Part 4. Examining Process

Chapter 24. Excise Tax

Section 1. Introduction to Excise Taxes

4.24.1  Introduction to Excise Taxes

Manual Transmittal

September 21, 2012

Purpose

(1) Revision. This transmits a revision to IRM 4.24.1, Excise Tax, Introduction to Excise Taxes

Material Changes

(1) Description of all fuel abstracts previously found at IRM 4.24.1.4.2 has been moved to IRM 4.24.4, Excise Fuel Taxes Workload, Policies and Procedures.

(2) Added content at IRM 4.24.1.2 (4) relating to identity theft.

(3) Added content relating to indoor tanning and medical devise taxes.

(4) Updated all hyperlinks and IRM references.

Effect on Other Documents

This material supersedes IRM 4.24.1, dated 8-13-2008.

Audience

This section is for SBSE Excise Tax Managers, Examiners and Specialists.

Effective Date

(09-21-2012)



/s/ John Imhoff
Director, Specialty Programs
Small Business / Self Employed

4.24.1.1  (09-21-2012)
Basic Excise Examiner Responsibilities-Overview

  1. All excise examiners must perform their professional responsibilities in a way that supports the IRS Mission. This requires excise examiners to provide top quality service and to apply the law with integrity and fairness to all.

4.24.1.1.1  (09-21-2012)
Customer Service

  1. Providing all taxpayers with high quality service in all contacts is a primary area of emphasis for all excise examiners.

4.24.1.1.2  (09-21-2012)
Focus on Problem Solving

  1. Excise examiners should assist taxpayers in solving any tax problem(s) identified during an examination and/or compliance review. Excise examiners should refer the taxpayer to the appropriate function within the Service to assist with the problem.

    1. Referrals should be made to Taxpayer Advocate Service (TAS) when criteria outlined in IRM 13.1.7.2, Taxpayer Advocate Case Criteria, is met.

    2. Referrals should be made to appropriate Collection personnel if taxpayers have questions about current or past collection actions.

  2. Excise examiners should refer to IRM 4.9.1, Examination Technical Time Reporting System, to determine the appropriate time reporting codes to use when assisting taxpayers in problem solving that is unrelated to an ongoing examination.

4.24.1.1.3  (09-21-2012)
Proper Use of Time

  1. The proper use of time is an essential element of a quality examination or compliance review. Excise examiners are responsible for the day-to-day management of their cases and are accountable for completing their work in the least amount of time necessary to perform a quality examination or compliance review. Both the number of hours charged to a case and the span of time the case is open must be reasonable.

  2. Factors used to determine if the time charged and the length of time a case is open are reasonable include:

    1. issue complexity and development,

    2. condition of books and records, and

    3. taxpayer/representative cooperation.

  3. A focus on timely actions will reduce taxpayer burden.

  4. In-process cases will be considered overage when they have been in status 12 (started) in excess of 270 days.

4.24.1.1.4  (09-21-2012)
Taxpayer Communication

  1. Effective communication with taxpayers is a significant factor in conducting a quality examination and in minimizing taxpayer burden. All communication with taxpayers should be courteous, professional, and clear. See IRM 4.10.1.5.3.

4.24.1.1.5  (09-21-2012)
Case File Documentation

  1. It is mandatory that the excise examiner, group managers, and any other employee involved in the examination process, document in the case file all actions taken. These actions must be recorded on Form 9984, Examining Officer’s Activity Record.

  2. The following information must be recorded on Form 9984:

    1. date of activity,

    2. location of the activity,

    3. contact code,

    4. remarks/notes/actions taken,

    5. time charged for each activity, and any

    6. periods of inactivity, such as extended leave, training, and details.

4.24.1.1.6  (09-21-2012)
Taxpayer Rights

  1. Excise examiners have the ongoing responsibility to ensure that all taxpayer rights are protected and observed, whether these rights are mandated by statute or provided as a matter of policy. See IRM 4.10.1.6.

4.24.1.1.7  (09-21-2012)
Confidentiality of Taxpayer Information-Taxpayer Privacy

  1. The obligation to protect taxpayer privacy and to safeguard the information taxpayers entrust to us is a fundamental part of the Service’s mission to apply the tax law with integrity and fairness to all. Taxpayers have the right to expect that the information they provide will be safeguarded and used only in accordance with the law.

  2. For Unauthorized Assess (UNAX) requirements see IRM 4.10.1.6.11.

  3. For Third Party Contact procedures see IRM 4.11.57.

  4. For information relating to Identity Theft and Incident Management Program see IRM 10.5.3.

4.24.1.2  (09-21-2012)
Overview of Excise Taxes

  1. Excise Taxes are levied on a wide variety of goods, services and activities. They may be imposed at the time of sale by the manufacturer, sale by the retailer, or use (by the consumer). Many of these taxes are set aside into trust funds earmarked for related capital projects, such as highway and airport improvements. Excise taxes are independent of income taxes.

4.24.1.3  (09-21-2012)
Excise IRM Part 4 Chapter 24 Overview

  1. The Excise Tax IRM 4.24 contains the following sections:

    • Section 1, Introduction to Excise Tax

    • Section 2, Form 637 Excise Tax Registration

    • Section 4, Fuel Taxes, Workload, Policies and Procedures

    • Section 5, LB& I Examination Program Procedures for Excise Examiners

    • Section 6, Excise Tax Examiner Responsibilities

    • Section 7, Excise Embedded Quality Review System (EQRS) and Excise National Quality Review System (NQRS)Excise Quality Review

    • Section 8, Examination Guidance for Excise Claims for Refund or Abatement

    • Section 9, Excise Tax Penalties and Excise Return Preparer Penalties Guidance

    • Section 10, Excise Tax Examination Reports, Case Closing and Appeals Procedures

    • Section 13, Overview of Excise Fuel Compliance Program

    • Section 14, Excise Fuel Compliance Safety, Uniform, and Motor Vehicle Requirements

    • Section 15, Excise Fuel Compliance Inspection, Sampling, and Shipping

    • Section 16, Excise Fuel Compliance Report Writing, Case Processing and Appeals Procedures

    • Section 17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures

    • Section 18, Excise Operations Support (EOS)

4.24.1.4  (09-21-2012)
Excise Tax Return and Claim Forms

  1. Excise tax returns and claims are processed at the Cincinnati Campus and filed using the following forms listed below.

    • Form 720, Quarterly Federal Excise Tax Return.

    • Form 720X, Amended Quarterly Federal Excise Tax Return. See IRM 4.24.8 for more information.

    • All original and amended Form 720-TO,Terminal Operator Report, that are filed on paper. See IRM 4.24.17 for more information.

    • All original and amended Form 720-CS,Carrier Summary Report, that are filed on paper. See IRM 4.24.17 for more information.

    • All original and amended Form 730 , Monthly Tax Return for Wagers

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

    • All original and amended Form 2290, Heavy Highway Vehicle Use Tax Return

    • Form 8849, Claim for Refund of Excise Taxes, (consisting of seven schedules) . See IRM 4.24.8 for more information.

    • Form 637, Application for Registration (For Certain Excise Tax Activities). See IRM 4.24.2 for more information.

    • Form 8876, Excise Tax on Structured Settlement Factoring Transactions. See IRM 4.24.6.7.7 for more information.

    • Form 6197, Gas Guzzler Tax

    • Form 6627, Environmental Taxes

    • Form 843, Claim For Refund and Request for Abatement, is used for all Dyed Diesel Fuel Penalty Claims. These claims are processed by the Cincinnati Campus and forwarded to the excise fuel territory manager. See IRM 4.24.16.3.

    Note:

    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, which together with the income tax return to which they are attached, are processed at the Submission Processing Center where taxpayer files the related income tax return.

  2. For more information regarding excise operations at the Cincinnati Campus see IRM 21.7.8, Business Tax Returns and Non-Master File Accounts - Excise Taxes.

4.24.1.5  (09-21-2012)
Overview of Excise Taxes Reported on Form 720

  1. This section provides a brief overview of the Excise Taxes reported on Form 720 and provides a hyperlink to additional information about the specific excise tax area. For additional information regarding processing excise returns see IRM 21.7.8, as well as the Examining Excise Taxes, Issues and Procedures web page at http://mysbse.web.irs.gov/Specialty/excise/issues/default.aspx.

  2. Form 720 has various sections:

    • Part 1- consists of excise taxes generally required to be deposited. See IRM 20.1.4.8, Form 720 Reporting Requirements.

    • Part 2- consists of excise taxes that are not required to be deposited.

    • Part 3- 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 1.

    • Schedule C, Claims, is used to make claims only if there is a liability reported in Part 1 or Part 2.

    • Schedule T, Two Party Exchange Information reporting, is used to report gallons of taxable fuel received in a two-party exchange within a terminal. These gallons must also be included on the appropriate line on page 1 of Form 720, or delivered in a two-party exchange contemporaneous with a removal across the rack. Enter all gallons of fuel received or delivered in a two-party exchange within a terminal for the applicable fuel.

  3. Exhibit 4.24.1-1. for a list of the types of excise taxes reported on Form 720, 2290, 730, and 11-C.

  4. See IRM 4.24.17 and 21.7.8.4.1.21 for information relating to Form 720-TO Terminal Operator Report and Form 720-CS Carrier Summary Report.

4.24.1.5.1  (09-21-2012)
Electronic Federal Tax Payment System

  1. Most excise taxpayers are required to electronically deposit their excise depository taxes using the Electronic Federal Tax Payment System (EFTPS). However, some excise 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 on EFTPS.

  2. Taxpayer inquiries regarding Electronic Federal Tax Payment System (EFTPS) payments should be referred to the Centralized Specialty Tax Operations toll free phone number 1-866-699-4096.

  3. See the EFTPS web site at https://www.eftps.gov/eftps/ for more information.

4.24.1.5.2  (09-21-2012)
Excise Taxes Reported on Form 720

  1. Excise Taxes are distinguished based on their activity code, commonly referred to as abstract codes. There are two main groups of excise taxes, fuel related and non-fuel related taxes. The non fuel related abstract groups are discussed below.

  2. See IRM 4.24.4.9, Overview of Fuel Excise Taxes, for a detailed description of fuel excise taxes. The web page for Fuel taxes can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/fuel/default.aspx.

4.24.1.5.2.1  (09-21-2012)
Air Transportation Taxes

  1. Tax is imposed on amounts paid for the transportation of persons by air (ABS 26), the transportation of property by air (ABS 28), and the use of international air travel facilities (ABS 27). Generally, the tax is paid by the person paying for the transportation and is collected and paid over to the government by the person receiving the payment.

  2. The web page for Air Transportation taxes can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/air/default.aspx.

4.24.1.5.2.2  (09-21-2012)
Coal Tax

  1. Tax is imposed on the sale of both surface mined (ABS 38 and 39) and underground mined (ABS 36 and 37) coal. The tax is imposed on the producer of the coal.

  2. The web page for Coal taxes can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/mantax/coal/default.aspx.

4.24.1.5.2.3  (09-21-2012)
Communications Tax

  1. Tax is imposed on amounts paid for communication services defined as local telephone service, and teletypewriter exchange service (ABS 22).

  2. The tax is paid by the person paying for the service, ordinarily the subscriber or other telephone consumer. The tax must be paid to the telecommunications carrier rendering the service who is responsible for collecting the tax and paying it over to the government.

  3. The web page for Communications tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/comm/default.aspx.

4.24.1.5.2.4  (09-21-2012)
Environmental Taxes/Ozone-Depleting Chemicals (ODC) Tax

  1. Oil spill liability tax (ABS 18) generally applies to crude oil received at a U.S. refinery and to petroleum products entered into the United States for consumption, use, or warehousing.

  2. The imported petroleum products oil spill tax (ABS 21) is imposed on petroleum products when they enter the United States for consumption, use, or warehousing.

  3. The tax on imported products (ABS 19) is imposed on an imported product containing or manufactured with ODCs if it is entered into the United States for consumption, use, or warehousing and is listed in the Imported Products Table.

  4. ODCs tax (ABS 98) is imposed on an ODC when it is first used or sold by its manufacturer or importer.

  5. A floor stocks tax (ABS 20) is imposed on ODCs held on January 1 by any person (other than the manufacturer or importer of the ODCs) for sale or for use in further manufacture.

  6. The web page for Environmental taxes can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/enviro/default.aspx.

4.24.1.5.2.5  (09-21-2012)
Foreign Insurance Tax

  1. Tax is imposed when U.S. residents buy insurance policies from nonresident alien individuals or businesses not licensed to sell insurance by a state or the District of Columbia (ABS 30).

  2. The web page for Foreign Insurance tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/foreign/default.aspx.

4.24.1.5.2.6  (09-21-2012)
Gas Guzzler Tax

  1. 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 (ABS 40). Automobiles imported for business or personal use are subject to the tax.

  2. The web page for Gas Guzzler tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/mantax/gas/default.aspx.

4.24.1.5.2.7  (09-21-2012)
Indoor Tanning Tax

  1. The Patient Protection and Affordable Care Act of 2010 established a new Internal Revenue Code section, 5000B, which imposes an excise tax on indoor tanning services (ABS 140) sold after June 30, 2010.

  2. The web page for Indoor Tanning tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/health/indoor/default.aspx.

4.24.1.5.2.8  (09-21-2012)
Medical Devise Tax

  1. The Health Care and Education Reconciliation Act of 2010 in conjunction with the Patient Protection and Affordable Care Act of 2010 established a new Internal Revenue Code section, 4191, which imposes an excise tax on certain sales of medical devices after December 31, 2012.

  2. The web page for Medical Devise Tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/health/medical/default.aspx.

4.24.1.5.2.9  (09-21-2012)
Retail Tax on Heavy Vehicles

  1. Tax is imposed on the sales price on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles (ABS 33):

    1. truck chassis and bodies,

    2. truck trailer and semitrailer chassis and bodies, and

    3. tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer.

  2. The web page for Retail Tax on Heavy Vehicles can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/retail/default.aspx.

4.24.1.5.2.10  (09-21-2012)
Ship Passenger Tax

  1. Tax is imposed for persons on a covered voyage. It is paid by the operator of the ship (ABS 29).

  2. The web page for Ship Passenger Tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/ship/default.aspx.

4.24.1.5.2.11  (09-21-2012)
Sport Fishing Equipment/Bows and Arrow Components Taxes

  1. Tax is imposed on the sale by manufacturer, producer, or importer of:

    1. certain sport fishing equipment (ABS 41),

    2. fishing rods and fishing poles (ABS 110),

    3. electric outboard motors (ABS 42),

    4. fishing tackle boxes (ABS 114),

    5. bows, quivers, broadheads, and arrow points (ABS 44), and

    6. arrow shafts (ABS 106).

  2. The web page for Sport Fishing and Archery Tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/sports/default.aspx.

4.24.1.5.2.12  (09-21-2012)
Tire Tax

  1. Generally tax is imposed on the sale by the manufacturer or importer of tires of the type used on highway vehicles, if wholly or in part made of rubber. The tax rate is also based on the load capacity of the tire. (ABS 108, 109, 113)

  2. The web page for Tire Tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/mantax/tires/default.aspx.

4.24.1.5.2.13  (09-21-2012)
Vaccine Tax

  1. The tax is imposed on the sale, and on certain uses treated as sales, by the manufacturer or importer of each dose of a taxable vaccine listed in IRC 4132(a)(1) (ABS 97).

  2. The web page for Vaccine Tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/mantax/vaccines/default.aspx.

4.24.1.5.2.14  (09-21-2012)
Obligations Not in Registered Form

  1. The tax is imposed on any debt issued by U.S. companies in non-registered (bearer) form (ABS 31).

  2. The web page for Obligations Not in Registered Form can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/Obligations/default.aspx.

4.24.1.5.2.15  (09-21-2012)
Structured Settlement Factoring Transactions

  1. A structured settlement factoring transaction is a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration. An excise tax is imposed on the factoring discount of certain structured settlement payments (ABS 34) and reported on Form 8876.

  2. For guidance and procedures see IRM 4.24.6.7.7, Excise Examinations Relating to Structured Settlement Factoring Transactions.

  3. The web page for Structured Settlement Factoring Transactions can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/struct/default.aspx.

4.24.1.6  (09-21-2012)
Overview of Excise Taxes Reported on Form 2290, 11-C, and Form 730

  1. The Form 2290, Heavy Highway Vehicle Use Tax, is imposed on the use of heavy highway motor vehicles (including semi trailers and trailers) with a taxable gross weight of 55,000 pounds or more on public highways (ABS 196).

    1. Generally, the person liable for the tax is the person in whose name the vehicle is registered or required to be registered at the time of its first use on the public highway in the taxable period.

    2. For additional information see IRM 21.7.8.4.2, Form 2290, Heavy Highway Vehicle Use Tax Return .

    3. The web page for Heavy Highway Vehicle Use Tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/hvut/default.aspx.

  2. The Form 730, Monthly Tax Return for Wagers, reports the tax imposed on taxable wagers. Wagers are the total of those wagers that are authorized and those wagers that are not authorized by the State in which they are accepted (ABS 198).

  3. The Form 11-C, Occupational Tax and Registration Return for Wagering is used by principals or agents who accept taxable wagers to register certain information and pay the occupational tax (ABS 197).

  4. The web page for Wagering tax can be found at http://mysbse.web.irs.gov/Specialty/excise/issues/wagering/default.aspx.

Exhibit 4.24.1-1 
Listing of Excise Taxes Including Associated IRC Sections and Trust Funds

Form Type of Excise Tax IRC Trust Fund
720 Air Transportation of Persons and Property 4261-4263, 4271-4272, 4281-4282, 4291, 6672,7501 Airport and Airways Air Transportation
720 Coal 4121 Black Lung Disability
720 Communications 4251-4253, 4291, 6672,7501 General
720 Ozone Depleting Chemicals 4681-4682 General
720 Foreign Insurance 4371-4374 General
720 Gas Guzzler 4064, 4221-4222 General
720 Indoor Tanning 5000B General
720 Inland Waterways 4042 Inland Waterways Trust
720 Medical Device 4191 General
720 Leaking Underground Storage Tank 4041, 4042, 4081 Leaking Underground Storage Tank
720 Retail Truck 4051-4053, 4221-4222 Highway
720 Ship Passenger 4471-4472 General
720 Sports Fishing/Bows and Arrow Components 4161-4162, 4221-4222 Aquatic Resources, Wildlife Restoration
720 Taxable Fuel (gasoline, diesel fuel, kerosene) 4041, 4081, 4082, 4091-4093, 6715 Highway, Airport and Airway
720 Tires 4071-4073, 4221-4222 Highway
720 Vaccines 4131-4132 Vaccine Injury Compensation
720 Obligations not in Registered Form 103,149,163,4701 General
8876 Structured Settlement Factoring 5891 General
730 Wagering 4401-4405, 4411-4412, 4421-4424 General
11-C Occupational Tax and Registration Return for Wagering 4411 General
2290 Heavy Highway Vehicle Use 4481-4483 Highway

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