Instructions for Form 720 (1/2007)

General Instructions

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

What's New

Changes Effective for the First Calendar Quarter of 2007

Domestic segment tax. For amounts paid for each domestic segment of taxable transportation of person by air (IRS No. 26), the domestic segment tax is $3.40 per segment for transportation that begins in 2007.

Use of international air travel facilities. The tax on use of international air travel facilities (IRS No. 27) has increased for amounts paid during 2007. For flights that begin or end in the United States, the tax is $15.10 per person. For domestic segments that begin or end in Alaska or Hawaii (applies only to departures), the tax is $7.50 per person.

Diesel fuel used in trains (IRS No. 71). The tax rate on dyed diesel fuel used in trains is $.001. The claim rate for undyed diesel fuel used in trains is $.243.

Taxable vaccines. Meningococcal and human papillomavirus vaccines have been added to the list of taxable vaccines. The effective date is for sales or uses after January 31, 2007. See page 6 for more information.

Arrow shafts. The tax on arrow shafts (IRS No. 106) is $.42 per arrow shaft.

Inland waterways fuel use tax (IRS No. 64). The inland waterways fuel use tax is $.201.

Qualified blood collector organizations. Qualified blood collector organizations are exempt from many federal excise taxes including the tax on fuels, tires, communication services, and for heavy vehicles (except that the exemption from the highway use tax applies after June 30, 2007). Each blood collector organization must be registered by the IRS as a condition for applying for the exemption (or credit or payments). To apply for registration, see Form 637, Application for Registration (For Certain Excise Tax Activities). Type of use 11, Exclusive use by a qualified blood collector organization, has been added to the Type of Use Table on page 10. In the future, see Pub. 510 for information on these exempt organizations.

Kerosene used in aviation. Ultimate purchasers of kerosene may claim a credit for kerosene used in noncommercial aviation (except nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) on line 5c or 5d if they have not waived the right to the claim.

Alternative fuel credit. See page 13 for new rules under How to claim the credit.

Reminders

Alternative fuel credit and alternative fuel mixture credit. You must be a registered alternative fueler to claim the alternative fuel credit and alternative fuel mixture credit. If you are not registered, you cannot make a claim at this time. Use Form 637 to apply for registration. After you are registered by the IRS, file Form 720X to claim the credit for this period. See Line 14. Alternative Fuel Credit and Alternative Fuel Mixture Credit, for more information.

Liquefied petroleum gas (LPG). LPG (formerly IRS No. 61) is now considered an alternative fuel. The tax on LPG is reported on the line for IRS No. 112 at $.183 per gallon.

Compressed natural gas (CNG). The tax on CNG (formerly IRS No. 101) is reported on the line for IRS No. 120 at $.183 per gasoline gallon equivalent (GGE). The GGE of CNG, for excise tax purposes, is 126.67 cubic feet.

Electronic Payment

Now, more than ever before, businesses can enjoy the benefits of paying their federal taxes electronically. Whether you rely on a tax professional or handle your own taxes, the IRS offers you a convenient program to make it easier. Spend less time on taxes and more time running your business. Use the Electronic Federal Tax Payment System (EFTPS) to your benefit. For information on EFTPS, visit www.eftps.gov or call the EFTPS Customer Service at 1-800-555-4477. Also see How To Make Deposits on
page 7.

Purpose of Form

Use Form 720 and attachments to report liability by IRS No. and pay the excise taxes listed on the form.

When To File

You must file a return for each quarter of the calendar year as follows:

Quarter covered	Due by
Jan., Feb., Mar.	April 30
Apr., May, June	July 31
July, Aug., Sept.	October 31
Oct., Nov., Dec.	January 31

If any due date for filing a return falls on a Saturday, Sunday, or legal holiday, you may file the return on the next business day.

Send your return to the IRS using the U.S. Postal Service or a designated private delivery service to meet the “timely mailing as timely filing/paying” rule. See Private Delivery Services on page 2.

Floor stocks tax. Report the floor stocks tax on ozone-depleting chemicals (ODCs), IRS No. 20, on the return due by July 31 of each year. The tax payment is due by June 30. See Floor Stocks Tax on page 7.

Where To File

Send Form 720 to the Internal Revenue Service Center, Cincinnati, OH 45999-0009.

How To File

If you are not reporting a tax that you normally report, enter a zero on the appropriate line in Part I or II (Form 720). Also, if you have no tax to report, write “None” on line 3, Part III; sign and date the return.

If you have adjustments to liabilities reported for prior quarters, see Form 720X, Amended Quarterly Federal Excise Tax Return. Do not enter adjustments on
Form 720.

If you attach additional sheets, write your name and EIN on each sheet.

Final Return

File a final return if you have been filing Form 720 and you:

Go out of business, or
Will not owe excise taxes that are reportable on Form 720 in future quarters.

If you are only filing to report zero tax and you will not owe excise tax in future quarters, check the final return box above Part I of Form 720. The IRS will then stop sending Package 720 to you each quarter.

Recordkeeping

Keep copies of your tax return, records, and accounts of all transactions to show that the correct tax has been paid. Keep records to support all claims and all exemptions at least 4 years from the latest of the date:

The tax became due,
You paid the tax, or
You filed a claim.

Penalties and Interest

Avoid penalties and interest by filing returns and depositing and paying taxes when due. The law provides penalties for filing a return late; depositing taxes late; paying taxes late; willfully failing to collect and pay tax or file a return; negligence; and fraud. These penalties are in addition to the interest charged on late payments. The penalty for filing a return late will not be imposed if you can show that the failure to file a timely return is due to reasonable cause. Those filing after the due date must attach an explanation to the return to show reasonable cause.

Trust fund recovery penalty. If communications and air transportation taxes are collected but not paid to the United States Treasury or are willfully not collected, the trust fund recovery penalty may apply. The penalty is the full amount of the unpaid tax.

The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so.

A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an employee of a sole proprietorship, an accountant, or a volunteer director/trustee. A responsible person may also include one who signs checks for the business or otherwise has authority to cause the spending of business funds.

Willfully means voluntarily, consciously, and intentionally. A responsible person acts willfully if he or she knows the required actions are not taking place.

Additional Information

You may find the following products helpful when preparing Form 720 and any attachments.

Publication 510, Excise Taxes for 2007, contains definitions and examples that will help you prepare
Form 720. Pub. 510 also contains information on fuel tax credits and refunds previously in Pub. 378.
Publication 509, Tax Calendars for 2007, has deposit and payment due dates for all federal excise taxes.
Notice 2005-4. You can find Notice 2005-4 on page 289 of Internal Revenue Bulletin 2005-2 at www.irs.gov/pub/irs-irbs/irb05-02.pdf.
Notice 2005-24. You can find Notice 2005-24 on page 757 of Internal Revenue Bulletin 2005-12 at www.irs.gov/pub/irs-irbs/irb05-12.pdf.
Notice 2005-62. You can find Notice 2005-62 on page 443 of Internal Revenue Bulletin 2005-35 at www.irs.gov/pub/irs-irbs/irb05-35.pdf.
Notice 2005-80. You can find Notice 2005-80 on page 953 of Internal Revenue Bulletin 2005-46 at www.irs.gov/pub/irs-irbs/irb05-46.pdf.
Notice 2006-50. You can find Notice 2006-50 on page 1141 of Internal Revenue Bulletin 2006-25 at www.irs.gov/pub/irs-irbs/irb06-25.pdf.
Notice 2006-92. You can find Notice 2006-92 on page 774 of Internal Revenue Bulletin 2006-43 at www.irs.gov/pub/irs-irbs/irb06-43.pdf.
Notice 2007-11. You can find Notice 2007-11 on page 405 of Internal Revenue Bulletin 2007-5 at www.irs.gov/pub/irs-irbs/irb07-05.pdf.

You may also call the business and specialty tax line at 1-800-829-4933 with your excise tax questions. The hours of operation are Monday - Friday, 7:00 a.m. to 10:00 p.m. local time.

Private Delivery Services

You can use certain private delivery services designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. These private delivery services include only the following:

DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next Day 3:00 pm, and DHL 2nd Day Service.
Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.
United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.

Photographs of Missing Children

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

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