Federal Excise Tax Categories on Form 720
Fuel, air travel, heavy trucks, tanning, PCORI, and more — every excise tax category the IRS collects on the Quarterly Federal Excise Tax Return, and who has to file.
Quick Answer
Federal excise taxes are taxes on specific products, services, and activities — not on income. If your business sells fuel, provides air transportation or communications services, sells heavy trucks or trailers at retail, manufactures taxed goods like tires or sporting equipment, runs a tanning salon, or sponsors a self-insured health plan, you likely owe one or more excise taxes. Nearly all of them are reported on Form 720, filed quarterly.
Excise Tax Categories at a Glance
| Category | Common Examples | Typically Paid By |
|---|---|---|
| Environmental Taxes | Petroleum (Superfund), taxable chemicals, ozone-depleting chemicals | Refineries, chemical manufacturers, importers |
| Communications & Air Transportation | Local telephone service, airline tickets, air cargo | Phone providers, airlines, and charter operators (collected from customers) |
| Fuel Taxes | Gasoline, diesel, kerosene, alternative fuels, LUST | Refiners, terminal position holders, blenders, importers |
| Retail Tax (FET) | Heavy trucks, trailers, and tractors sold at retail | Dealers and retailers making the first retail sale |
| Manufacturers Taxes | Gas guzzler autos, tires, coal, sport fishing gear, bows and arrows | Manufacturers, producers, and importers |
| Other Taxes | Indoor tanning, PCORI fee, foreign insurance, ship passengers | Tanning salons, plan sponsors and insurers, premium payers, vessel operators |
Environmental Taxes
Environmental excise taxes appear in Part I of Form 720 and fund programs like hazardous waste cleanup. They fall into three main groups:
Petroleum and Superfund Taxes
A per-barrel tax applies to crude oil received at U.S. refineries and to petroleum products entered into the United States. The Superfund chemical excise tax adds per-ton taxes on a list of taxable chemicals sold or used by manufacturers, producers, and importers, and on certain imported substances made from those chemicals. Who it applies to: refinery operators, petroleum importers, and chemical manufacturers and importers.
Ozone-Depleting Chemicals (ODCs)
Taxes on ozone-depleting chemicals are computed on Form 6627, which attaches to Form 720. The tax is based on the weight of the chemical and its ozone-depletion factor, and also reaches imported products that were made using ODCs. Who it applies to: manufacturers and importers of ODCs and importers of products manufactured with them.
Deep dive: Environmental Excise Taxes on Form 720
Communications & Air Transportation Taxes
These are collected taxes: the business collects the tax from its customers as part of the price, then reports and remits it on Form 720.
Communications Tax
A 3% tax applies to amounts paid for local telephone service and teletypewriter exchange service. Who it applies to: the provider that bills the customer collects the tax and files Form 720 to remit it. See our communications excise tax guide for details.
Air Transportation Taxes
Amounts paid for the transportation of persons by air are taxed at 7.5%, plus a flat per-segment fee on domestic segments that is adjusted annually. Transportation of property by air is taxed at 6.25% of the amount paid, and separate per-person facility taxes apply to flights that begin or end outside the U.S. Who it applies to: airlines, air charter operators, and others who sell taxable air transportation — they collect from passengers and shippers and remit on Form 720. Full breakdown: Air Transportation Excise Taxes on Form 720.
Fuel Taxes
Fuel taxes are the largest excise category by revenue. Form 720 covers gasoline, diesel, kerosene (including kerosene used in aviation), and alternative fuels such as propane and compressed natural gas. Base rates include 18.3 cents per gallon for gasoline and 24.3 cents per gallon for diesel, and most fuels also carry the LUST (Leaking Underground Storage Tank) tax of 0.1 cent per gallon.
Fuel tax generally attaches when fuel is removed from a terminal rack, imported, or blended — so liability usually falls on refiners, terminal position holders, importers, and blenders rather than gas stations or consumers. Who it applies to: fuel producers, distributors, blenders, and importers, plus certain users of untaxed fuel. Businesses that use fuel for nontaxable purposes (such as off-highway use) can often recover the tax through Schedule C credits or Form 8849 refund claims.
Deep dive: Fuel Excise Taxes on Form 720: The Complete Guide
Retail Tax on Heavy Trucks & Trailers (FET)
The retail federal excise tax — often just called FET — is a 12% tax on the first retail sale of certain heavy highway vehicles: truck chassis and bodies rated above 33,000 pounds gross vehicle weight, trailer and semitrailer chassis and bodies rated above 26,000 pounds, and highway tractors used with taxable trailers.
Who it applies to: the dealer or retailer making the first retail sale is liable for the tax, though it is typically built into the sale price. Because 12% of a six-figure truck sale is substantial, correct FET reporting matters — and certain sales, such as sales for export or resale, can qualify for exemption.
Full guide: Federal Excise Tax (FET) on Trucks, Trailers & Fuel
Manufacturers Taxes: Gas Guzzler, Tires, Coal & Sporting Goods
Manufacturers excise taxes are imposed when a manufacturer, producer, or importer sells (or in some cases uses) a taxable article:
Gas Guzzler Tax
Applies to manufacturers and importers of passenger automobiles that fail to meet fuel economy standards. The tax is figured on Form 6197 and scales with the model's fuel economy rating — the lower the miles per gallon, the higher the tax. An individual importing a covered car can file a one-time Form 720 to report it.
Taxable Tires
Tires designed for highway use are taxed based on their maximum rated load capacity above a set threshold — heavier-rated tires owe more tax. Who it applies to: tire manufacturers and importers selling taxable tires.
Coal
Coal from U.S. mines is taxed at the producer level, either per ton or as a percentage of the sales price — whichever is lower — with different rates for underground-mined and surface-mined coal.
Sport Fishing Equipment & Archery
Most sport fishing equipment is taxed at 10% of the sale price (a lower 3% rate applies to certain items such as fishing tackle boxes). Bows with a peak draw weight of 30 pounds or more, and certain archery parts and accessories, are taxed at 11%; arrow shafts carry a flat per-shaft rate adjusted annually. Who it applies to: manufacturers, producers, and importers of this equipment.
Other Excise Taxes: PCORI, Tanning, Foreign Insurance & Ship Passengers
Indoor Tanning Services — 10%
A 10% tax applies to amounts paid for indoor tanning services using UV lamps. The salon or provider collects the tax from the customer and remits it quarterly on Form 720 — this is one of the most common reasons small businesses file. Details: The Indoor Tanning Tax on Form 720.
PCORI Fee
The Patient-Centered Outcomes Research Institute fee applies to issuers of specified health insurance policies and sponsors of applicable self-insured health plans, including many HRAs. It is a per-life fee based on the average number of covered lives, adjusted each year, and unlike most Form 720 taxes it is filed annually — on the second-quarter return due July 31. Full guide: PCORI Fee: Who Pays and How to File.
Foreign Insurance Tax
Premiums paid to foreign insurers and reinsurers for coverage of U.S. risks are subject to an excise tax measured in cents per dollar of premium, with the rate depending on the type of coverage (casualty, life, or reinsurance). Who it applies to: any person who makes such a premium payment to a foreign insurer can be liable to report and pay the tax.
Ship Passenger Tax
A $3 per passenger tax applies to certain voyages on commercial passenger vessels, such as cruises that extend over one or more nights, and to certain voyages offering gambling. Who it applies to: the operator of the vessel reports and pays the tax on Form 720.
Which Category Applies to You?
Start with what your business sells, makes, imports, or provides. If any of it appears on the Form 720 line items — fuel, communications or air transportation services, heavy vehicles, taxable manufactured goods, tanning services, or a self-insured health plan — you have a filing obligation for each quarter in which you have liability. One return covers every category: you simply complete the lines (identified by IRS number) that apply to you.
Keep two timing rules in mind. Most Form 720 taxes are reported quarterly, and if your net liability exceeds $2,500 in a quarter, semi-monthly deposits are generally required. The PCORI fee is the exception — it is an annual filing on the Q2 return. And if you paid excise tax on fuel or other items used for a nontaxable purpose, you may be owed money back through Schedule C or Form 8849.
Not sure which lines apply? File720Online walks you through each category with plain-language questions and fills in the correct IRS numbers, rates, and attachments (like Form 6197 and Form 6627) for you.
Frequently Asked Questions
What is a federal excise tax?
A federal excise tax is a tax imposed on specific goods, services, or activities — such as fuel, air transportation, heavy truck sales, or indoor tanning — rather than on income. Businesses that sell, manufacture, import, or provide these taxable items report and pay the tax to the IRS on Form 720, the Quarterly Federal Excise Tax Return.
Do I file a separate Form 720 for each excise tax category?
No. Form 720 is a single quarterly return that covers every excise tax category. Each tax has its own line and IRS number on the form — you complete only the lines that apply to your business and file one return per quarter.
What is the gas guzzler tax?
The gas guzzler tax is a federal excise tax on manufacturers and importers of passenger automobiles that fail to meet fuel economy standards. The tax is computed on Form 6197 based on the vehicle model’s fuel economy rating and is reported on Form 720. An individual who imports a covered vehicle for personal use can be liable and may file a one-time Form 720 to report it.
What is the Superfund excise tax?
The Superfund excise taxes are environmental taxes that fund hazardous substance cleanup. They include a per-barrel tax on crude oil received at U.S. refineries and on imported petroleum products, plus per-ton taxes on listed taxable chemicals and certain imported chemical substances. They are reported on Form 720 with Form 6627 attached.
Are there exemptions from federal excise tax?
Yes, but they vary by category. Certain sales — for example, sales for export or for further manufacture, or sales to certain government and exempt purchasers — can qualify for exemption under specific excise taxes, and some exemptions require IRS registration. Overpaid excise taxes and nontaxable uses can also be recovered as credits on Schedule C of Form 720 or refund claims on Form 8849.
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