Let’s understand how to file the fuel excise taxes for your business through Form 720 manually.
If your business uses diesel for transportation and other purposes, it is generally taxed at the federal level. One such event is the removal of diesel from the terminal rack.
A terminal is a medium that acts as a distributing or storage facility for any taxable fuel that gets supplied from a vessel, whereas a rack is a mechanism that transports the fuel from a terminal.
On removing the diesel from the terminal the position holder is taxed. A position holder is the one who holds the inventory related to taxable fuels, which is in the records of the terminal operator.
Here, the taxable events could be
If the refiner or owner of taxable fuel is not a taxable fuel registrant immediately before the removal, the bulk transfer of taxable fuel is subject to specific conditions.
The removal of taxable fuel from the rack is regulated under separate provisions.
After September 30, 1995, the bulk transfer removal of a gasohol batch from an approved refinery is subject to certain conditions if the refiner, about the removal, considers itself a person not registered under section 4101 of Form 720 (refer to § 48.4101–1(a)).
A biodiesel mixture contains both diesel and biodiesel in it. If you sell or use it in your business, you must file the fuel excise tax. This removal is apart from the terminal rack.
The tax rate per gallon on diesel for IRS No 60 A, B, and C is $0.244.
Diesel-water emulsion is a special type of fuel for diesel engines. It's a mix of diesel and water that helps reduce pollution from diesel engines.
The diesel emulsion water attracts a reduced rate of tax, and if you are liable for removing this fuel at the terminal or any other taxable event, you can enter the count of gallons in this line.
To get a discounted rate, your special diesel emulsion water needs to have at least 14% water. The additive you add must be approved by a U.S. company with the EPA. You also have to be registered as a taxpayer with the IRS. If you don't meet these rules, you need to report your diesel emulsion water like regular diesel when selling, using, or removing it.
The rate for this is $0.198 per gallon.
Dyed diesel is diesel fuel with a color added to show it's not meant for regular road vehicles. The dye helps distinguish it from the taxed diesel used for public roads.
LUST Tax, which stands for Leaking Underground Storage Tank Tax, is a small fee ($0.001 per gallon) applied to dyed diesel unless it's intended for export.
Similar to dyed diesel, even kerosene is dyed and attracts LUST tax at a fee of $0.001 per gallon.
Any other removal, such as kerosene for feedstock, gasoline blend stocks, or the sale or use of diesel or kerosene in Alaska, must be reported with a number of gallons in line 119 of Form 720. It is taxed at $0.001.
Now it is about filing tax for the removal of kerosene from the terminal rack, just like in diesel. For that, you need to report the number of gallons on line 35 a. It is also applicable to tax at a rate of $0.244.
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As mentioned in the diesel section about other taxable events, if the removal of kerosene has taken place in such events, report it in line 35 b of Form 720. It is taxed at $0.244, like diesel.
The removal of kerosene for non-commercial aviation from the terminal to a tank of aircraft must be reported on line 69 of Form 720. It is taxed at $0.219 per gallon.
Similarly, if the kerosene is removed from the terminal to the tank of a commercial aviation aircraft, it must be reported on line 77 of Form 720. It is taxed at $0.043 per gallon.
In the nontaxable use of the removal of kerosene from a terminal to the tank of an aircraft in aviation, report this on line 111 of Form 720. This is a LUST tax and is taxed at $0.001 per gallon.
Any other fuel delivered in the tank of a train, motor vehicle, or motor boat that is mentioned below. It is taxed accordingly, as given and reported in line 79 of Form 720.
If multiple rates apply to you, then attach a schedule mentioning the gallons and rates and keep the space empty in this section.
In the removal of gasoline from the terminal rack, it must be reported under 62 a. A tax of $0.184 is applicable on this fuel.
On all the other taxable events, just like mentioned in the diesel section, the removal of gasoline in such events must be reported on 62 b. In the blending of alcohol with gasoline outside the terminal or bulk transfer, even this must be reported in line 62 b of Form 720 with the number of gallons of alcohol.
This is taxed at $0.184.
Fractional aircraft ownership is when several individuals jointly share the expenses and usage of buying and operating an aircraft.
A surtax applies to the fuel used in an aircraft participating in a fractional ownership program, as defined, after March 31, 2012.
The person in charge of the fractional ownership program is responsible for the surtax. This needs to be reported on Line 13. It is taxed at $0.141 per gallon.
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If you are using aviation gasoline, this must be reported on line 14 of Form 720. This is taxed at $0.194 per gallon.
This is one of the liquids that is not taxed under section 4081. If this is supplied to the fuel tank of a boat or motor vehicle or is used to make bulk sales, it is taxed. It must be reported on line 112 and is taxed at $0.183 per GGE.
Similarly, like LPG, P series fuel is an alternative fuel. It must be reported on line 118 of Form 720 and is taxed at $0.184 per GGE.
An alternate fuel, if used, must be reported on line 120. It is taxed at $0.183 per GGE.
Another alternative fuel must be reported on line 121 of Form 720 if used. It is taxed at $0.184 per gallon.
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It is an alternative fuel as well, which must be reported on line 122 on usage. It is taxed at $0.244 per gallon.
This is also an alternative fuel, which must be reported on line 123. It is taxable at $0.244 per gallon.
LNG is another alternative fuel other than the other taxable ones under section 4081. If your business uses this, it must be reported on line 124. It is taxable at $0.243 per DGE.
Have you been filing fuel excise taxes accurately? Fuel tax is among the comprehensive sections in Form 720 filing. Manual filing may lead to errors. Go online for convenience!