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What to know about filing excise taxes

Posted on November 4, 2019

Does your business provide goods and/or services that are subject to excise tax?

Here is what excise tax is — and why it exists:

  • An excise tax is a legislated tax on specific goods or services such as fuel, tobacco, and alcohol. Classified as intranational taxes, excise taxes are imposed within a government infrastructure — rather than international taxes, which are imposed across country borders.
  • A federal excise tax is usually collected from motor fuel sales, airline tickets, tobacco, alcohol, and a few other goods and services.
  • Excise taxes are primarily for businesses. Consumers may or may not see the cost of excise taxes directly.
  • Many excise taxes are paid by merchants who then pass the tax on to consumers through higher prices. Merchants pay excise taxes to wholesalers and consider excise taxes in product pricing which increases the retail price overall.
  • Like anything, there are some exceptions. Some excise taxes are paid directly by consumers. Examples include property taxes and excise taxes on certain retirement account activities.

When are excise taxes paid?

It depends. Since excise taxes are charged on a wide variety of goods, services and activities, the tax is imposed at different times, depending on the type of offering. Excise tax may be imposed at the time of:

  • Import
  • Sale by the manufacturer
  • Sale by the retailer, or
  • Use by the consumer

How are excise taxes reported?

Businesses must file IRS Form 720 quarterly to report the tax to the IRS. Here’s what that includes:

  • Many excise taxes go into trust funds earmarked for related capital projects, such as highway and airport improvements.
  • Excise taxes are independent of income taxes.
  • Individuals pay excise taxes on things like gasoline, indoor tanning, airline tickets, and tires. Since the excise cost is usually included in the price, the seller or manufacturer is responsible for sending these tax payments to the IRS and filing Form 720.

Businesses must file for each quarter of the calendar year:

  • Quarter 1 – January, February, March: Due April 30
  • Quarter 2 – April, May, June: Due July 31
  • Quarter 3 – July, August, September: Due October 31
  • Quarter 4 – October, November, December: Due January 31

How do businesses file these taxes?

IRS encourages businesses to file Form 720 electronically. To help excise taxpayers, the IRS posts the contact information on IRS.gov of all approved e-file transmitters for excise forms. Businesses can submit forms online 24 hours a day.

Excise forms eligible to be filed electronically include:

  • Form 720, Quarterly Federal Excise Tax.
  • Form 2290, Heavy Highway Vehicle Use Tax.
  • Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8.

Teipen Selanders Poynter & Ayres are experienced with excise tax regulations. If your business has questions, has missed a filing deadline, or needs filing assistance, we can help.