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What Businesses Need to Know About the Excise Tax

by | Jan 1, 2023 | Small Business, Taxes | 0 comments

Excise tax is a type of indirect tax levied on specified commodities, services, or activities. Gas, flight tickets, large trucks and highway tractors, indoor tanning, tires, cigarettes, and other commodities and services are often subject to a federal excise tax.

This tax is frequently included into the price of the goods. While the excise tax is not normally shown on the receipt, it may be paid at the time of:

  • Import
  • The retailer’s sale
  • Sale by the manufacturer
  • Use by the producer or the end user

Many excise taxes are placed in trust funds to be used for initiatives connected to the taxed product or service, such as highway and airport renovations. Excise taxes are distinct from income taxes. Businesses liable to excise tax must normally file a Form 720, Quarterly Federal Excise Tax Return, with the IRS to record the tax.

Frequently, the merchant, producer, or importer is required to pay the excise tax to the IRS and file Form 720. A third party collects some excise taxes. After that, the third party delivers the tax to the IRS and files Form 720. The tax on a flight ticket, for example, is often paid by the customer and gathered by the carrier.

When to file:

Each quarter of the calendar year, businesses must file the form. The following are the deadlines:

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

If the deadline for filing a tax return comes on a Saturday, Sunday, or legal holiday, the due date is the following business day.

How to Make a File

E-filing excise tax returns is safe, secure, simple, and accurate, and while paper excise tax returns are accepted by the IRS, electronic filing is highly advised. To make this procedure simpler for taxpayers, IRS.gov lists the contact information for all permitted e-file transmitters of excise forms. Businesses can submit forms online 24 hours a day, seven days a week.

Businesses that e-file receive proof that the IRS received their form. E-filing also decreases processing time and mistakes. To file electronically, business taxpayers must pay the provider’s online submission cost.

The following excise tax forms are available for electronic filing:

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

Please call the office if you have any questions or would like more information about federal or state excise taxes.


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