Quarterly Federal Excise Tax Return

Retail Tax

Truck, trailer, and semitrailer chassis and bodies, and tractors (IRS No. 33). The tax is 12% (.12) of the sales price on the first retail sale of each unit. The tax applies to:

• Truck chassis and bodies except truck chassis and bodies suitable for use with a vehicle with a gross vehicle weight (GVW) 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 GVW of 26,000 pounds or less, and
• Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer regardless of GVW.

The sales price of a unit includes the sales price of certain related parts and accessories sold on or in connection with the sale of the unit.

Section 4051(d) tire credit. A tax credit may be taken equal to the amount of tax that has been imposed on each tire that is sold on or in connection with the first retail sale of a taxable vehicle reported on IRS No. 33. Claim the section 4051(d) tire credit on Schedule C, line 11a.

Ship Passenger Tax

Transportation by water (IRS No. 29). A tax is imposed on the operator of commercial ships. The tax is $3 for each passenger on a commercial passenger ship that has berth or stateroom accommodations for at least 17 passengers if the trip is over 1 or more nights. A voyage extends over 1 or more nights if it lasts longer than 24 hours. The tax also applies to passengers on any commercial ship that transports passengers engaged in gambling aboard the ship beyond the territorial waters of the United States. Enter the number of passengers for the quarter on the line for IRS No. 29.

Other Excise Tax

Obligations not in registered form (IRS No. 31). For obligations issued during the quarter, enter the principal amount of the obligation multiplied by the number of calendar years (or portion thereof) during the period beginning on the issue date and ending on the maturity date on the line for IRS No. 31.

Luxury Tax

Passenger vehicles (IRS No. 92). The tax is imposed on the first retail sale of a passenger vehicle and is equal to 3% (.03) of the sales price in excess of $40,000. The first retail sale includes the use or lease of a vehicle. The tax is paid by the seller of the vehicle.

Add the tax on each sale during the quarter and enter the total on the line for IRS No. 92. See Pub. 510 for more information.

Also, see Pub. 510 for information on applying this tax to electric and clean-fuel-burning vehicles.

Manufacturers Taxes

Do not include the excise tax on coal in the sales price when determining which tax rate to use.

Underground mined coal (IRS Nos. 36 and 37). The tax on underground mined coal is the lower of $1.10 per ton or 4.4% (.044) of the sales price. Enter on the line for IRS No. 36 the number of tons of underground mined coal sold at $25 or more per ton. Enter on the line for IRS No. 37 the total sales price for all sales of underground mined coal sold at a selling price of less than $25 per ton.

Surface mined coal (IRS Nos. 38 and 39). The tax on surface mined coal is the lower of $.55 per ton or 4.4% (.044) of the sales price. Enter on the line for IRS No. 38 the number of tons of surface mined coal sold at $12.50 or more per ton. Enter on the line for IRS No. 39 the total sales price for all sales of surface mined coal sold at a selling price of less than $12.50 per ton.

Highway-type tires (IRS No. 66). The tax applies only to highway-type tires and is as follows:

1. For tires weighing more than 40 pounds but not more than 70 pounds - $.15 a pound for each pound over 40 pounds.
2. For tires weighing more than 70 pounds but not more than 90 pounds - $4.50 plus $.30 a pound for each pound over 70 pounds.
3. For tires weighing more than 90 pounds - $10.50 plus $.50 a pound for each pound over 90 pounds.

Figure the tax for each tire sold and enter the total for the quarter on the line for IRS No. 66.

Gas guzzler tax (IRS No. 40). Use Form 6197, Gas Guzzler Tax, to figure the liability for this tax and attach it each quarter to Form 720. The tax rates for the gas guzzler tax are shown on Form 6197.

Vaccine taxes (IRS No. 97). A tax is imposed on the sale or use of a vaccine manufactured, produced, or entered into the United States at $.75 per dose if it:

• Contains diptheria toxoid, tetanus toxoid, pertussis bacteria, extracted or partial cell bacteria, specific pertussis antigens, or polio virus;
• Is against measles, mumps, rubella, hepatitus B, chicken pox, or rotavirus gastroenteritis;
• Is any HIB (haemophilus influenza type B) vaccine; or
• Is any conjugate vaccine against streptococcus pneumoniae.

If any taxable vaccine is combined with one or more additional taxable vaccines, then the tax is imposed on each vaccine included in the combination.

Example. MMR contains three taxable vaccines: measles, mumps, and rubella. The tax per dose on MMR is $2.25 (3 x $.75).

Add the tax for each taxable vaccine and enter the total tax on the line for IRS No. 97.

Foreign Insurance Taxes

Policies issued by foreign insurers (IRS No. 30). Enter the amount of premiums paid during the quarter on policies issued by foreign insurers. Multiply the premiums paid by the rates listed on Form 720 and enter the total for the three types of insurance on the line for IRS No. 30.

Treaty-based return positions under section 6114. Foreign insurers and reinsurers who take the position that a treaty of the United States overrules, or otherwise modifies, an Internal Revenue law of the United States, must disclose such position. This disclosure must be made once a year on a statement which must report the payments of premiums that are exempt from the excise tax on policies issued by foreign insurers for the previous calendar year. This statement is filed with the 1st quarter Form 720, which is due before May 1 of each year.

You may be able to use Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), as a disclosure statement.

How to file. At the top of Form 720, write Section 6114 Treaty. Provided you have no other transactions reportable on Form 720:

1. Check the one-time filing box on page 1. If this is your final return, check the final return box.
2. Write None on lines 1, 3, and 5.
3. Sign the return.

You need an EIN to file Form 720. If you do not have an EIN, use Form SS-4 to apply for one. See Employer Identification Number (EIN) on page 3.

Where to file. Mail the Form 720 with the attached statement to: Internal Revenue Service Center, P.O. Box 21086, Philadelphia, PA 19114. Also, see the Caution under Private Delivery Services on page 2.

Exception. If you are reporting liabilities in Parts I or II (Form 720), follow the instructions above for How to file, except mail the Form 720 to: Internal Revenue Service Center, Cincinnati, OH 45999-0009.

Part II

Sport fishing equipment (IRS No. 41). The tax on sport fishing equipment is 10% (.10) of the sales price. The tax is paid by the manufacturer, producer, or importer. Taxable articles include fishing rods and poles (and component parts), reels, fly fishing lines (and other lines not over 130 pounds test), fishing spears, spear guns, spear tips, terminal tackle, fishing supplies and accessories, and any parts or accessories sold on or in connection with these articles. See Pub. 510 for a complete list of taxable articles. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 41.

Electric outboard motors and sonar devices (IRS No. 42). The tax on an outboard motor or a sonar device for finding fish is 3% (.03) of the sales price. The tax is paid by the manufacturer, producer, or importer. The tax is limited to $30 for each sonar device. Sonar devices for finding fish do not include graph recorders, digital types, meter readouts, or combination graph recorders or combination meter readouts. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 42.

Bows (IRS No. 44). The tax on bows is 11% (.11) of the sales price. The tax is paid by the manufacturer, producer, or importer. It applies to bows having a draw weight of 10 pounds or more. The 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 suitable for use with arrows described below. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 44.

Arrow components (IRS No. 102). The tax on any shaft, point, nock, or vane is 12.4% (.124) of the sales price for which the component is sold. The tax is paid by the manufacturer, producer, or importer of any component used in the manufacture of any arrow that after assembly measures 18 inches or more in overall length or is less than 18 inches long but is suitable for use with a bow that has a draw weight of 10 pounds or more. Add the tax on each sale during the quarter and enter the total on the line for IRS No. 102.

Alcohol sold as but not used as fuel (IRS No. 51). An excise tax is imposed if the credit was claimed on Form 6478, Credit for Alcohol Used as Fuel, and any person later:

1. Uses a mixture or straight alcohol for a purpose other than fuel,
2. Separates the alcohol from the mixture, or
3. Mixes the straight alcohol.

Use the following table to determine the tax for each gallon of alcohol. Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 51. If more than one rate applies, leave the Rate column blank and attach a schedule showing the rates and number of gallons taxed at each rate.

Floor Stocks Tax

Ozone-depleting chemicals floor stocks tax (IRS No. 20). Use Form 6627 to figure the liability for this tax. Enter the amount from Form 6627, Part III, line 4, column (d) on the line for IRS No. 20. Attach Form 6627 to Form 720 that is due July 31 of each year. Deposit the payment by June 30 at an authorized financial institution. See How To Make Deposits on page 7.

Part III

Line 4. Report on line 4 of Form 720 the total claims from line 12 of Schedule C. See the instructions on page 8.

Lines 7a and 7b. Include on line 7a the amount from line 10 of your previous return that you applied to this return and the amount from line 7b. If you are applying an amount from line 5b of Form 720X, enter that amount on line 7b.

Line 10. You may have any overpayment refunded or applied to your next return. Include on line 7a of your next return the amount from line 10 you want to have applied to that return.

If you owe other Federal tax, interest, or penalty, the overpayment on line 10 and line 7b will first be applied to the unpaid amounts.

Payment of Taxes

Generally, semimonthly deposits of excise taxes are required. A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period).

However, no deposit is required for the situations listed below; the taxes are payable with the return.

• The net liability for taxes listed in Part I (Form 720) does not exceed $2,500 for the quarter.
• The gas guzzler tax and/or the luxury tax is being paid on a one-time filing. See One-Time Filings on page 1.
• The liability is for taxes listed in Part II (Form 720), except for the floor stocks tax, which generally require a single deposit. See Floor Stocks Tax on page 6.
• 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 under section 4101. See Regulations section 48.4081-3.

How To Make Deposits

To avoid a penalty, make your deposits timely and do not mail your deposits directly to the IRS. Records of your deposits will be sent to the IRS for crediting to your accounts. Electronic deposit requirement. You must make electronic deposits of all depository taxes (such as deposits for employment tax, excise tax, and corporate income tax) using the Electronic Federal Tax Payment System (EFTPS) in 2002 if:

• The total deposits of such taxes in 2000 exceeded $200,000 or
• You were required to use EFTPS in 2001.

If you are required to use EFTPS and fail to do so, you may be subject to a 10% penalty. If you are not required to use EFTPS, you may participate voluntarily. To get more information or to enroll in EFTPS, call 1-800-555-4477 or 1-800-945-8400.

Depositing on time. For EFTPS deposits to be on time, you must initiate the transaction at least one business day before the date the deposit is due.

Federal Tax Deposit Coupons. If you are not making deposits by EFTPS, use Form 8109, Federal Tax Deposit Coupon, to make the deposits at an authorized financial institution. See the instructions in the coupon book for additional information. If you do not have a coupon book, call 1-800-829-1040.

When To Make Deposits

There are two methods for determining deposits:

• Regular method and
• Alternative method.

The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes (IRS Nos. 22, 26, 27, and 28) if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. See Alternative method below.

If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period.

Regular method. The deposit of tax for a semimonthly period is due by the 14th day following that period. Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday.

Alternative method (IRS Nos. 22, 26, 27, and 28). Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. The deposit of tax is due by the 3rd banking day after the 7th day of that period.

Example. The tax included in amounts billed or tickets sold for the period June 16-30, 2002, is considered collected from July 16-22, 2002, and must be deposited by July 25, 2002.

To use the alternative method, you must keep a separate account of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year.

The net amount of tax that is considered collected during the semimonthly period must be either:

• The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month or
• One-half of the net amount of tax reflected in the separate account for the preceding month.

Special rule for deposits of taxes in September 2002. If you are required to make deposits, see the chart below. The special rule does not apply to taxes not required to be deposited (see Payment of Taxes on page 6). See Regulations section 40.6302(c)-2 for rules to figure the net tax liability for the deposits due in September.

For the remaining days in September, be sure to make your deposits by the regular due date.

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