Instructions For Form 720 - Quarterly Federal Excise Tax Return

deposit of taxes for each semimonthly period in the

Alternative method taxes

Enter the tax included in amounts billed or

calendar quarter is at least

(16.67%) of the tax liability

tickets sold during the period beginning

you would have had for the look-back quarter if the

September 1 and ending September 10/11

increased rate of tax had been in effect for that look-back

in box S, Special rule for September box

on the 4th quarter return.

quarter;

•

Any quarter if liability includes any tax not in effect

For the remaining days in the September period,

throughout the look-back quarter; or

•

report the liability as follows:

For deposits under the alternative method, any quarter

if liability includes any tax not in effect throughout the

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

Regular method taxes

Enter the liability for the period beginning

quarter.

September 26/27 and ending September

30 in box F.

Requirements to be met. For the safe harbor rule to

Alternative method taxes

Enter the tax included in the amounts billed

apply, you must:

•

or tickets sold for the period beginning

Make each deposit timely at an authorized financial

September 11/12 and ending September

institution and

15 in box M of the 4th quarter return.

•

Pay any underpayment for the current quarter by the

Enter the tax included in amounts billed or

due date of the return.

tickets sold during the period beginning

September 16 and ending September 30 in

If you meet the requirements and use the safe harbor

box N of the 4th quarter return.

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

The IRS may withdraw the right to make deposits

of tax using the safe harbor rule from any person

Schedule T—Two-Party Exchange

not complying with these rules.

CAUTION

Information Reporting

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

delivering person, is liable for the tax imposed on the

Schedule A—Excise Tax Liability

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

How to complete. Complete Schedule A to record net

person are both taxable fuel registrants and all of the

tax liabilities for Part I taxes for each semimonthly period

following occur.

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

•

The transaction includes a transfer from the delivering

The following table will help you determine which

person, who holds the inventory position for the taxable

boxes to complete on Schedule A.

fuel in the terminal as reflected in the records of the

terminal operator.

AND enter the net

•

The exchange transaction occurs before or at the

IF you are reporting under THEN you report on tax liability in

the...

line...

boxes...

same time as completion of removal across the rack by

the receiving person.

Regular method

A – F

•

The terminal operator in its records treats the receiving

Alternative method

M – R

person as the person that removes the product across

the terminal rack for purposes of reporting the transaction

If you are reporting more than one type of tax on

on Form 720-TO, Terminal Operator Report.

lines 1 and 2:

•

The transaction is the subject of a written contract.

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

semimonthly period and

Information reporting. Schedule T — Two-Party

2. Enter the total in the applicable box.

Exchange Information Reporting, is used to report

gallons of taxable fuel:

•

Additional rules. Report communications and air

Received in a two-party exchange within a terminal.

transportation taxes based on:

These gallons must also be included on the appropriate

•

Actual collections on line 1.

line on page 1 of Form 720, or

•

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

Delivered in a two-party exchange contemporaneous

tax to report for a semimonthly period is the net amount

with a removal across the rack.

that is considered collected during that period.

Enter all gallons of fuel received or delivered in a

Example. The amounts billed for communications

two-party exchange within a terminal for the applicable

services from June 1-15, 2005, are considered collected

fuel.

during the period July 1-7, 2005, and are reported for the

3rd quarter of 2005 on Schedule A in box M, not the 2nd

quarter of 2005.

Schedule C—Claims

Reporting tax liability under the special September

Complete all information requested for each line,

rule. An additional reporting is required under the

including month income tax year ends and period of

special September rule (for the period shown in the chart

claim, or for line 14, earliest and latest date of sale

above) as follows:

included in the claim. Your claim will be disallowed if you

do not follow the required procedures or do not provide

Regular method taxes

Enter the tax liability for the period

all the required information. Also, you are certifying to the

beginning September 16 and ending

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

September 25/26 in box G, Special rule for

claim. See Pub. 378 and Pub. 510 for more information.

September.

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Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2005 Page 9

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