The Form 720 Quarterly Federal Excise Tax Return is the IRS form businesses use to report and pay federal excise taxes every three months. Excise taxes are not income taxes: they apply to specific products and activities like fuel pulled from a terminal, airline tickets, sport fishing gear, indoor tanning, and health plan coverage, and the revenue often flows into dedicated trust funds for highways, airports, and environmental cleanup. If your business collects or owes any of these taxes, you file Form 720 four times a year, and for most of the taxes on it you also make deposits twice a month in between.
What Form 720 Covers
The form groups dozens of individual excise taxes into broad categories. Whether one applies to you depends on what you sell, produce, or provide.
Environmental taxes cover the domestic petroleum Superfund tax, imported petroleum products, oil spill liability, ozone-depleting chemicals, and imported chemical substances. They are computed on Form 6627 and carried over to Form 720.
Communications and air transportation taxes include a 3% tax on local telephone and teletypewriter exchange service, a 7.5% tax on domestic passenger air transportation, a per-segment domestic flight charge of $5.30 in 2026, and a 6.25% tax on air cargo. Airlines and telecom providers collect these from customers and remit them.
Fuel taxes apply when taxable fuel is removed from a terminal rack or sold outside the bulk transfer system. Federal rates are $0.244 per gallon for diesel and kerosene and $0.184 per gallon for gasoline, and they feed the Highway Trust Fund.
Manufacturers’ taxes hit certain goods at the point of sale by the manufacturer, producer, or importer. Sport fishing equipment is taxed at 10% of the sale price (capped at $10 per rod or pole), electric outboard motors and tackle boxes at 3%, and truck and trailer chassis and bodies sold at retail at 12%. Heavy-duty tires are taxed at $0.0945 per 10 pounds of maximum rated load capacity above 3,500 pounds, with a lower rate for bias-ply and super single tires.
Other excise taxes include a 10% tax on indoor tanning services, collected from the customer.
The form is divided into two parts. Part I contains the taxes above, most of which follow semimonthly deposit rules. Part II contains taxes generally paid with the return itself, with no advance deposits required. The most common Part II item is the Patient-Centered Outcomes Research Institute (PCORI) fee, owed by health insurance issuers and self-insured plan sponsors based on the average number of covered lives. For plan years ending January through September 2025, the rate is $3.47 per covered life; for plan years ending October through December 2025, it is $3.84. The PCORI fee is reported once a year, on the second-quarter Form 720 due July 31. Part II also covers the inland waterways fuel use tax, the ozone-depleting chemicals floor stocks tax, and the excise tax on corporate stock repurchases (reported using Form 7208).
Who Must File
You file Form 720 if you are liable for, or responsible for collecting, any excise tax listed in Part I or Part II. That includes fuel terminal operators, manufacturers of taxable goods, airlines and telecom companies, indoor tanning providers, and health plan sponsors owing the PCORI fee.
One rule catches filers off guard: once you file Form 720 for any quarter, you have to keep filing every quarter, even when you owe nothing, until you submit a final return telling the IRS to stop. Skipping a zero-liability quarter can generate notices and processing delays. The exception is a business whose only excise tax obligation is the annual PCORI fee: it files only in the second quarter.
Quarterly Filing Deadlines
Form 720 is due on the last day of the month following the end of each calendar quarter:
- First quarter (January–March): April 30
- Second quarter (April–June): July 31
- Third quarter (July–September): October 31
- Fourth quarter (October–December): January 31
When a due date falls on a Saturday, Sunday, or legal holiday, it moves to the next business day. You can file electronically through an IRS-approved e-file provider or mail a paper return to the IRS processing center in Ogden, Utah. Electronic filing is not mandatory for Form 720, but it gives you immediate confirmation of receipt.
If you send a paper check with the return, include Form 720-V, the payment voucher, so the IRS credits your account correctly. A check with the return covers only the balance due with the return itself. Any semimonthly deposits owed during the quarter have to go through the Electronic Federal Tax Payment System (EFTPS).
Semimonthly Deposits
For Part I taxes, you generally cannot wait until the quarterly filing deadline to pay. The IRS requires semimonthly deposits through EFTPS throughout the quarter. This is the part of Form 720 compliance that new filers most often miss.
Each month splits into two semimonthly periods: the 1st through the 15th, and the 16th through the last day. Under the regular deposit method, each deposit is due 14 days after the semimonthly period ends. So a deposit for the first half of a month is due by the 29th, and a deposit for the second half is due by the 14th of the following month.
Small filers get a break. If your total Part I tax liability for the quarter is $2,500 or less, no semimonthly deposits are required and you simply pay with the return.
Part II taxes are paid with the return, so semimonthly deposits do not apply to them.
The Safe Harbor Rule
If your liability moves around from quarter to quarter, the safe harbor rule can protect you from deposit penalties. You qualify by depositing at least one-sixth of the net tax liability you reported for the look-back quarter (the second calendar quarter before the current one) for each semimonthly period. Every deposit has to be timely, and any remaining balance has to be paid by the Form 720 due date. The safe harbor does not cover any tax that was not imposed during the look-back quarter.
How To Complete the Return
Preparing Form 720 starts with pulling the operational data behind each tax: gallons of fuel, dollar amounts of taxable sales, total receipts from taxable services, and covered lives for the PCORI fee. Each line on the form corresponds to a specific tax identified by an IRS number. You multiply the taxable base by the rate shown on that line.
For Part I taxes, you also complete Schedule A, which breaks your quarterly liability into semimonthly periods. Schedule A is what drives your deposit obligations, so the numbers on it should match what you actually paid through EFTPS during the quarter. Part II taxes go directly on the form without a semimonthly breakdown.
Fuel Tax Credits on Schedule C
Businesses that buy taxed fuel and use it for certain nontaxable purposes can claim a credit or refund on Schedule C, filed as part of Form 720. The credit returns the excise tax you already paid on fuel that was never used on public highways. Qualifying uses include:
- Fuel consumed on a farm for farming purposes
- Off-highway business use in equipment or vehicles not registered for highway travel
- Fuel burned in boats engaged in commercial fishing
- Fuel used in intercity, local, and school buses
- Fuel used in U.S. government highway vehicles not driven on highways
- Fuel exported or shipped out of the country
- Exclusive use by nonprofit educational organizations, states, or qualified blood collector organizations
Deadlines for Schedule C claims depend on the type of claim. Fuel-use claims on lines 1 through 6 must be filed during the first quarter following the last quarter of your income tax year that the claim covers. Claims filed by registered ultimate vendors have their own deadline: the last day of the first quarter following the earliest quarter included in the claim. For tire credits and other miscellaneous claims, you generally have three years from the date you filed the return or two years from the date the tax was paid, whichever is later.
Penalties
Form 720 carries three penalty categories, and they can stack.
Late filing. Filing after the deadline costs 5% of the unpaid tax for each month or partial month the return is late, capped at 25%.
Late payment. Paying the tax late, even with a timely-filed return, adds a separate penalty of 0.5% of the unpaid tax per month, rising to 1% per month if you still have not paid within 10 days after the IRS issues a notice of intent to levy. The combined cap is 25%. When both late-filing and late-payment penalties apply for the same month, the IRS reduces the filing penalty by the payment penalty amount so the same month is not fully double-charged.
Failure to deposit. Missed semimonthly deposits are penalized based on how late they arrive:
- 1 to 5 days late: 2% of the underpayment
- 6 to 15 days late: 5% of the underpayment
- More than 15 days late: 10% of the underpayment
- Still unpaid 10 days after the first IRS delinquency notice: 15% of the underpayment
The deposit penalty is the one that surprises most first-time Form 720 filers. Many assume they can pay the whole quarter’s tax with the return and only learn about semimonthly deposits after a penalty notice arrives. Meeting the safe harbor threshold is the simplest way to stay clear of this penalty when your liability moves around.
Ending Your Filing Obligation
If you close the business or stop having any excise tax activity to report, check the “Final Return” box above Part I on your last filing. Until you do, the IRS will keep expecting a Form 720 from you every quarter and may send notices when one does not arrive. If you have been filing zero-liability returns just to stay current, checking the final return box on a zero return ends the cycle cleanly.