General Instructions

Changes Beginning 2003

The following changes are effective after December 31, 2002 and will be on Form 720 or in the instructions for the 1st quarter of 2003.

• The tax on sales of luxury passenger vehicles (IRS No. 92) is scheduled to expire.
• The tax on use of international air travel facilities (IRS No. 27) increases to $13.40 and $6.70 for amounts paid during 2003.
• Fuel tax changes:

The following tax rates will increase:
10% gasohol (IRS No. 59)	$ .132
7.7% gasohol (IRS No. 75)	.14396
5.7% gasohol (IRS No. 76)	.15436
Gasoline removed or entered for the production of 10% gasohol (IRS No. 58)	.14666
Gasoline removed or entered for the production of 7.7% gasohol (IRS No. 73)	.15596
Gasoline removed or entered for the production of 5.7% gasohol (IRS No. 74)	.16369

The gasohol blending credit rates for gasoline taxed at the full rate will decrease:
10% gasohol (CRN 356)	$ .03734
7.7% gasohol (CRN 357)	.02804
5.7% gasohol (CRN 363)	.02031

In addition, the tax on ethanol fuels under IRS No. 79 and No. 51 will change.

Purpose of Form

Use Form 720 and attachments to report liability by IRS No. and pay the excise taxes listed on the form.

When To File

You must file a return for each quarter of the calendar year as follows:

Quarter covered	Due by
Jan., Feb., Mar.	April 30
Apr., May, June	July 31
July, Aug., Sept.	October 31
Oct., Nov., Dec.	January 31

If any due date for filing a return falls on a Saturday, Sunday, or legal holiday, you may file the return on the next business day.

Send your return to the IRS using the U.S. Postal Service or a designated private delivery service to meet the timely mailing as timely filing/paying rule. See Private Delivery Services on page 2.

Floor stocks tax.   Report the floor stocks tax on ozone-depleting chemicals (ODCs), IRS No. 20, on the return due by July 31 of each year. The tax payment is due by June 30. See page 6.

Where To File

Send Form 720 to the Internal Revenue Service Center, Cincinnati, OH 45999-0009.

How To File

If you are not reporting a tax that you normally report, enter a zero on the appropriate line in Part I or II (Form 720). Also, if you have no tax to report, write None on line 3, page 2, Part III; sign and date the return.

If you have adjustments to liabilities reported for prior quarters, see Form 720X, Amended Quarterly Federal Excise Tax Return. Do not enter adjustments in the tax column of Form 720.

If you attach additional sheets, write your name and EIN on each sheet.

One-Time Filings

If you import for personal use a gas guzzling automobile or a passenger vehicle subject to the luxury tax, you may be eligible to make a one-time filing of Form 720 and Form 6197.

You may make a one-time filing to report the gas guzzler tax or the luxury tax if you meet all of the following conditions:

• You do not use the vehicle in the course of any trade or business;
• You do not import gas guzzling automobiles or luxury passenger vehicles in the course of your trade or business; and
• You are not required to file Form 720 reporting excise taxes for the calendar quarter, except for a one-time filing.

To make a one-time filing:

1. File the return for the quarter in which you incur liability for the tax. See When To File above.
2. Pay the tax with the return. No deposits are required.
3. If you are an individual and do not have an employer identification number (EIN), enter your social security number (SSN) or individual taxpayer identification number (ITIN) on Form 720 in the space for the EIN.
4. Check the one-time filing box above Part I on page 1 of Form 720.

Final Return

File a final return if you have been filing Form 720 and you:

1. Go out of business or
2. Will not owe excise taxes that are reportable on Form 720 in future quarters.

If you are only filing to report zero tax and you will not owe excise tax in future quarters, check the final return box above Part I on page 1 of Form 720. The IRS will then stop sending Package 720 to you each quarter.

Recordkeeping

Keep copies of your tax return, records, and accounts of all transactions to show that the correct tax has been paid. Keep records to support all claims and all exemptions at least 4 years from the latest of the following dates:

• When the tax became due,
• When you paid the tax, or
• When you filed a claim.

Penalties and Interest

Avoid penalties and interest by filing returns and depositing and paying taxes when due. The law provides penalties for filing a return late; depositing taxes late; paying taxes late; willfully failing to collect and pay tax or file a return; negligence; and fraud. These penalties are in addition to the interest charge on late payments. The penalty for filing a return late will not be imposed if you can show that the failure to file a timely return is due to reasonable cause. Those filing after the due date must attach an explanation to the return to show reasonable cause.

Trust fund recovery penalty.   If communications and air transportation taxes are collected but not paid over to the United States Treasury or are willfully not collected, the trust fund recovery penalty may apply. The penalty is the full amount of the unpaid trust fund tax.

The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so.

A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an employee of a sole proprietorship, an accountant, or a volunteer director/trustee. A responsible person may also include one who signs checks for the business or otherwise has authority to cause the spending of business funds.

Willfully means voluntarily, consciously, and intentionally. A responsible person acts willfully if he or she knows the required actions are not taking place.

Additional Information

You may find the following publications helpful when preparing Form 720 and the attachments:

• Pub. 510, Excise Taxes for 2002, contains definitions and examples that will help you prepare Form 720.
• Pub. 378, Fuel Tax Credits and Refunds, has information on nontaxable uses of fuels.
• Pub. 509, Tax Calendars for 2003, has deposit and payment due dates for all Federal excise taxes.

Private Delivery Services

You can use certain private delivery services designated by the IRS to meet the timely mailing as timely filing/paying rule for tax returns and payments. The most recent list of designated private delivery services was published by the IRS in September 2002. The list includes only the following:

• Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service.
• DHL Worldwide Express (DHL): DHL Same Day Service and DHL USA Overnight.
• Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.
• United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.

Unresolved Tax Issues

If you have attempted to deal with an IRS problem unsuccessfully, you should contact the Taxpayer Advocate. The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels.

While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

Your assigned personal advocate will listen to your point of view and will work with you to address your concerns. You can expect the advocate to provide you with:

• A "fresh look" at your new or on-going problem.
• Timely acknowledgment.
• The name and phone number of the individual assigned to your case.
• Updates on progress.
• Timeframes for action.
• Speedy resolution.
• Courteous service.

When contacting the Taxpayer Advocate, you should provide the following information:

• Your name, address, and employer identification number.
• The name and telephone number of an authorized contact person and the hours he or she can be reached.
• The type of tax return and year(s) or period(s) (for quarterly returns) involved.
• A detailed description of the problem.
• Previous attempts to solve the problem and the office you contacted.
• A description of the hardship you are facing (if applicable).

You may contact a Taxpayer Advocate by calling a toll-free number, 1-877-777-4778. Persons who have access to TTY/TDD equipment may call 1-800-829-4059 and ask for Taxpayer Advocate assistance. If you prefer, you may call, write, or fax the Taxpayer Advocate office in your area. See Pub. 1546, The Taxpayer Advocate Service of the IRS, for a list of addresses and fax numbers.

Photographs of Missing Children

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Specific Instructions

Name and Address

The first time you file Form 720, type or print your name, address (including the suite, room, or other unit number), and the quarter ending date (month and year). After that, the IRS will mail you a Package 720 with a preprinted label every quarter. Use the preprinted label on your form. If your address changes, make the corrections on the label and check the address change box above Part I on page 1 of Form 720.

P.O. box.   If the Post Office does not deliver mail to the street address and you have a P.O. box, show the box number instead of the street address.

Foreign address.   Enter the city, province or state, and country. Follow the country's practice for entering the postal code. Do not abbreviate the country name.

Employer Identification Number (EIN)

If the EIN on the label is wrong or you did not receive a preprinted label, enter the correct number. (If you are a one-time filer, you do not need an EIN. See One-Time Filings on page 1.) If you do not have an EIN, use Form SS-4, Application for Employer Identification Number, to apply for one. You can get this form by calling 1-800-TAX-FORM (1-800-829-3676) or by visiting the IRS Web Site at www.irs.gov. You can ask for an EIN by calling the Tele-TIN phone number for your service center listed in the instructions for Form SS-4.

Signature

Form 720 must be signed by a person authorized by the entity to sign this return.

Third Party Designee

If you want to allow an employee of your business or another person to discuss your Form 720 with the IRS, check the Yes box in the Third Party Designee section of the return. Also, enter that person's name, phone number, and any five digits that person chooses as his or her personal identification number (PIN). The designation must specify an individual and may not refer to your payroll office or a tax preparation firm.

By checking the Yes box, you are authorizing the IRS to call the designee to answer any questions that may arise during the processing of your return. You are also authorizing the designee to:

• Give the IRS any information that is missing from your return,
• Call the IRS for information about the processing of your return or the status of your refund or payment(s), and
• Respond to certain IRS notices that you have shared with the designee about math errors and return preparation. The notices will not be sent to the designee.

You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

Part I

Environmental Taxes

Use Form 6627, Environmental Taxes, to figure the environmental taxes on:

• ODCs, IRS No. 98;
• Imported products that used ODCs as materials in the manufacture or production of the product, IRS No. 19; and
• The floor stocks tax on ODCs, IRS No. 20.

Attach Form 6627 to Form 720. The tax rates for these taxes are shown on Form 6627.

Communications and Air Transportation Taxes

Who Must File

The person receiving the payment for communications or air transportation services must collect and pay over the tax and file the return. Enter the amount of tax collected or considered collected for the quarter.

Communications Services (IRS No. 22)

The tax is 3% of amounts paid for local telephone service, toll telephone service, and teletypewriter exchange service.

Transportation of Persons by Air (IRS No. 26)

The tax on transportation of persons by air is made up of the percentage tax and the domestic segment tax. Add the percentage tax and the domestic segment tax to get the total tax on transportation of persons by air.

Percentage tax.   The percentage tax is 7.5% for amounts paid for taxable transportation of persons by air.

Domestic segment tax.   For amounts paid for each domestic segment of taxable transportation of persons by air, the domestic segment tax is $3.00 per segment for transportation that begins in 2002.

Rural airports.   If a segment is to or from a rural airport, the domestic segment tax does not apply.

Transportation of Property by Air (IRS No. 28)

The tax is 6.25% of amounts paid for transportation of property by air.

Use of International Air Travel Facilities (IRS No. 27)

For amounts paid during 2002, the tax on international flights is:

• $13.20 per person for flights that begin or end in the United States or
• $6.60 per person for domestic segments that begin or end in Alaska or Hawaii (applies only to departures).

Fuel Taxes

First taxpayer's report.   If you are reporting gallons of gasoline, diesel fuel, and kerosene that may again be subject to tax, you may need to file a first taxpayer's report. The report must contain all the information as shown in the Model Certificate A, Appendix C of Pub. 510.

The person who paid the first tax must:

• Give a copy of the first taxpayer's report to the buyer;
• File the first taxpayer's report with Form 720 for the quarter for which the report relates; and
• Write EXCISE - FIRST TAXPAYER'S REPORT across the top of a separate copy of the report, and by the due date of Form 720, send the copy to: Internal Revenue Service Center, Cincinnati, OH 45999-0555.

Diesel Fuel (IRS No. 60).   If you are liable for the diesel fuel tax on removal at the terminal rack, report these gallons on line (a) of IRS No. 60. If you are liable for the diesel fuel tax on events other than removal at the terminal rack, report these gallons on line (b) of IRS No. 60.

Multiply the total number of gallons subject to tax on lines (a) and (b) by $.244 and make one entry in the tax column.

Kerosene (IRS No. 35).   If you are liable for the kerosene tax on removal at the terminal rack, report these gallons on line (a) of IRS No. 35. If you are liable for the kerosene tax on events other than removal at the terminal rack, report these gallons on line (b) of IRS No. 35.

Multiply the total number of gallons subject to tax on lines (a) and (b) by $.244 and make one entry in the tax column.

Liquefied petroleum gas (LPG) (IRS No. 61).   Only LPG (such as propane and butane) is reported on the line for IRS No. 61. LPG is taxed at $.136 per gallon.

Gasoline (IRS No. 62).   If you are liable for the gasoline tax on removal at the terminal rack, report these gallons on line (a) of IRS No. 62. If you are liable for the gasoline tax on events other than removal at the terminal rack, report these gallons on line (b) of IRS No. 62. If you are liable for the additional tax on failure to blend or later separation, report these gallons on line (c) of IRS No. 62.

Multiply the total number of gallons subject to tax on lines (a) and (b) by $.184. Multiply the total number of gallons subject to tax on line (c) by the appropriate rate below. Combine the tax for lines (a), (b), and (c), and make one entry in the tax column.

Additional tax on failure to blend or later separation.   Anyone who purchases gasoline for gasohol production at one of the reduced rates (IRS Nos. 58, 73, and 74) and fails to blend the gasoline with alcohol is subject to an additional tax. Anyone who purchases gasohol at one of the reduced rates (IRS Nos. 59, 75, and 76) and later separates the gasoline from the mixture is subject to an additional tax. The additional tax rates per gallon of gasoline are:

Type of Gasohol	Rate of Tax
10% gasohol	$ .03845
7.7% gasohol	.02887
5.7% gasohol	.02092

Report the number of gallons on line (c) of IRS No. 62 and enter the appropriate rate in the Rate column of that line. 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.

Gasoline removed or entered for the production of gasohol (IRS Nos. 58, 73, and 74).   Only gasoline removed or entered for the production of gasohol containing ethanol is reported on the lines for IRS Nos. 58, 73, and 74. For gasohol that does not contain ethanol, use the line for IRS No. 79.

Gasohol (IRS Nos. 59, 75, and 76).   Only gasohol containing ethanol is reported on the line for IRS Nos. 59, 75, and 76. For gasohol that does not contain ethanol, use the line for IRS No. 79.

Other fuels (IRS No. 79).   Use the following table to determine the tax for each gallon. Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 79. 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.

Fuel	Tax Rate per Gallon
Liquefied natural gas	$ .1190
Qualified -
Ethanol	.1305
Methanol	.1235
Partially exempt -
Ethanol produced from natural gas	.1140
Methanol produced from natural gas	.0925
Gasoline removed or entered for the production of -
10% gasohol (methanol)	.13777
7.7% gasohol (methanol)	.14929
5.7% gasohol (methanol)	.15885
Types of gasohol -
10% gasohol (methanol)	.1240
7.7% gasohol (methanol)	.1378
5.7% gasohol (methanol)	.1498
Special motor fuels/alcohol mixture containing -
Ethanol	.1310
Methanol	.1240
Diesel/alcohol mixture containing -
Ethanol	.1910
Methanol	.1840
Diesel sold for diesel/alcohol mixture containing -
Ethanol	.21222
Methanol	.2044
Aviation fuel/alcohol mixture containing -
Ethanol	.0860
Methanol	.0790
Aviation fuel sold for aviation/alcohol mixture containing -
Ethanol	.09555
Methanol	.08777
Other fuels not shown	.1840

Compressed natural gas (IRS No. 101).   Tax is imposed on compressed natural gas (CNG) that is sold for use or used as fuel in a motor vehicle or motorboat. The rate of tax is $.4854 per thousand cubic feet (determined at standard temperature and pressure).

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