Federal excise taxes are often overshadowed by more familiar filings like income or payroll taxes—but for many businesses, they’re just as important. If your business sells goods or services that fall into certain categories—like fuel, air transportation, or health coverage—you may be required to file IRS Form 720 each quarter.

While the form looks complex, the real challenge is figuring out whether and how it applies to you. Add to that the pressure of quarterly filing deadlines and evolving tax rules, and it’s no wonder this form gets pushed to the bottom of the stack.

This guide is designed to simplify that. Below, we walk through the official instructions for Form 720, explain who’s required to file, explore common categories that trigger excise taxes, and highlight what’s changed for 2025. 

Table of Contents

  1. What is IRS Form 720?
  2. Who needs to file Form 720—and when?
  3. IRS Form 720 categories: What counts as an excise tax
  4. How to fill out IRS Form 720 step by step
  5. Common errors to avoid when filing Form 720
  6. What comes next—and how Harness can help

What is IRS Form 720?

IRS Form 720, officially titled the Quarterly Federal Excise Tax Return, is used to report and pay federal excise taxes. These taxes apply to specific products and services, such as gasoline, indoor tanning, air transportation, and even certain health insurance policies.

Excise taxes are not income taxes—they’re transaction-based. The government uses them to regulate or generate revenue from goods and services that are either high-demand or have regulatory interest. For many businesses, especially those in transportation, energy, healthcare, or manufacturing, excise tax obligations are routine—and potentially costly if overlooked.

Form 720 is filed quarterly with the IRS, making it one of the few non-income-related tax forms that requires ongoing attention throughout the year. It’s also used to calculate liability for environmental and fuel-related excise taxes, which can change frequently depending on federal legislation and IRS adjustments.

Who needs to file Form 720—and when?

Not every business needs to file IRS Form 720, but if your company deals in goods or services subject to federal excise tax, this form is required on a quarterly basis. If you’re a large corporation or a sole proprietorship, what matters most is the type of activity, not the size of your business.

Common examples of businesses that file Form 720

If you’re unsure whether your business qualifies, reviewing Part I and II of the official IRS instructions for Form 720 can help you identify relevant activity categories. Certain liabilities—like the PCORI fee—are only due once a year, but still require inclusion on the second-quarter Form 720.

Filing deadlines for 2025

Form 720 must be filed quarterly, with due dates falling on the last day of the month following each calendar quarter:

Late filing may result in penalties and interest, especially if payment isn’t submitted on time.

IRS Form 720 categories: What counts as an excise tax

A woman focused on completing a tax form at her desk—illustrating the hands-on effort many small business owners must make when filing excise taxes with Form 720.

The excise taxes reported on IRS Form 720 fall into several broad categories, outlined in Parts I and II of the form. Each category includes specific product or service codes that determine your liability.

Here’s a breakdown of the most common categories for 2025.

1. Environmental taxes

Applies to the sale or use of chemicals and imported substances that contribute to ozone layer depletion or pollution. This includes:

2. Communications and air transportation taxes

Applies to services like:

If your business bills customers for these services (directly or indirectly), you may be responsible for collecting and remitting these taxes.

3. Fuel taxes

Includes taxes on:

These taxes affect fuel importers, manufacturers, distributors, and sometimes retailers. Rates and exemptions may vary, so staying current with IRS fuel tax updates is essential.

4. Manufacturer’s taxes on sale or use

This includes excise taxes on:

If you’re a manufacturer or importer of these items, you likely owe taxes under this section—even if your sales are small.

5. Health insurance policies (PCORI)

Insurance providers, including self-insured employers, must pay an annual fee to fund the Patient-Centered Outcomes Research Institute. For 2025, this is still included in second-quarter Form 720 filings.

Each excise category is tied to a specific line and tax rate in Form 720. Make sure you’re reviewing current instructions, as thresholds and rates can shift.

How to fill out IRS Form 720 step by step

Form 720 might look overwhelming at first, but once you understand its layout, completing it becomes far more manageable. Here’s a straightforward guide to walk you through the process for your quarterly excise tax filing.

Step 1: Complete the taxpayer information at the top

You’ll begin by entering your:

Make sure the EIN and business name exactly match your IRS records—mistakes here can delay processing or trigger penalties.

Step 2: Fill in Part I—Environmental, Communications, and Transportation taxes

This section includes line items for:

You’ll report the quantity or amount of the taxable activity and then calculate the tax due for each applicable line. Double-check the most recent IRS Form 720 Instructions for current tax rates.

Step 3: Complete Part II—Manufacturer, Retail, and PCORI taxes

This covers taxes on:

If you’re a self-insured employer, you’ll likely report the PCORI fee here during Q2.

Step 4: Review Schedule A (if applicable)

Schedule A must be completed if you’re claiming any liability for fuel tax. It details tax amounts by liability period (month) and is used for verification. If fuel taxes don’t apply to you, you can skip this.

Step 5: Add Schedule T or Schedule C if required

These are only required in specific circumstances, so review your business activity carefully.

Step 6: Total the amounts and complete the payment voucher

On the final page:

Include payment with the 720-V voucher or pay via EFTPS (Electronic Federal Tax Payment System).

Common errors to avoid when filing Form 720

Excise taxes are already complicated—and small mistakes can lead to processing delays, IRS notices, or even penalties. Here are some of the most frequent filing errors businesses make with Form 720, and how to avoid them:

1. Using the wrong quarter or tax period

One of the most common errors is selecting the incorrect quarter on the top of the form. The IRS treats incorrect dates as a mismatch, which can delay processing even if the rest of the form is accurate.

2. Misclassifying tax liability

With over two dozen tax categories in Parts I and II of Form 720, it’s easy to misplace your liability. Carefully review the IRS instructions to make sure your products or services are matched to the correct tax code section. If you’re reporting environmental taxes, for example, they belong under Part I—not Part II.

3. Omitting Schedule A or Schedule T when required

If your business deals with fuel or transportation-related taxes, you may need to attach Schedule A (Excise Tax Liability)or Schedule T (Two-Party Exchange). Forgetting these can lead to rejected filings or IRS notices requesting clarification.

4. Filing when not required—or skipping when you are

Some businesses mistakenly file every quarter, even if they only incur excise tax once or twice a year. Others assume they don’t need to file if they owe nothing. In fact, if you’re registered for certain activities, a “zero liability” return is still required.

5. Ignoring new tax rates or IRS updates

Excise tax rates can change annually—or even mid-year—based on federal legislation. Always refer to the most recent instructions to ensure you’re using up-to-date rates and categories. Failing to update your numbers is a red flag to the IRS.

What comes next—and how Harness can help

Filing Form 720 isn’t something most business owners are excited to tackle. Between ever-shifting excise tax rules, quarterly deadlines, and a surprisingly complex layout, it’s easy to feel overwhelmed. But it’s also essential—especially if your business touches industries like fuel, manufacturing, transportation, or health coverage.

The good news? You don’t have to work out the details alone. 

At Harness, we help individuals and business owners like you stay compliant while optimizing every part of the tax experience. If you need help understanding which excise taxes apply to your business or how to file correctly across multiple quarters, our expert tax advisors are here to guide you with personalized insight.

Get started with Harness today and take the complexity out of Form 720—and the rest of your financial plan. 

Disclaimer

Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC. 

Content was prepared by a third-party provider and not the adviser. Content should not be regarded as a complete analysis of the subjects discussed. Although we believe the content is reliable, it is not guaranteed as to accuracy and does not purport to be complete nor is it intended to be the primary basis for financial or tax decisions.