How to File IRS Form 720: Quarterly Federal Excise Tax Return

Excise taxes apply to particular goods, services and activities rather than to profit, and this is the quarterly return that reports them.

Businesses are frequently caught by it without considering themselves part of an excise sector at all. Health plan sponsors and certain service providers are common examples, and the obligation to deposit during the period runs on its own rhythm.

This covers who has to file, the major categories the return covers, how the quarterly cycle works alongside the deposit requirements, and how a return is corrected.

Form 720, Quarterly Federal Excise Tax Return, covers a wide range of federal excise taxes imposed on specific goods, services, and activities. If your business falls into one of the covered categories, you must file Form 720 and pay the applicable excise tax quarterly. This guide walks through who must file, the major excise taxes, the deposit rules, and the filing deadlines.

Who Must File Form 720?

Any business that collects, owes, or is liable for a federal excise tax listed on Form 720. Common filers include:

• Fuel distributors and sellers (gasoline, diesel, kerosene, jet fuel)
• Airlines and transportation companies (air passenger tax, cargo tax)
• Coal producers
• Insurance companies issuing certain policies
• Health insurers and self-insured health plans subject to the PCORI fee
• Indoor tanning service providers
• Fishing equipment and boat manufacturers and importers

Major Excise Taxes on Form 720

Air Transportation Taxes

A 7.5% tax on the price of taxable air transportation (passengers), plus a per-person domestic segment tax. A flat-rate tax applies to international flights. Airlines collect these taxes from passengers and remit them on Form 720.

Fuel Taxes

Excise taxes on diesel fuel, gasoline, kerosene, aviation fuel, and other fuels. Rates vary by fuel type. Fuel distributors and airlines are major filers in this category. Credits for non-taxable uses (farming, off-highway business use) are also claimed on Form 720.

Patient-Centered Outcomes Research (PCORI) Fee

Health insurers and self-insured health plans must pay an annual PCORI fee, reported on the second quarter Form 720 (due July 31). The fee is assessed per covered life. The rate is adjusted annually by the IRS.

Indoor Tanning Services Tax

A 10% excise tax on indoor tanning services paid by the customer. Tanning salon operators collect the tax and remit on Form 720.

Coal Excise Tax

Taxes on the sale of coal mined from US mines. Two rates: coal from underground mines (4.4% of sales price, up to $1.10 per ton), and coal from surface mines (4.4% of sales price, up to $0.55 per ton).

Quarterly Filing Deadlines

Deposit Requirements

The deposit rules for excise taxes vary by the type of tax. Some excise taxes must be deposited semi-monthly (within 3 business days of the semi-monthly period). Others can be paid with the quarterly return. Check the specific instructions for each tax on Form 720 to determine the deposit frequency.

Pro Tip: Most excise tax deposits must be made through the Electronic Federal Tax Payment System (EFTPS). Do not mail a check if the deposit rules require electronic payment, penalties apply for improper payment method.

Amending Form 720

Use Form 720-X, Amended Quarterly Federal Excise Tax Return, to correct a previously filed Form 720. You can file 720-X to claim a refund or credit, or to pay additional tax. Note that claims for refunds must generally be filed within 3 years of when the tax was paid.

Frequently Asked Questions

Written by

Ankit Sarawagi, CPA, CA, MBA

Ankit leads the finance team at Profitjets, where he has worked with 500+ businesses across the US on bookkeeping, tax and CFO-level strategy. He writes about the habits that keep small business books accurate all year. Connect on LinkedIn