on Forms 720

in box F.

filed for prior quarters, use Form 720X; or

•

Alternative method taxes

Enter the tax included in the amounts billed or

To request an abatement or refund of interest under

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

and ending September 30 in box N of the 4th

Abatement. Also use Form 843 to request refund of the

quarter return.

penalty under section 6715 for misuse of dyed fuel.

-10-

Instructions for Form 720 (Rev. 7-2010)

Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2010 Page 10

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