Federal excise taxes for businesses apply only if you manufacture, sell, import, or provide something on a specific federal list: motor fuel, alcohol, tobacco, firearms, heavy trucks, air transportation, certain communications services, listed chemicals and petroleum, wagering, indoor tanning, and a handful of others. If nothing your company does appears on that list, you owe nothing. If something does, the obligation is narrow but strict, with its own registration, its own quarterly return, and deposit deadlines that fall twice a month.
Activities That Trigger a Federal Excise Tax
Each category below is governed by its own section of the Internal Revenue Code, and a business only owes the tax if it engages in the specific activity. Rates and thresholds shown are the ones a general reader is most likely to need; narrow subcategories exist within most of them.
Motor Fuel
Federal excise tax on gasoline is 18.3 cents per gallon and on diesel is 24.3 cents per gallon, with an additional 0.1 cent per gallon on both for the Leaking Underground Storage Tank Trust Fund. That brings the effective totals to 18.4 cents for gasoline and 24.4 cents for diesel.1Office of the Law Revision Counsel. 26 U.S. Code 4081 – Imposition of Tax The tax is imposed when fuel leaves a refinery or terminal, or when it enters the country, so refiners, importers, and terminal operators carry the initial liability. Businesses that use taxed fuel off-highway (farming, construction equipment, stationary industrial use) can recover the tax through a credit or refund.
Alcohol and Tobacco
Beer is taxed at $18.00 per barrel generally, dropping to $3.50 per barrel on the first 60,000 barrels for small brewers producing no more than two million barrels annually. Distilled spirits are $13.50 per proof gallon, with a reduced $2.70 rate on the first 100,000 proof gallons for qualifying producers. Still wines at 16% alcohol or less start at $1.07 per wine gallon, with credits that can drop the effective rate below eight cents per gallon for the smallest producers.2Alcohol and Tobacco Tax and Trade Bureau. Tax Rates Small cigarettes are taxed at $50.33 per thousand, about $1.01 per pack of twenty.3Office of the Law Revision Counsel. 26 USC 5701 – Rate of Tax Large cigars, pipe tobacco, chewing tobacco, snuff, and roll-your-own each have their own rates.
Alcohol and tobacco excise taxes are administered by the Alcohol and Tobacco Tax and Trade Bureau, not the IRS. That means separate registration and separate filings from the Form 720 process described later in this article.
Firearms, Ammunition, and Heavy Trucks
Pistols and revolvers are taxed at 10% of the manufacturer’s or importer’s sale price. Other firearms, plus shells and cartridges, are taxed at 11%.4Alcohol and Tobacco Tax and Trade Bureau. Firearms and Ammunition Taxes and Tax Exemptions These are taxes on the first sale, not the retail markup.
Heavy trucks and trailers carry a 12% tax on the retail sale price. The tax applies to truck chassis and bodies with a gross vehicle weight over 33,000 pounds, trailers and semitrailers over 26,000 pounds, and tractors over 19,500 pounds (or where the combined tractor-trailer weight exceeds 33,000 pounds).5Office of the Law Revision Counsel. 26 USC 4051 – Imposition of Tax on Heavy Trucks and Trailers Sold at Retail Sporting goods like archery equipment and fishing tackle also carry manufacturers taxes at varying rates.
Air Transportation and Communications
Domestic passenger air tickets are taxed at 7.5% of the fare plus a per-segment fee of $5.30 for each leg in 2026.6National Air Transportation Association. ICYMI: IRS Announces 2026 FET Rates Domestic air freight is taxed at 6.25% of the shipping charge.7Federal Aviation Administration. ATTF Excise Tax Rate Structure A 3% tax applies to local telephone service, toll telephone service, and teletypewriter exchange service, collected by the service provider.8Office of the Law Revision Counsel. 26 USC 4251 – Imposition of Tax
Environmental and Petroleum Taxes
Superfund excise taxes cover sales or use of listed chemicals at per-ton rates that vary by substance, and imported substances derived from those chemicals. Both components were reinstated in 2022. A separate petroleum tax applies to domestic crude oil and imported petroleum products: $0.09 per barrel for the Oil Spill Liability Trust Fund plus an inflation-adjusted Hazardous Substance Superfund rate. For 2026 the Superfund rate is $0.18 per barrel, so the combined petroleum tax is $0.27 per barrel.9Internal Revenue Service. Instructions for Form 6627
Wagering
Two taxes stack. First is an annual occupational tax: $50 if the wagering is state-authorized, $500 if not.10Internal Revenue Service. Form 11-C – Occupational Tax and Registration Return for Wagering Second is a tax on the wagers themselves: 0.25% of each wager for state-authorized operations, 2% for unauthorized ones.11Office of the Law Revision Counsel. 26 U.S. Code 4401 – Imposition of Tax
Indoor Tanning and the PCORI Fee
Indoor tanning services carry a 10% excise tax collected from the customer at the time of payment. When tanning is bundled with other services, the provider allocates the charge based on fair market value and applies the 10% only to the tanning portion.12Internal Revenue Service. Excise Tax on Indoor Tanning Services Frequently Asked Questions
Employers with self-funded health plans and insurers with fully insured policies owe the Patient-Centered Outcomes Research Institute (PCORI) fee. For plan years ending October through December 2025, the fee is $3.84 per covered life; for plan years ending January through September 2025, it’s $3.47 per covered life. It’s reported on Form 720 and due July 31 of the year after the plan year ends.13Internal Revenue Service. Patient-Centered Outcomes Research Institute Filing Due Dates and Applicable Rates
Registering Before You Owe: Form 637
If your business produces fuel, manufactures certain chemicals, or otherwise participates in a tax-free sales chain, you need to register with the IRS before you start operating in that role. This is separate from your EIN. Form 637, Application for Registration (For Certain Excise Tax Activities), gives you a registration number that authorizes you to engage in those transactions, including buying or selling tax-free when the rules allow.14Internal Revenue Service. 637 Registration Program
The IRS assigns activity letters that define what each registrant can do. That registration number has to appear on the paperwork for any tax-free transaction, and if you accept a buyer’s number without checking it, you can end up liable for the tax yourself. The IRS runs an online lookup where sellers can verify a buyer’s number and activity letter.15Internal Revenue Service. Excise Tax – Form 637 Registration Status
How to File
Most federal excise taxes are reported on Form 720, the Quarterly Federal Excise Tax Return. One return covers fuel taxes, manufacturers taxes, air transportation, communications, indoor tanning, PCORI, environmental taxes, and more.16Internal Revenue Service. About Form 720, Quarterly Federal Excise Tax Return Form 720 is due on the last day of the month following each calendar quarter: April 30, July 31, October 31, and January 31. A weekend or holiday shifts the deadline to the next business day.17Internal Revenue Service. Instructions for Form 720 – Quarterly Federal Excise Tax Return
Two activities file on their own returns instead. Trucks and buses with a taxable gross weight of 55,000 pounds or more that are registered for highway use owe the heavy highway vehicle use tax on Form 2290. The annual tax runs from $100 at 55,000 pounds up to $550 for vehicles over 75,000 pounds, with $22 increments per additional 1,000 pounds in between.18eCFR. 26 CFR 41.4481-1 – Imposition and Computation of Tax The tax period is July 1 through June 30, and Form 2290 is due August 31 for vehicles first used in July; later first-use months prorate the tax and shift the deadline.19Internal Revenue Service. When Form 2290 Taxes Are Due
Businesses that accept wagers file Form 730 monthly, due the last day of the following month. A return is required every month, even when no wagers were taken.20Internal Revenue Service. Form 730 – Monthly Tax Return for Wagers
Deposits Come Due Twice a Month
Filing quarterly doesn’t mean paying quarterly. Most Form 720 filers with meaningful liability deposit on a semimonthly schedule. Tax incurred in the first fifteen days of a month is due by the 29th of the same month. Tax incurred in the second half is due by the 14th of the following month.21eCFR. 26 CFR 40.6302(c)-1 – Deposits
Small filers get a break. If your total Part I tax on Form 720 is $2,500 or less for the quarter, you can skip the semimonthly deposits and pay when you file.17Internal Revenue Service. Instructions for Form 720 – Quarterly Federal Excise Tax Return All deposits go through the Electronic Federal Tax Payment System (EFTPS); mailed checks aren’t accepted for deposit-level payments.
Exemptions, Credits, and Refunds
Falling into a taxable category doesn’t mean every transaction is taxed. Exports are broadly exempt if the seller keeps shipping records that prove the goods left the country. Sales to state and local governments for their own use are generally exempt. Fuel used for farming or off-highway business purposes is not subject to the fuel excise tax. Exemptions aren’t automatic: the buyer typically provides a certificate of exemption that includes their Form 637 registration number, and the seller keeps it on file.22Internal Revenue Service. About Publication 510, Excise Taxes
When tax has already been paid at the terminal on fuel that later gets used for a qualifying non-taxable purpose, the business can recover it. Form 8849, Claim for Refund of Excise Taxes, is the main route.23Internal Revenue Service. About Form 8849, Claim for Refund of Excise Taxes A business that already files Form 720 can take the credit directly on its quarterly return, reducing what it owes for that period.
Records You Need to Keep
The IRS expects records that back up every return, every exemption certificate, and every credit or refund claim. The default retention window is three years from the date the return was filed. Underreport gross taxable transactions by more than 25% and the window stretches to six years. A fraudulent return, or a return that was never filed, has no statute of limitations at all.24Internal Revenue Service. Topic No. 305, Recordkeeping
In practice: hold onto purchase invoices, exemption certificates from buyers, fuel usage logs for off-highway credit claims, your Form 637 registration paperwork, and EFTPS deposit confirmations. Fuel credits for off-highway use are a common audit target, and most disputes turn on whether the usage records actually show what the taxpayer claims.
What Non-Compliance Costs
Missed deposits trigger a failure-to-deposit penalty scaled to how late the deposit is. It starts at 2% for one to five days late, moves to 5% for six to fifteen days, and reaches 10% past fifteen days. If the IRS sends a notice and the deposit still isn’t paid within ten days, the penalty climbs to 15%.
A late return carries its own penalty: 5% of the unpaid tax for each month or partial month the return is overdue, capped at 25%.25Internal Revenue Service. Failure to File Penalty Interest runs on unpaid tax and penalties from the original due date. Willful failure to collect, account for, or remit excise taxes can also be prosecuted criminally, with fines and imprisonment on the table. Semimonthly deposit deadlines plus stacking penalties mean a short delay can get expensive quickly.