Paying the Taxes

Excise taxes are due and payable without assessment or notice. If you need to make a payment when you file your quarterly return, make your payment by check or money order payable to the United States Treasury. Write on your check or money order your employer identification number, Form 720, and the period covered by the payment.

Floor stocks tax on ODCs. You must deposit the floor stocks tax imposed on ODCs held on January 1, as discussed earlier, by June 30 of the year that the tax is imposed.

Deposit Requirements

If you have to file a quarterly excise tax return on Form 720, you may have to make deposits of your excise taxes before the return is due. If you are not required to make deposits, you pay the tax when you file Form 720. See Exceptions, later.

Federal tax deposit coupons. If you do not make your deposits electronically (discussed next), they must be accompanied by a Form 8109, Federal Tax Deposit Coupon. If you do not have a coupon book, contact your local IRS office or call 1-800-829-1040.

Electronic deposit requirement. You must use the Electronic Federal Tax Payment System (EFTPS) to make electronic deposits of all depository tax liabilities (including employment taxes, corporate income tax, and excise taxes) you incur after 2001, if you meet either of the following conditions.

• You had to make electronic deposits in 2001.
• You deposited more than $200,000 in federal depository taxes in 2000.

If you do not meet these conditions, electronic deposits are voluntary.

For information about EFTPS, access it on the Internet at www.eftps.gov, or see Publication 966, Now a Full Range of Electronic Choices to Pay ALL Your Federal Taxes.

You can enroll in EFTPS on-line or you can call:

• 1-800-945-8400, or
• 1-800-555-4477.

When To Make Deposits

These rules apply to taxes reported on Form 720 for which deposits are required.

Generally, you make deposits for a semimonthly period. A semimonthly period is the first 15 days of a month or the 16th day through the end of a month.

All taxes are deposited under the rules for regular method taxes. However, communication and air transportation taxes can be deposited under the rules for alternative method taxes.

All excise taxes that must be deposited are subject to the special September rules. Under these rules, an additional deposit is required in September and different dates may apply if you are required to make electronic deposits (see Electronic deposit requirement, earlier). The taxes for that part of the period not covered by the special rules should be deposited by the normal due date.

See Publication 509 for an Excise Tax Calendar that shows the due dates for the current year.

Regular method taxes. Deposits of taxes (other than alternative method taxes) for a semimonthly period are due by the 14th day following the semimonthly period. Therefore, the deposit for the first semimonthly period is due by the 29th of that month. The deposit for the second semimonthly period is due by the 14th of the following month.

If the 14th day is a Saturday, Sunday, or legal holiday in the District of Columbia, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday.

September rule. For 2002, deposit by September 27 the taxes for the period beginning September 16 and ending September 25. If making electronic deposits, deposit by September 30 the taxes for the period beginning September 16 and ending September 26.

Make the deposit for the remaining days of the second semimonthly period in September by the regular due date.

Alternative method taxes. You can deposit communications and air transportation taxes based on amounts considered as collected (the alternative method) rather than on amounts actually collected.

If you use the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered as collected during the first 7 days of the second following semimonthly period. You must deposit these taxes by the third banking day after that seventh day.

To use the alternative method, you must keep a separate account of the tax included in the amounts billed or tickets sold during the month. Report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected.

Example. Under the alternative method, the tax included in amounts billed or tickets sold between March 1 and March 15, 2002, is considered collected during the first 7 days of April 2002. The deposit of these taxes is due by April 10, 2002, 3 banking days after April 7. These amounts are reported on the Form 720 for the second quarter of 2002.

September rule. For 2002, deposit by September 27 the communications and air transportation taxes included in the amounts billed or tickets sold during the period beginning September 1 and ending September 10. If making electronic deposits, deposit by September 30 the air transportation and communications taxes included in the amounts billed or tickets sold during the period beginning September 1 and ending September 11.

Report alternative method taxes deposited under the September rule on Form 720 for the 4th quarter.

Make the deposit for the remaining days of the first semimonthly period in September by the regular due date.

Amount of Deposits

Deposits for a semimonthly period generally must be at least 95 percent of the net tax liability for that period unless the safe harbor rule (discussed later) applies. Generally, you do not have to make a deposit for a period in which you incurred no tax liability.

Net tax liability. Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. If you use this method, you must use it for all semimonthly periods in the calendar quarter.

September rule. To figure your net tax liability under the September rule, see sections 40.6302(c)-2 and, for alternative method taxes, 40.6302(c)-3 of the regulations.

Safe Harbor Rule

You can use the safe harbor rule to figure if you have deposited a sufficient amount of tax. The rules apply separately to regular method taxes and alternative method taxes.

The safe harbor rule applies to persons who filed a Form 720 for the second calendar quarter (the look-back quarter) preceding the current quarter. If you filed for the look-back quarter, you will meet the semimonthly deposit requirement for the current quarter if all the following conditions are met.

• The deposit of that tax for each semimonthly period in the current quarter is not less than 1/6 (16.67%) of the net tax liability reported for that tax for the look-back quarter.
• Each deposit is timely made.
• Any underpayment for the current quarter is paid by the due date of the return.
• For regular method taxes, liability does not include any tax that was not imposed, or a tax on a chemical not subject to tax, at all times during the look-back quarter.
• For alternative method taxes, liability does not include any tax that was not imposed at all times during the look-back quarter and the month preceding the look-back quarter.
• For the semimonthly period for which the additional deposit is required (September rule), the additional deposit must be at least 11/90 (12.23%), 10/90 (11.12%) for non-EFTPS, of the net tax liability reported for the look-back quarter.

Tax rate increases. You must modify the safe harbor rule if there has been an increase in the rate of tax. You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability.

Exceptions

You do not have to make deposits of taxes in the following situations. You pay these taxes when you file your Form 720 for the quarter.

1. The liability is for taxes on the following items.
1. Sport fishing equipment.
2. Electric outboard motors and sonar devices.
3. Bows.
4. Arrow components.
5. Fuels used on inland waterways.
6. Alcohol sold as fuel but not used as fuel.
2. The taxes are reportable on a one-time filing. (See the earlier discussion, One-time filing, under Filing Form 720.)
3. The net liability for taxes listed in Part I of Form 720 does not exceed $2,500 for the quarter.
4. The tax liability is for the removal of a batch of gasohol from an approved refinery by bulk transfer, if the refiner elects to treat itself for that removal as not registered.

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