21.7.8  Excise Taxes

Manual Transmittal

September 17, 2013

Purpose

(1) This transmits revised IRM 21.7.8, Business Tax Returns and Non-Master File Accounts - Excise Taxes.

Material Changes

(1) Various editorial changes have been made throughout this IRM.

(2) IRM 21.7.8.3.4 - IPU 13U1112 issued 06–18–2013 - Added new content for Integrated Automation Technologies (IAT) tools.

(3) IRM 21.7.8.4.1.4.2 - IPU 12U1858 issued 11-20-2012 - Remove Telephone Excise Tax Refund (TETR) references.

(4) IRM 21.7.8.4.1.4.3 - IPU 13U0382 issued 02-20-2013 - Update rates per Rev. Proc. 2012-41 (Inflation Adjusted Items for 2013).

(5) IRM 21.7.8.4.1.4.7 - IPU 13U0086 issued 01-08-2013 - Add medical device tax rate to table.

(6) IRM 21.7.8.4.1.4.7.4 - IPU 13U0086 issued 01-08-2013 - Add new subsection for Medical Device Tax.

(7) IRM 21.7.8.4.1.5.1, Patient-Centered Outcomes Research (PCOR) - Add subsection for Patient Protection and Affordable Care Act (ACA), Section 6301, Public Law 111–148.

(8) IRM 21.7.8.4.1.5.2 - IPU 13U0382 issued 02-20-2013 - Update arrow shafts rate per Rev. Proc. 2012-41 (Inflation Adjusted Items for 2013).

(9) IRM 21.7.8.4.1.6 - IPU 13U0382 issued 02-20-2013 - Update section with legislative action from American Taxpayer Relief Act of 2012 (Pub. L. 112-240).

(10) IRM 21.7.8.4.2.1 - IPU 12U1590 issued 09-13-2012 - Remove paragraph (4) note and move content to new paragraph (5). Add paragraph (6) to include Notice 2012-57, Certain Filing Changes for Heavy Highway Use Tax Return, extension information.

(11) IRM 21.7.8.4.2.3 - IPU 12U1603 issued 09-19-2012 - Add Treas. Reg. 41-6001-2 acceptable substitute information to subsection.

(12) IRM 21.7.8.4.2.4 - IPU 12U1603 issued 09-19-2012 - Add reference to acceptable proof of payment substitutes.

(13) IRM 21.7.8.4.2.4 - IPU 13U0086 issued 01-08-2013 - Add exception for Form 2290, Schedule 1, replacement request.

(14) IRM 21.7.8.4.2.15(3) - IPU 13U0086 issued 01-08-2013 - Add note regarding Form 2290 L- Freeze Code.

(15) IRM 21.7.8.4.2.15.1(4) - IPU 13U1112 issued 06–18–2013 - Updated paragraph with claim clarification and added note.

(16) IRM 21.7.8.4.2.15.1(5) - IPU 13U0086 issued 01-08-2013 - Add note regarding Form 2290 L- Freeze Code.

(17) IRM 21.7.8.4.2.20(5) - IPU 13U0086 issued 01-08-2013 - Add note regarding Form 2290 L- Freeze Code.

(18) IRM 21.7.8.4.5.4 - IPU 13U0382 issued 02-20-2013 - Update section with legislative action from American Taxpayer Relief Act of 2012 (Pub. L. 112-240).

(19) IRM 21.7.8.4.5.7.11(2) - IPU 13U1112 issued 06–18–2013 - Updated paragraph with claim clarification.

(20) IRM 21.7.8.4.5.7.11(4) - IPU 13U0086 issued 01-08-2013 - Add paragraph regarding Form 2290 L- Freeze Code.

(21) IRM 21.7.8.4.6 - IPU 12U1725 issued 10-15-2012 - Delete subsection regarding Leaking Underground Storage Tank (LUST) double taxation claims.

(22) IRM 21.7.8.4.7 - IPU 13U0382 issued 02-20-2013 - Update section title to Specific Claims and Other Issues. Add new content for the American Taxpayer Relief Act of 2012 retroactive fuel claims.

Effect on Other Documents

IRM 21.7.8 dated August 24, 2012 (effective August 24, 2012) is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs): 12U1590, 12U1603, 12U1725, 12U1858, 13U0086, 13U0382, and 13U1112

Audience

This IRM is intended for Wage and Investment, Customer Account Services, and Compliance employees who handle issues involving Business Master File Excise Tax Returns.

Effective Date

(09-17-2013)


Ivy S. McChesney
Director, Accounts Management
Wage and Investment Division

21.7.8.1  (09-17-2013)
Overview of Excise Taxes

  1. This section contains procedures and guidelines for resolving excise tax phone and paper inquiries centralized at the Cincinnati Campus.

  2. The federal government levies excise taxes to finance general government activities and specific programs. Excise taxes are assessed on the sale, use, or inventory of various types of goods, services, or activities. The taxes may be imposed at the time of the sale by the manufacturer, the sale by the retailer, or use by the consumer. All or a portion of the amounts paid are deposited in one of the following trust funds:

    • Highway Trust Fund

    • Airport and Airway Trust Fund

    • Black Lung Disability Trust Fund

    • Leaking Underground Storage Tank Trust Fund

    • Sport Fish Restoration and Boating Trust Fund

    • Vaccine Injury Compensation Trust Fund

    • Inland Waterways Trust Fund

    • Oil Spill Liability Trust Fund

    • Patient-Centered Outcomes Research Trust Fund

  3. Since there are numerous legislative changes to excise tax law and procedures throughout the tax year, the procedures in this IRM correlate with the excise tax forms and publications.

21.7.8.2  (10-01-2011)
Excise Tax Forms and Publications

  1. The following excise tax returns and claims are processed at the Cincinnati Campus:

    • Form 11-C, Occupational Tax and Registration Return for Wagering

    • Form 637, Application for Registration (For Certain Excise Tax Activities)

    • Form 720, Quarterly Federal Excise Tax Return

    • Form 720X, Amended Quarterly Federal Excise Tax Return

    • Form 720-TO, Terminal Operator Report

    • Form 720-CS, Carrier Summary Report

    • Form 730, Monthly Tax Return for Wagers

    • Form 2290, Heavy Highway Vehicle Use Tax Return

    • Form 6197, Gas Guzzler Tax

    • Form 6627, Environmental Taxes

    • Form 8849, Claim for Refund of Excise Taxes (Seven Schedules)

  2. The Publication 510, Excise Taxes, provides information on excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, and other forms. In addition, it covers fuel tax credits and refunds. This publication does not cover Form 2290, Heavy Highway Use Tax Return, Form 11C, Occupational Tax and Registration Return for Wagering, or Form 730, Monthly Tax Return for Wagers. The information on heavy highway vehicle use and wagering tax can be found in the form instructions.

21.7.8.3  (09-17-2013)
Excise Tax Centralization

  1. Forward all centralized excise claims, returns, or adjustment requests to the Cincinnati Campus for processing. The following address should be used for internal mail routing:

    Internal Revenue Service
    Excise Operations, Stop 5701G
    201 W. Rivercenter Blvd.
    Covington, KY 41011

  2. The Form 4136, Credit for Federal Tax Paid on Fuels, Form 8864, Biodiesel and Renewable Diesel Fuels Credit, and Form 6478, Credit for Alcohol Used as Fuel, are not centralized at the Cincinnati Campus. These forms are attached to an income tax return and processed at the Submission Processing Center where the taxpayer files the related income tax return. The related correspondence and amended income tax returns are processed at the appropriate campus.

  3. The Form 4136 Individual Master File (IMF) processing procedures are under IRM 21.6.3.4.2.6.1, Fuel Tax Claims, and the Business Master File (BMF) processing procedures are under IRM 21.7.4.4.9.1, Form 4136, Credit for Federal Tax Paid on Fuels.

  4. See IRM 21.6.3.4.1.11, Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit, or IRM 21.7.4.4.8.3.3, Form 6478, Alcohol and Cellulosic Biofuels Fuels Credit (Including Second Generation Biofuel), for Form 6478 procedures.

21.7.8.3.1  (09-17-2013)
CIRSC's Excise Tax Functions and Phone Numbers

  1. Call site Customer Service Representatives (CSR) may prepare an e-4442 or transfer the call as follows:

    If ... Then ...
    Tax Law issues relating to Excise taxes Transfer #92135
    Installment Agreement/Reinstatement Transfer #92030
    Account issues related to Excise taxes Transfer #90284

    Note:

    Advise the caller that you are going to attempt to transfer the call to the Excise toll-free number and provide the number, 1–866–699–4096, to the caller. If the call does not go through, they can dial that number directly (See hours of operation in (5) below).

    Caution:

    If you misroute a call to Excise, they cannot transfer the caller to another number. They must instruct the taxpayer to hang up and dial the correct area. Excise cannot transfer calls.

    Tax Law issues relating to Affordable Care Act (ACA) Excise Tax, Indoor Tanning Services, Medical Device, and Patient-Centered Outcomes Research (PCOR) Trust Fund Fee Transfer #92113
  2. Centralized Excise Operations at the Cincinnati Campus cannot answer payment installment inquiries or initiate installment agreements (Status 60 accounts). Route installment agreement calls to A-92030.

    Note:

    Do not send the Form 2290 filer a stamped Schedule 1 after the first installment agreement payment. The tax must be paid in full before a stamped Schedule 1 can be sent to the taxpayer to register their vehicles. See IRM 21.7.8.4.2.5, Taxpayer Payment, and Form 2290 instructions for more information.

  3. The option to pay the tax in installments (installment privilege, status 20), was eliminated beginning tax year July 1, 2005. The tax must be paid in full with Form 2290 or the taxpayer will receive a balance due notice which will include applicable penalties and interest.

  4. Before disclosing any tax information, you must be sure you are speaking with the taxpayer or authorized representative. See the Taxpayer Authentication guidelines in IRM 21.1.3.2, General Disclosure Guidelines. Also, before leaving any messages on a taxpayer's answering machine, review IRM 11.3.2.6, Methods for Communications of Confidential Information. Fax procedures contained in IRM 11.3.1.11, Facsimile Transmission of Tax Information, must be reviewed prior to faxing confidential information to the taxpayer.

  5. The Excise Operation phone numbers are listed below:

    If taxpayer is calling from: Then they may call this number:
    The United States 1-866-699-4096 (toll-free)
    Canada or Mexico 1-859-669-5733 (not toll-free)

    Note:

    The hours of operation are Monday through Friday, 8:00 a.m. to 6:00 p.m. EST. Calls cannot be transferred to Centralized Excise at any other time. Customers cannot leave a message.

  6. If you can help the customer with general issues, then you may answer the customer's question and do not have to transfer the call to Excise Operations. Examples of general issues include, but are not limited to:

    • Credit transfers

    • Where to send Excise forms

    • Payment inquiry

    • Balance due, etc.

      Note:

      Beginning July 1, 2005, the installment privilege was repealed for the Form 2290, Heavy Highway Vehicle Use Tax Return. CSRs may transfer a misapplied payment to a Form 2290, account (Master File Tax Account (MFT) 60), and do not have to transfer the call to Excise. If you transfer a misapplied payment, you must check the account filing requirements with Command Code (CC) ENMOD or CC INOLE. If it is determined that the misapplied payment erroneously opened a Form 2290 filing requirement, remove the filing requirement. If you are unable to determine if the filing requirement should be removed, research CC BMFOL to check for a liability history, contact the taxpayer, or route the call to Excise.

21.7.8.3.2  (01-01-2005)
Excise Tax Research

  1. This section contains general research items applicable to all centralized excise tax modules. Specific research steps and suggestions are provided in the IRM section addressing each centralized excise tax form.

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      Note:

      There are various issues on certain forms throughout IRM 21.7.8 that have CATA criteria. Always check for CATA criteria before adjusting an account.

  3. See Exhibit 21.5.3-2, Examination Criteria (CAT-A) - General, for additional information on CATA criteria.

  4. Always contact the Large Corp Technical Unit before making an adjustment on a "Large Corp" case or notice. See IRM 21.7.1.4.11.4, Campus Contacts for Large Corp Cases, for additional information.

21.7.8.3.3  (08-07-2006)
Statute Awareness and Additional Tax

  1. It is every IRS employee's responsibility to protect the statute of limitations. A statute of limitation is a time period established by law to review, analyze, and resolve taxpayer and IRS related issues. Employees must always check the statute of limitation before adjusting a taxpayer's tax account. In general, the period of limitation is three years from the due date of the return, the date the return was actually filed, or two years from the date of payment, whichever is later. If tax is assessed on an account where the period has expired, the adjustment will go unpostable. Decreasing the tax on an account where the period has expired causes an erroneous abatement. Tax increases within 90 days of the Assessment Statute Expiration Date (ASED) are statute imminent and must be expedited to the Statute Function. The Excise Statute Coordinator will provided local routing instructions for statute imminent cases.

    Note:

    A tax decrease does not go unpostable on an account where the period has expired. You must use extreme caution when decreasing the tax on an account where the statute has expired.

  2. A tax increase cannot be assessed after the period has expired. However, if an IRS No. (also known as abstract number) was not previously reported on Form 720, Quarterly Federal Excise Tax Return, the period does not start to run for that unreported IRS No. until a return is filed reporting that IRS No. The manual assessment process must be used anytime the Form 720 has an expired period, or is within 90 days of expiration and tax is being assessed for a previously unreported IRS No. for that tax period. Hand carry manual assessments to the Statute Function.

  3. If tax cannot be assessed, input a Transaction Code (TC) 290, using blocking series 05, 15, or 00 and advise the taxpayer that the time to assess the additional tax has expired.

  4. If a claim is filed for tax that was reported on a return and paid timely (is not an erroneous assessment), and the period has expired, formally disallow the claim. Input a TC 290.00 using blocking series 98 or 99 and indicate in the remarks field "statute expired." Send a 105C letter and advise the taxpayer that the time for filing a claim has expired and give them appeal rights. See IRM 25.6.1, Statute of Limitations Processes and Procedures, for additional information.

21.7.8.3.4  (09-17-2013)
Integrated Automation Technologies (IAT)

  1. Effective June 17, 2013, Excise Operation employees are required to use the mandated Integrated Automation Technologies (IAT) tools shown in the table below. The IAT tools simplify taxpayer account processing by assisting the user with IDRS research and input. The required use of these tools applies to all phone and paper programs.

    Mandated Use Suggested Use
    ACT ON BMF Penalties
    Address Fill Forms
    Credit Transfer New Name Search
    Disclosure Phone Number
    ESTAB Quick CC
    FRM49 REQ54
    Letters REQ77
    Refund Suite Search 6209
    Payment Undeliverable Tool
    Tracer UP Histories

    Note:

    Due to the volume of interest bearing fuel claims (Ultimate Vendor claims reported on Form 8849, Schedules 2, 3, and 8), the Excise Operation is unable to use the IAT Comprehensive Refund Suite (CRS) for fuel claim manual refund preparation. The tool is under IAT enhancement to handle the Ultimate Vendor fuel claims.

  2. If an IAT tool is not available, or an employee has a problem with the IAT TASK Manager (ITM), the case should be processed with established IDRS procedures.

  3. The IAT Website at http://iat.web.irs.gov/ can be used to subscribe to the IAT newsletter, report problems with IAT tools, and research IAT job aids.

21.7.8.4  (01-01-2007)
Excise Tax Procedures

  1. This section contains procedures for working excise tax issues centralized at the Cincinnati Campus.

21.7.8.4.1  (10-01-2009)
Form 720, Quarterly Federal Excise Tax Return

  1. The Form 720 is used to report and pay certain excise tax liabilities. The IRS Numbers (Abstract Numbers) are listed on the form. The MFT is 03 and the tax class is 4. Additional sources of information are:

    • Publication 510, Excise Taxes

    • Instructions for Form 720

    • Publication 3536, Motor Fuel Excise Tax EDI Guide, for electronically filed Form 720-TO and Form 720-CS

  2. The Form 720 consists of the following parts and schedules:

    • Part I consists of excise taxes subject to deposit requirements. See IRM 20.1.4.10, Form 720 Reporting Requirements.

    • Part II consists of excise taxes not subject to deposit requirements.

    • Part III consists of the lines for total tax. Taxpayers use this section to determine their balance due or overpayment.

    • Schedule A, Excise Tax Liability, is used to record the net tax liability for each semimonthly period in a quarter. Schedule A must be completed if there is an entry in Part I.

    • Schedule C, Claims, is used to make claims only if you are reporting a liability in Part I or Part II.

    • Schedule T, Two Party Exchange Information Reporting

21.7.8.4.1.1  (08-07-2006)
Form 720, Filing Requirements

  1. Form 720, is filed quarterly as shown below.

    Quarter covered All excise taxes due by
    January, February, March April 30
    April, May, June July 31
    July, August, September October 31
    October, November, December January 31

    Note:

    Whenever due dates for filing return falls on a Saturday, Sunday, or a legal holiday, the return is considered filed timely if filed the next business day after the due date.

21.7.8.4.1.2  (11-08-2010)
Form 720, Deposit Requirements

  1. Generally, all taxes are deposited under the rules for regular method taxes.

    Exception:

    Communication and air transportation taxes can be deposited under the rules for alternative method taxes (IRS Nos. 22, 26, 27, and 28).

  2. All excise taxes that must be deposited under the regular method are subject to the "September Rules" . See IRM 20.1.4.10.7, Special Rules for Deposits in September Form 720. Research CC BRTVU to determine if the penalty computation should include the "September Rules" .

    Note:

    If deposits are required under the "September Rules" , the due date for Electronic Federal Tax Payment System (EFTPS) deposits for the regular method (period beginning September 16) is September 29.

  3. The safe harbor rule applies separately to deposits under the regular method and the alternative method. See IRM 20.1.4.10.6, Safe Harbor (1/6th Rule) for Deposits Form 720.

  4. No deposits are required for taxes as follows:

    • Taxes reported in Part II of Form 720 (Exception: The payment for floor stock tax on ozone-depleting chemicals is due by June 30.)

    • Net tax liability of less than $2,500.00 for the quarter

    • One time filings defined in Reg. Sec. 40.6011(a)-2(b).

  5. Beginning after December 31, 2010, authorized depositories will no longer accept Form 8109, Federal Tax Deposit Coupon, and Form 8109-B, FTD Deposit Form (Over The Counter Version), to deposit their quarterly taxes. Most taxpayers will be required to electronically deposit all employment, excise, and corporate depository taxes using EFTPS. However, some taxpayers may be able to remit payment for their excise tax due on Form 720 with their tax return. See IRM 20.1.4.10.5, De Minimis Exception to Deposit Requirements Form 720 for more information. Otherwise, the payments must be paid through EFTPS. See IRM 21.7.1.4.8.1, Electronic Federal Tax Payment System (EFTPS), for more information.

21.7.8.4.1.3  (01-01-2007)
Form 720, IRS Number (No.)

  1. Taxes are identified by an "IRS No." (also known as "Abstract Number" ) on Form 720 and in IRS account records.

  2. When tax is adjusted on Form 720, the adjustment must include the IRS No. that identifies the type of tax being adjusted. Credits are made using CRNs.

  3. Each IRS No. is a separate return for all purposes. If an original return is filed timely reporting one IRS No. and later a supplemental return ( Form 720X, Amended Quarterly Federal Excise Tax Return) is filed reporting an additional IRS No., the second return may be subject to a late filing penalty. This penalty must be manually computed if the tax module is restricted. See IRM 20.1.2, Failure to File/Failure to Pay Penalties.

21.7.8.4.1.4  (01-01-2007)
Form 720, Part I

  1. Excise taxes shown below are reported in Part I of Form 720,. These taxes generally have deposit requirements recorded on Form 720, Schedule A, Excise Tax Liability.

21.7.8.4.1.4.1  (01-05-2009)
Environmental Taxes

  1. Form 6627, Environmental Taxes, is used to figure the environmental taxes on:

    • Domestic Petroleum oil spill tax, IRS No. 18

    • Imported petroleum products oil spill tax, IRS No. 21

    • Ozone-depleting chemicals (ODCs), IRS No. 98

    • Imported products that used ODCs as materials in the manufacture or production of the product, IRS No. 19

    • Floor Stocks of ODC's, IRS No. 20 (reported in Part II of Form 720)

  2. Oil spill liability taxes (IRS Nos. 18 and 21) were reinstated beginning April 1, 2006. Section 4611 Oil Spill Liability Tax is imposed on:

    • Crude oil received at a domestic refinery

    • Petroleum products entered in the United States for consumption use or warehousing

      Note:

      The tax rate is $.08 per barrel (42 gallons). The tax can be passed on to the customer. IRS will not provide guidance on how to do this because it is a business matter. No one (including state and local governments) is exempt from the tax.

  3. Form 6627 is attached to Form 720.

  4. The tax rates for all of the environmental taxes are on Form 6627. Input adjustment on MFT 03 using TC 29X with the appropriate IRS No.

21.7.8.4.1.4.2  (11-20-2012)
Communication Taxes

  1. The person receiving the payment for communication services must collect and pay over the tax and file the return. The tax is assessed on the amount paid for right of service rather than provision of the service.

  2. The tax is 3 percent of amounts paid for:

    • Local telephone service

    • Teletypewriter exchange services

    Bundled service and long distance service are not subject to communication tax.

    • Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed time for which the service is used. Bundled Service is provided by both land lines and wireless (cellular) service. If voice over internet protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service.

    • Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller.

    • The method for sending or receiving a call, such as land line, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled.

  3. Payments for certain services or users are exempted from the communication tax. The Publication 510, Excise Taxes, provides a list of exemptions and the exemption certificate requirements.

  4. Input adjustment on MFT 03 using TC 29X and IRS No. 22.

21.7.8.4.1.4.3  (02-20-2013)
Air Transportation Tax

  1. Air transportation taxes are collected and reported by providers of air transportation of persons or property.

  2. There are three IRS Nos. for air transportation taxes:

    • IRS No. 26 is for transportation of persons by air. The rate of tax is 7.5 percent of the amount paid for this air transportation plus a domestic segment tax of $3.90 per segment that begins on or after January 1, 2013.

    • IRS No. 27, is for use of international air travel facilities. Beginning January 1, 2013, the rate is $17.20 per person for flights that begin or end in the United States. The rate for departure of interstate flights that begin or end in Alaska or Hawaii, is $8.60 per person.

    • IRS No. 28, is for transportation of property by air. The rate of tax is 6.25 percent of the amount paid for this air transportation.

  3. An uncollected tax report is required by collecting agents if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. See Form 720 instructions.

  4. Input adjustments on MFT 03 using TC 29X with the appropriate IRS No.

21.7.8.4.1.4.4  (04-13-2012)
Fuel Taxes

  1. An excise tax is imposed on the following fuels:

    • Diesel fuel, tax on removal at terminal rack, IRS No. 60

    • Diesel fuel, taxable events other than removal at rack, IRS No. 60

    • Diesel fuel, tax on sale or removal of biodiesel mixture (other than removed at terminal rack), IRS No. 60

    • Diesel water-fuel emulsion, IRS No. 104

    • Dyed diesel fuel, Leaking Underground Storage Tank (LUST) tax, IRS No. 105

    • Dyed kerosene, LUST tax, IRS No. 107

    • LUST tax, other exempt removals, IRS No. 119

    • Kerosene, tax on removal at terminal rack, IRS No. 35

    • Kerosene, tax on taxable events other than removal at terminal rack, IRS No. 35

    • Kerosene for use in aviation, IRS No. 69

    • Kerosene for use in commercial aviation (other than foreign trade), IRS No. 77

    • Kerosene for use in aviation, LUST tax on nontaxable uses, including foreign trade, IRS No. 111

    • Other fuels, IRS No. 79 (See the Form 720 instructions for additional detail.)

    • Gasoline, tax on removal at terminal rack, IRS No. 62

    • Gasoline, tax on taxable events other than removal at terminal rack, IRS No. 62

    • Gasoline, tax on sale or removal of alcohol fuel mixture other than removal at terminal rack, IRS No. 62

    • Any liquid fuel used in a fractional ownership program aircraft, IRS No. 13

    • Aviation gasoline, IRS No 14

    • Liquefied petroleum gas (LPG) (such as propane or butane), IRS No. 112

    • "P" series fuels, IRS No. 118

    • Compressed natural gas (CNG), IRS No. 120

    • Liquefied hydrogen, IRS No. 121

    • Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, IRS No. 122

    • Liquid fuel derived from biomass, IRS No. 123

    • Liquefied natural gas (LNG), IRS No. 124

21.7.8.4.1.4.4.1  (10-01-2008)
First Taxpayer's Report

  1. If the taxpayer is reporting gallons of fuel that may again be subject to tax, a "First Taxpayer's Report" must be filed with the Form 720 See Publication 510, Excise Taxes, Model Certificate B. The taxpayer that paid the first tax must:

    • Give a copy of the first taxpayer's report to the buyer

    • File the first taxpayer's report with Form 720 for the quarter to which the report relates

    • Write "EXCISE-FIRST TAXPAYER'S REPORT" across the top of a separate copy of the report, and by the due date of Form 720 mail the copy to the Cincinnati Campus

  2. A first taxpayer's report is not required for the tax imposed on:

    • Removal at a terminal rack

    • Non bulk entries into the United States

    • Removals or sales by blenders

    Note:

    If the taxpayer liable for the tax expects that another tax will be imposed on the fuel listed above, then the taxpayer should file (but is not required to file) a first taxpayer's report.

  3. If the first taxpayers report relates to fuel sold to more than one buyer, copies of the report must be made when the fuel is divided. Each buyer must be given a copy of the report.

21.7.8.4.1.4.4.2  (10-01-2008)
Diesel Fuel

  1. Diesel fuel is any liquid that, without further processing or blending, is suitable for use as a fuel in a diesel-powered highway vehicle or train and/or a transmix.

  2. A diesel powered highway vehicle is any self-propelled vehicle designed to carry a load over public highways and propelled by a diesel engine.

  3. An excluded liquid is either of the following:

    • A liquid that contains less than 4 percent normal paraffins; or

    • A liquid with a distillation range of 125° Fahrenheit or less

    • A sulfur content of 10 ppm or less; and

    • A minimum color of +27 Saybolt

  4. A transmix is a by-product of refined products created by the mixing of different specification products during pipeline transportation. See Publication 510, for additional information.

  5. Adjust the tax using IRS No. 60 and tax rate of $.244 per gallon.

21.7.8.4.1.4.4.3  (10-01-2008)
Diesel-Water Fuel Emulsion

  1. Effective January 1, 2006, the taxpayer is liable for the reduced rate of tax on a diesel-water fuel emulsion removal at the terminal rack or other taxable event if the following requirements are met:

    • The diesel-water fuel emulsion must contain at least 14 percent water.

    • The emulsion additive must be registered by a United States manufacturer under section 211 of the Clean Air Act with the Environmental Protection Agency (EPA).

    • The taxpayer is registered by the IRS.

    • If these requirements are not met, the tax must be reported on the sale, removal or use of diesel-water fuel emulsions as diesel.

    • The rate of tax is $.198 per gallon.

  2. Input adjustment on MFT 03 using TC 29X and IRS No. 104.

21.7.8.4.1.4.4.4  (10-01-2009)
Dyed Diesel Fuel and Dyed Kerosene Fuel

  1. Diesel fuel and kerosene fuel are not subject to excise tax (other than the LUST tax) if all of the following tests are met:

    • The person otherwise liable for tax (position holder, etc.) is a registrant

    • If removed from a terminal, the terminal is an approved terminal

    • The diesel or kerosene fuel satisfies the dyeing requirements (Solvent red 164 and no other dye. See Publication 510, for more information)

  2. A penalty is imposed on a person if any of the following situations apply:

    • Any person that sells or holds for sale dyed fuel for any use which such person knows or has reason to know, is not a nontaxable use of such fuel

    • Any person that holds dyed fuel for use, or used by the person for a use other than a nontaxable use, and the person knows or has reason to know that the fuel was dyed

    • A person willfully alters, chemically or otherwise, or attempts to alter, the strength or composition of any dye in dyed fuel

    • The person has knowledge that a dyed fuel has been altered, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel

  3. The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. If the penalty is imposed, each officer, employee, or agent of a business who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. IRM 21.7.8.4.6, Fuel Compliance Penalties, provides master file adjustment information.

21.7.8.4.1.4.4.5  (10-15-2012)
Leaking Underground Storage Tank (LUST) Tax

  1. Effective after September 30, 2005, the LUST tax is imposed at $.001 per gallon on removals, entries, and sales of dyed diesel fuel and dyed kerosene, certain gasoline blendstocks, kerosene used for a feedstock purpose, kerosene for use in aviation (nontaxable uses), and diesel fuel or kerosene sold or used in Alaska. See chart below for appropriate IRS No. for input of adjustment on MFT 03.

    IRS No. (Abstract No.) Type of Fuel (Tax rate $.001)
    105 Dyed Diesel Fuel
    107 Dyed kerosene
    111 Kerosene for use in aviation (Kerosene removed directly from a terminal into the fuel tank of an aircraft for nontaxable uses)
    119 Other exempt removals. (Gasoline blendstocks, kerosene used for a feedstock purpose, and diesel fuel or kerosene sold or used in Alaska)
    125 Inland Waterways. See IRM 21.7.8.4.1.5.4, Inland Waterways Fuel Use Tax, for tax per gallon on specific years.
  2. Input adjustment using TC 29X on MFT 03 using appropriate IRS No.

    Note:

    The LUST tax is not credited or refunded, except for exported taxable fuel and section 4081(e) claims.

21.7.8.4.1.4.4.6  (10-01-2008)
Kerosene Fuel

  1. Kerosene includes any of the following liquids:

    • One of the two kinds of kerosene (No. 1-K and No. 2-K) covered by American Society for Testing and Materials (ASTM) specification D3699

    • Kerosene type jet fuel covered by ASTM specifications D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8)

      Note:

      Kerosene does not include any of the excluded liquids listed above for diesel fuel.

  2. Adjust tax using the table below:

    Use of Kerosene Fuel for: IRS No. Tax Rate
    Removal at terminal rack 35 $.244
    Taxable events other than removal at terminal rack 35 $.244
    Aviation 69 $.219
    Commercial aviation (other than foreign trade) 77 $.044

21.7.8.4.1.4.4.7  (09-17-2013)
Gasoline and Aviation Gasoline

  1. Persons liable for the gasoline tax on removal at the terminal rack, gasoline tax for events other than removal at the terminal rack, or the gasoline has been blended with alcohol outside of the bulk transfer/terminal system must report the tax as follows in the table below:

    IF Gasoline Tax is Reported Report Tax on Form 720 IRS No. Tax Rate per Gallon
    For removal at the terminal rack Line 62(a) 62 $.184
    For events other than removal at the terminal rack Line 62(b) 62 $.184

  2. Aviation gasoline is taxed at $.194 and the IRS No. is 14.

  3. Adjust the tax on MFT 03, using the applicable IRS No. and tax rate.

21.7.8.4.1.4.4.8  (04-05-2012)
Surtax on Fuel Used in a Fractional Ownership Program Aircraft

  1. Beginning April 1, 2012, the Federal Aviation Administration (FAA) Modernization and Reform Act of 2012 (P.L. 112–95) imposes a $.141 per gallon excise tax on any liquid used in a fractional ownership program aircraft. Fractional ownership aircraft programs are noncommercial aviation for uses of aircraft after March 31, 2012. The surtax is imposed in addition to the base fuel tax applied to fuel used in noncommercial aviation.

  2. The surtax is imposed on any fuel used in a fractional ownership program aircraft for:

    1. Transportation of a qualified fractional owner in a fractional ownership aircraft program, or

    2. Use of an aircraft on account of a qualified fractional owner, including the use in deadhead service (aircraft traveling without passengers or freight).

  3. The term fractional ownership program aircraft means any aircraft that is:

    1. Listed as a fractional program aircraft in the management specifications issued to the manager of such program by the FAA.

    2. Registered in the United States.

  4. The program manager is liable for the surtax.

  5. In general, a fractional ownership aircraft program is a system of aircraft ownership and exchange that involves a single program manager that manages a fleet of aircraft on behalf of fractional owners. Participation in a fractional ownership aircraft program entitles the owner to fly on any of the aircraft in the program's fleet on an on-available basis, regardless of the owner's ownership interest in the aircraft in which the owner travels.

  6. Fuel used in flight demonstration, maintenance, and crew training flights by a fractional program aircraft is not subject to the $.141 tax.

  7. The tax is reported on Form 720 (MFT 03) under IRS Number 013.

  8. Additional information regarding this tax can be found in Notice 2012–27, Fractional Aircraft Ownership Programs Fuel Surtax, and under IRC 4043.

  9. Input any adjustment to the tax on MFT 03 with a TC 29X and IRS Number 013, also referred to as Abstract 13.

  10. There is not a correlating CRN for this tax. If the taxpayer amends the original tax reported on Form 720, they must file Form 720X, Amended Quarterly Federal Excise Tax Return.

21.7.8.4.1.4.4.9  (04-24-2009)
Other Fuels

  1. The taxpayer is liable for the tax on the fuels listed below when they are delivered into the fuel supply tank of a motor vehicle or motorboat (or trains for B-100).

    Fuel Tax Rate Per Gallon
    Qualified: Ethanol produced from coal and; $.184
    Methanol produced from coal $.184
    Partially exempt: Ethanol produced from natural gas and; $.114
    Methanol produced from natural gas $.0925
    B-100 (100 percent biodiesel) and $.244
    Liquefied gas derived from biomass $.184
    Other fuels not shown $.184
  2. Adjust tax on MFT 03 using IRS No. 79 and appropriate tax rate.

21.7.8.4.1.4.4.10  (04-24-2009)
Alternative Fuels

  1. Alternative fuel is any liquid other than gas oil, fuel oil, or any product taxable under IRC section 4081. The taxpayers are liable for tax on alternative fuel delivered into the fuel supply tank of a motor vehicle, motorboat, or on certain bulk sales, as listed below.

    Alternative Fuel IRS Number Tax Rate
    Liquefied petroleum gas (LPG) 112 $.183
    "P Series" fuels 118 $.184
    Compressed natural gas (CNG) 120 $.183
    Liquefied hydrogen 121 $.184
    Any liquid fuel derived from coal (including) peat through the Fischer-Tropsch process 122 $.244
    Liquid fuel derived from biomass 123 $.244
    Liquefied natural gas (LNG) 124 $.243

    Note:

    LPG includes propane, butane, pentane, or mixtures of those gases.

  2. Adjust the tax on MFT 03 using the appropriate CRN and tax rate.

21.7.8.4.1.4.5  (09-17-2013)
Retail Taxes

  1. The first retail sale of certain truck chassis and bodies, trailer and semitrailer chassis and bodies, highway tractors, and related parts and accessories is subject to a 12 percent tax (IRS No. 33). This tax is imposed by IRC section 4051. The retail sales price applies to the total consideration paid (including the value of a trade-in), but it does not include insurance or delivery charges. The tax applies to:

    • Truck chassis and bodies, except truck chassis and bodies suitable for use on a vehicle with a gross vehicle weight of 33,000 pounds or less

    • Trailer and semitrailer chassis and bodies, except trailer and semitrailer chassis and bodies suitable for use with a vehicle with a gross vehicle weight of 26,000 pounds or less

    • Tractors chiefly used for highway transportation in combination with a trailer or semitrailer, except tractors that have a gross vehicle weight of 19,500 pounds or less and a gross combined weight of 33,000 pounds or less. Generally, gross combined weight is the weight of the tractor, the weight of its trailer(s), equipment, driver, passengers, fuel and pay load (everything that moves with the vehicle).

  2. The taxable sales price includes the price for parts and accessories sold on, with, or in connection with the sale of a taxable article, even if the parts are billed separately. The tax also applies to accessories purchased separately within the first six months after a vehicle is placed in service, unless the total cost of all accessories during that period does not exceed $1,000. The tax imposed on parts and accessories sold on or in connection with the units listed above and the tax imposed on the separate purchase of parts and accessories for the units listed above do not apply to an EPA approved idling reduction device installed on a tractor or insulation that has an R value of at least R35 per inch.

    Reminder:

    An idling reduction device is any device or system of devices that provide the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary.

  3. If an article listed in (1) above is wrecked and extensive repairs are necessary to return it to operating condition, the tax must be paid on the restoration cost if the cost exceeds 75 percent of the cost of a new vehicle. When worn vehicles are restored to operating condition, with or without use of a glider kit, the tax does not apply to the upgrade unless the total expenditures exceed 75 percent of the cost of a comparable new vehicle. This provision does not apply to an article that was not subject to the tax when it was new.

    Example:

    An owner operator restored a 1999 tractor trailer and purchased a glider-kit. The seller did not charge a federal tax on the glider-kit. The total restoration cost of the vehicle is $80,000. The cost of a new vehicle is $100,000. The restoration of the vehicle is more than 75 per cent of the cost of a new vehicle, so the owner owes the 12 percent excise tax.

  4. Input adjustment on MFT 03 using TC 290 and the appropriate IRS No.

21.7.8.4.1.4.6  (01-01-2007)
Ship Passenger Tax

  1. A tax is imposed by IRC 4471 when a voyage of more than 24 hours by a commercial passenger vessel with berths for more than 16 passengers begins or ends in the United States. It is paid by the operator of the ship. Regardless of duration, the tax is also imposed where passengers are engaged in gambling sponsored by the owner or operator of the vessel (or an agent) beyond the territorial waters of the United States.

  2. The tax is $3.00 for each passenger on the ship, when that passenger first embarks or disembarks in the United States.

  3. Input adjustment on MFT 03, using TC 29X and IRS No. 29.

21.7.8.4.1.4.7  (01-08-2013)
Manufacturers Tax

  1. A variety of items are subject to taxes imposed on the manufacturer, producer, or importer. A manufacturer is any person who produces a taxable article from new or raw material, or from scrap, salvage, or junk material, by processing or changing the form of an article or by combining or assembling two or more articles. The manufacturer furnishes and keeps title to the materials and/or the finished article. See the chart below:

    Type of Manufacturer Tax IRS No. Tax Rate
    Coal - Underground Mined 36 If the sale price of the underground mined coal is $25 or more per ton, use the $1.10 per ton tax rate.

    Example:

    If a producer of coal sells 21,000 (10.5 tons) pounds of coal from an underground mine for $525, the price per ton is $50.00. The tax is $1.10 x 10.5 tons ($11.55).

    Coal - Underground Mined 37 If the sale price of the underground mined coal is less than $25 per ton, use the .044 of the selling price tax rate.
    Coal - Surface Mined 38 If the sale price of the surface mined coal is $12.50 or more per ton, use the $.55 per ton tax rate.
    Coal - Surface Mined 39 If the sale price of the surface mined coal is less than $12.50 per ton, use the .044 of the selling price tax rate.
    Taxable tires other than bias ply or super single tires 108 $.0945 (for each 10 pounds of the maximum rated load capacity over 3,500 pounds)
    Taxable tires, bias ply or super single tires (other than super single tires designed for steering) 109 $.04725 (same as above)
    Taxable tires, super single tires designed for steering 113 $.0945 (same as above)
    Gas Guzzler Tax 40 To determine tax, see Form 6197, Gas Guzzler Tax.
    Vaccines taxes 97 To determine tax, see IRM 21.7.8.4.1.4.7.3, Vaccine Taxes.
    Medical Devices 136 2.3 percent of the sales price.

  2. Input adjustment with TC 290 on MFT 03 using appropriate IRS No.

21.7.8.4.1.4.7.1  (09-17-2013)
Excise Tire Tax

  1. For Compliance research and studies similar to the tire tax study required by the Energy Policy Act of 2005, six new fields were added to the non-money fields on Integrated Data Retrieval System (IDRS) for decrease or increase to the tire counts on Form 720 tax modules (MFT 03).

  2. The six new tire count fields correlate with IRS Nos. 108, 109, and 113 and CRNs 396, 304, and 305. Each count displayed on IDRS is nine digits long. Example:

    • IRS No. 108 tire count - If tire count for 1 tire, the display is 000000001

    • IRS No. 109 tire count - If tire count for 12 tires, the display is 000000012, etc.

    • IRS No. 113 tire count -If tire count for 100 tires, the display is 000000100

    • CRN 396 tire count - If tire count for 2,250 tires, the display is 000002250

    • CRN 304 tire count - If tire count for 900,200 tires, the display is 000900200

    • CRN 305 tire count - If tire count is for 1,000,000 tires the display is 001000000

  3. In addition, six new adjustment reference numbers are needed to adjust the tire count numbers in (2). The reference numbers are:

    • 900 tire count will adjust the 108 Tire Count field

    • 901 tire count will adjust the 109 Tire Count field

    • 902 tire count will adjust the 113 Tire Count field

    • 903 tire count will adjust the 396 Tire Count field

    • 904 tire count will adjust the 304 Tire Count field

    • 905 tire count will adjust the 305 Tire Count field

  4. To input an adjustment to a tire count field, you must overlay the tire count field with the new number of tires (increase or decrease).

    Example:

    A Form 720 is filed claiming an increase to the number of super single tires designed for steering (IRS No. 113). The Integrated Data Retrieval System (IDRS) shows that 200 tires were previously reported and Form 720X, Amended Quarterly Federal Excise Tax Return, shows an additional 4,000 tires. The adjustment is input with a Transaction Code (TC) 290 for $378.00, IRS No. 113 for $378.00, and overlay the tire count display for reference number 902 using 00004200.

    Reminder:

    When adjusting the tire counts, add the current number of tires to the new number of tires and overlay the tire count field with the new tire count.

  5. If more than two tire counts need to be overlaid on one adjustment, then multiple adjustments must be input. Use Posting Delay Code (PDC) 1 on the second adjustment to allow one posting per cycle.

  6. The tire count adjustments are displayed on the Tax Module Display (TXMOD) and the Business Master File Online (BMFOL). See IRM 21.7.8.4.5.7.10, Form 8849, Schedule 6, Tire Tax, for processing procedures. The adjustment for the count of tire tax must be input on MFT 03. No other MFT is programmed for this type of adjustment.

21.7.8.4.1.4.7.2  (01-01-2007)
Form 6197, Gas Guzzler Tax

  1. Form 6197, Gas Guzzler Tax, is used to figure the gas guzzler tax. The gas guzzler tax is imposed on the sale, use, or lease by the manufacturer or importer of an automobile of a model type that does not meet certain standards for fuel economy. Automobiles imported for business or personal use are also subject to the tax.

  2. The tax liability is figured each quarter and reported on Form 720 with IRS No 40. Form 6197 is attached to Form 720.

    Note:

    If a gas guzzling automobile is imported, the taxpayer may be eligible to make a one-time filing of Form 720 and Form 6197 if the following conditions are met:

    • The vehicle is not used in the course of any trade or business.

    • The person importing the gas guzzling vehicle does not do so in the course of their trade or business.

    • The person is not required to file Form 720 reporting excise taxes for the calendar year quarter, except for one-time filing.

    • There are no deposit requirements for one-time filers. All of the tax reported for a one-time filer may be paid with the return.

  3. Input adjustment using TC 29X and IRS 40.

21.7.8.4.1.4.7.3  (09-17-2013)
Excise Tax on Vaccines

  1. Tax is imposed on certain vaccines sold or used by the manufacturer in the United States.

  2. A taxable vaccine means any of the following vaccines:

    • Any vaccine containing diphtheria toxoid

    • Any vaccine containing tetanus toxoid

    • Any vaccine containing pertussis bacteria, extracted or partial cell bacteria, or specific pertussis antigens

    • Any vaccine containing polio virus

    • Any vaccine against measles

    • Any vaccine against mumps

    • Any vaccine against rubella

    • Any vaccine against hepatitis A (effective after November 30, 2004)

    • Any vaccine against hepatitis B

    • Any vaccine against chicken pox

    • Any vaccine against rotavirus gastroenteritis

    • Any vaccine against streptococcus pneumonia

    • Any HIB vaccine

    • Any trivalent vaccine against Influenza (effective after June 30, 2005) or any other vaccine against seasonal influenza (effective after August 1, 2013)

    • Any vaccine against human papillomavirus

    • Any meningococcal vaccine

  3. The tax is 75 cents per dose of each taxable vaccine. The tax per dose on a vaccine that contains more than one taxable vaccine is 75 cents times the number of taxable vaccines.

  4. Use TC 29X and IRS No. 97 to adjust the tax.

21.7.8.4.1.4.7.4  (09-17-2013)
Taxable Medical Devices

  1. Beginning January 1, 2013, IRC 4191 imposes an excise tax of 2.3 percent on the sale of certain medical devices by the manufacturer, producer, or importer of the device. This provision was enacted by section 1405 of the Health Care and Education Reconciliation Act of 2010, Public Law 111–152, in conjunction with the Patient Protection and Affordable Care Act, Public Law 111–148.

  2. In general, a taxable medical device is a device that is listed with the Food and Drug Administration (FDA) under section 510(j) of the Federal Food, Drug, and Cosmetic Act and 21 CFR part 807. The term taxable medical device does not include eyeglasses, contact lenses, or hearing aids. The term taxable medical device also does not include devices generally purchased by the general public at retail for individual use (the "retail exemption" ).

  3. IRC 4221(a) limits tax-free sales of taxable medical devices to sales for:

    • Use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for further manufacture.

    • Export, or resale by the purchaser to a second purchaser for export.

  4. The manufacturer, the first purchaser, and in some cases the second purchaser must be registered by the IRS to make a tax-free sale for further manufacture or export. A manufacturer or purchaser applies for a registration by filing Form 637, Application for Registration. The applicant may request Activity Letters A, B, or D, depending upon whether they are a manufacturer and/or producer for further manufacturing or export.

  5. The tax imposed under IRC 4191 is based on the price for which a taxable medical device is sold (sales price). The sales price and related tax liability is reported on Form 720, Quarterly Federal Excise Tax Return.

  6. The taxpayer must use the Form 720X, Amended Quarterly Federal Excise Tax Return, to amend the original filing (reporting errors).

  7. Use TC 29X and IRS No. 136 on MFT 03 to adjust tax. The sales price field is captured by Submission Processing and is an adjustable information field. Use Item Reference Number 812 to adjust the sales price field.

    Caution:

    Due to processing issues with the Medical Device Sales field, the field for the first (201303), second (201306), and third quarters (201309) must be reviewed for accuracy and, if necessary, corrected whenever an original or amended return is available.

  8. Semi-monthly deposits will generally be required if tax liability exceeds $2,500 for the calendar quarter. Per Notice 2012–77, Section 6, the IRS is providing deposit penalty relief for medical device taxpayers. During the first three calendar quarters of 2013, the IRS will not impose the deposit penalty provided that the taxpayer demonstrates a good faith attempt to comply with the deposit requirements and the failure to deposit was not due to willful neglect. IRM 20.1.4, Failure to Deposit Penalty, provides additional information.

  9. If the manufacturer or purchaser is eligible to claim a credit or refund (without interest), the claimant must use Schedule C (Form 720) or Form 8849, Schedule 6. The related credit reference number (CRN) is 438. See Publication 510, Excise Taxes, Chapter 5, for more information about claims for credit or refund.

  10. Additional filing and payment information is available in the Instructions for Form 720 and Publication 510, Excise Taxes.

21.7.8.4.1.4.8  (01-01-2007)
Foreign Insurance Tax

  1. Tax is imposed when U.S. residents buy insurance polices from nonresident alien individuals or businesses not licensed to sell insurance by a state or the District of Columbia. Form 720 must be filed by the person making the premium payment to the foreign insurer or agent. Foreign insurance taxes include:

    • Casualty insurance and indemnity bonds at $.04 per premium

    • Life insurance, sickness and accident policies, and annuity contracts at $.01 per premium

    • Reinsurance at $.01 per premium

  2. Foreign insurers and reinsurers who take a position that a treaty of the United States overrules, or otherwise modifies an Internal Revenue Law of the United States must file Form 8833 , Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and/or a disclosure statement attached to Form 720 . Insureds are exempt under the regulations from filing the disclosure statement (301.6114-1(c)(1)(viii)).

  3. Foreign insurance does not apply to casualty insurance premiums paid to foreign insurers for coverage of export goods in transit to foreign destinations.

  4. Input adjustment using TC 29X and IRS No. 30 on MFT 03.

21.7.8.4.1.5  (01-01-2007)
Form 720, Part II

  1. Excise taxes shown below are reported in Part II of Form 720. These excise taxes do not require federal tax deposits recorded on Schedule A, Excise Tax Liability.

21.7.8.4.1.5.1  (09-17-2013)
Patient-Centered Outcomes Research (PCOR)

  1. Section 6301 of the Patient Protection and Affordable Care Act (ACA), Public Law 111-148, provides for the establishment of the private, nonprofit corporation, the Patient-Centered Outcomes Research Institute (PCORI). Through research, the Institute will assist patients, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical research findings.

  2. The ACA created IRC 9511 to establish a Patient-Centered Outcomes Research Trust Fund (PCORTF) with the Secretary of the Treasury as a trustee. This legislation also created IRC 4375, 4376, and 4377, which impose fees on health insurance policies and self-insured health plans to provide net revenues for the PCORTF.

  3. The issuers of specified health insurance policies and sponsors of applicable self-insured health plans will pay and report the fees with Form 720. This provision will be processed as an annual return on the second quarter. The first return will be filed on the tax period ending June 30, 2013 (master file tax module 201306) and is due July 31, 2013. There is no Federal Tax Deposit (FTD) requirement for the fees.

  4. The first year fee is $1.00 for specific health insurance policies ending before 10/01/2013. The second year fee adjusts to $2.00 (policy or plan years ending 10/1/2013 through 9/30/2014) and then the fee is indexed to national health expenditures until 9/30/2019.

  5. For Compliance research and analysis, the following four fields are displayed on Command Code (CC) TXMOD and CC BMFOL:

    • Specified Health Insurance Policies Average Number of Lives Covered (SHIP-COUNT)

    • Specified Health Insurance Policies Amount (SHIP-AMT)

    • Applicable Self-Insured Health Plans Average Number of Lives Covered (ASIHP-COUNT)

    • Applicable Self-Insured Health Plans Amount (ASIHP-AMT)

  6. Use TC 29X and IRS No. 133 on MFT 03 to adjust tax. The average number of lives field (Column a) and the fee amount field [Col. (a) x Col. (b)] are captured by Submission Processing and must be adjusted during amended return processing. The SHIP-AMT and ASHIP-AMT fields are combined to determine the IRS No. 133 tax liability amount. See Form 720, Part II, IRS No. 133 for additional line detail.

  7. The following adjustment reference numbers are available to adjust the fields identified in paragraph 5:

    • Data Reference Number (DRN) 906 is used to overlay the SHIP-COUNT field.

    • CRN 813 is used to adjust the SHIP-AMT field.

    • DRN 907 is used to overlay the ASIHP-COUNT field.

    • CRN 814 is used to adjust the ASIHP-AMT field.

    Caution:

    Due to processing and programming issues with the SHIP-COUNT and ASIHP-COUNT fields, the fields for the tax period June 30, 2013 must be reviewed for accuracy and, if necessary, corrected whenever an original or amended return is available.

    Note:

    The SHIP-COUNT and ASIHP-COUNT are overlay informational fields and do not adjust up and down. When adjusting the count fields, you must overlay the count field with the new total number of lives regardless of previous adjustments. The ADJ54 DRN field contains ten digits and requires zero(s) to the left of the amount. A lives count of 85,000 must be input as 0000085000. The SHIP-AMT and ASIHP-AMT are adjustable amount fields, but will never post below zero (negative amount).

    Example:

    The original return reports IRS No. 133 as $10,250.00. The SHIP-AMT is $10,250.00 and the SHIP-COUNT display is 10250. If the taxpayer files an amended return and reports SHIP-COUNT as 12,250, SHIP-AMT as $12,250.00, and IRS No. 133 as $12,250.00, the adjustment should include TC 290 for 2,000.00, IRS No. 133 for 2,000.00, CRN 813 for 2,000.00, and DRN 906 for 0000012250.

    Example:

    The original return reports IRS No. 133 as $40,000.00. The SHIP-AMT is $25,000.00, SHIP-COUNT display is 25000, ASIHP-AMT is $15,000.00, and ASIHP-COUNT display is 15000. If the taxpayer files an amended return and reports SHIP-COUNT as 25,000, SHIP-AMT as $25,000.00, ASHIP-COUNT as 45,000, ASIHP-AMT as $45,000.00, and IRS No. 133 as $70,000.00, the adjustment should include TC 290 for 30,000.00, IRS No. 133 for 30,000.00, CRN 814 for 30,000.00, and DRN 907 for 0000045000.

  8. If the ADJ54 screen is unable to handle all the necessary reference numbers, then multiple adjustments must be input. Use Posting Delay Code (PDC) 1 on the second adjustment to allow one posting per cycle.

  9. Credit Reference Number (CRN) 439 is used to report Schedule C claims.

  10. Form 720X is used to make adjustments to previously filed tax returns.

21.7.8.4.1.5.2  (02-20-2013)
Sport and Fishing Equipment

  1. IRC section 4161 imposes the following taxes on the manufacturer, producer, or importer:

    Type of Tax IRS No. Tax Rate
    Sport fishing equipment (other than fishing rods and fishing poles) includes reels, fly fishing lines and other fishing lines not over 130 pounds test, fishing spears, spear guns, and spear tips. See Publication 510, Excise Tax, for a complete list. 41 Ten per cent (.10) of the sale price.
    Fishing Rods and fishing poles (and component parts) 110 Ten per cent (.10) of sales price with a maximum tax rate of $10 per article.
    Electric outboard motors 42 Three per cent (.03) of the sales price.
    Fishing tackle boxes 114 Three per cent (.03) of the sale price.
    Bows, quivers, broadheads, and points 44 Eleven per cent (.11) tax is imposed only on bows having a peak draw weight of 30 pounds or more. Tax is also imposed on the sale of any part or accessory suitable for inclusion in, or attachment to, a taxable bow and any quiver, broadheads, or point suitable for use with arrows.
    Arrow shafts 106 Forty-eight cents ($.48) tax per arrow shaft is imposed if the arrow shaft measures 18 inches or more in overall length, or measures less than 18 inches in overall length but is suitable for use with a taxable bow.

    Note:

    After October 3, 2008, the tax does not apply to any shaft made of all natural wood with no laminations or artificial means of enhancing the spine of the shaft (whether sold separately or incorporated as part of a finished or unfinished product) and used in the manufacture of any arrow which, after its assembly, meets both of the following conditions:

    • It measures 5/16 of an inch or less in diameter

    • It is not suitable for use with a taxable bow, described in the table above

  2. Input adjustments with a TC 29X on MFT 03 using appropriate IRS No.

21.7.8.4.1.5.3  (06-21-2010)
Indoor Tanning Services

  1. Beginning July 1, 2010, the Patient Protection and Affordable Care Act of 2010 imposes a 10 percent excise tax on the amount paid for indoor tanning services. The tax applies to amount paid after June 30, 2010, and must be collected by the person receiving the payment (the provider). The provider reports and pays the tax on Form 720, Quarterly Federal Excise Tax Return. The tax is paid each quarter using Form 720. If the customer does not pay the tax at the time payment for the indoor tanning services is made, to the extent the tax is not collected, the provider is liable for the tax (See IRC section 5000B (c) (3) for additional information.). To pay the tax, businesses must have an Employer Identification Number (EIN) assigned by the IRS. Businesses that do not have an EIN can apply for an EIN online at www.irs.gov. If a provider provides indoor tanning services at more than one location and each location has a different EIN, a separate Form 720 must be filed for each establishment with its own EIN.

  2. If other goods and services are paid for along with the indoor tanning services, such as purchase of protective eye wear, use of towels etc., the other goods and services may be excluded from the tax if:

    • they are separable (regardless of the manner of invoicing the charges),

    • they are separately stated, and

    • the charges do not exceed the fair market value for those other goods and services

    Note:

    If the customer purchases bundled services and the charges are not separately stated, the tax applies to the portion of the payment that can reasonably be attributed to indoor tanning services, using the ratio in Reg. 49.5000B-1T(d)(3).

  3. There is a limited exception for collecting and paying the tax for certain qualified physical fitness facilities that offer indoor tanning services. The tax does not apply when:

    • a payment to such facilities if the predominant business or activity of the facility is physical fitness and access to tanning services is not a substantial part of the facility’s main business activity; and

    • the fitness facility does not sell tanning services to the general public (the exception does not apply to a qualified physical fitness facility that charges separately for indoor tanning services, or offers different pricing options to members based on whether access to indoor tanning services is included)

  4. Adjustments to tax are input on MFT 03. Use a TC 29X with IRS No. 140 (abstract number).

  5. There is not a correlating CRN for this tax. If the taxpayer has to amend the original tax, they must file Form 720X, Amended Quarterly Federal Excise Tax Return.

21.7.8.4.1.5.4  (10-01-2010)
Inland Waterways Fuel Use Tax

  1. The Inland Waterway Fuel Use Tax is imposed by IRC section 4042. The tax applies to liquid fuel used in the propulsion system of commercial transportation vessels while traveling on certain inland and intracoastal waterways. The tax generally applies to all types of vessels, including ships, barges, and tugboats.

  2. The leaking underground storage tank (LUST) tax must be paid on any liquid fuel used on inland waterways that is not subject to LUST tax under IRC section 4041(d) or IRC section 4081. For example, Bunker C residual fuel oil is subject to the LUST tax.

  3. Vessels exempt from this tax include fishing vessels, deep-draft ocean-going vessels, passenger vessels, ocean-going barges, and vessels operated by a state or local government.

  4. The operator of the vessel is responsible for filing the tax return and paying the tax liability.

  5. Input adjustment with TC 29X on MFT 03 and IRS No. 64 and IRS No. 125 (if applicable).

21.7.8.4.1.5.5  (04-24-2009)
Alcohol and Cellulosic Biofuel Sold As But Not Used As Fuel

  1. An excise tax is imposed if the alcohol fuel mixture credit, alcohol credit, or cellulosic biofuel producer credit was claimed and any person later:

    • Uses a mixture

    • Uses straight alcohol

    • Uses cellulosic biofuel for a purpose other than fuel

    • Separates the alcohol from the mixture or;

    • Mixes the straight alcohol

  2. Use the following table to determine the tax for each gallon of alcohol:

    IF the alcohol is: AND THEN the tax rate per gallon is:
    At least 190 proof is ethanol $.45
    At least 190 proof is methanol $.60
    At least 190 proof benefited from the small ethanol producer credit $.55
    At least 150 proof but less than 190 proof is ethanol $.3333
    At least 150 proof but less than 190 proof is methanol $.45
    At least 150 proof but less than 190 proof benefited from the small ethanol producer credit $.4333

    Note:

    The tax rate for cellulosic biofuel that is not alcohol is $1.01 per gallon ($.46 per gallon if the cellulosic biofuel is ethanol and $.41 per gallon if the cellulosic biofuel is alcohol).

  3. These are also referred to as Section 40 fuels.

  4. Input adjustment with TC 29X on MFT 03 using IRS No. 51.

21.7.8.4.1.5.6  (01-16-2009)
Biodiesel Sold As But Not Used As Fuel

  1. An excise tax is imposed if the biodiesel or renewable diesel mixture credit, or biodiesel or renewable diesel credit was claimed and any person later:

    • Uses a mixture or straight biodiesel or renewable diesel for a purpose other than as fuel

    • Separates the biodiesel or renewable diesel from the mixture

    • Mixes the straight biodiesel or renewable diesel

  2. The tax is:

    • $1.00 per gallon of biodiesel

    • $1.00 per gallon of agri-biodiesel

    • $1.00 per gallon of renewable diesel

      Note:

      An additional $.10 per gallon is added if the agri-biodiesel benefited from the small agri-biodiesel producer credit.

  3. Input adjustment using TC 290 on MFT 03 with IRS No 117.

21.7.8.4.1.5.7  (06-21-2007)
Floor Stocks Tax

  1. Tax is imposed on any ozone-depleting chemical (ODC) held (other than by the manufacturer or importer of the ODC) on January 1 for sale or use in further manufacturing. The person holding title (as determined under local law) to the ODC is liable for the tax, whether or not delivery has been made.

  2. Form 6627, Environmental Taxes, is used to figure the tax liability and attached to the Form 720 that is due by July 31 of each year.

  3. The tax deposit is due by June 30 at an authorized financial institution.

  4. Input adjustment using TC 29X on MFT 03 using IRS No. 20.


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