Form 720: Federal Excise Tax — Who Files It and When

What Is Excise Tax and Who Pays It?

Federal excise taxes are imposed at the point of manufacture, sale, or use of specific goods and services designated by Congress. The businesses responsible for collecting and remitting the tax vary by category. In some cases it's the manufacturer, in others it's the retailer or service provider. The tax is often embedded in the price of the good or service, but the obligation to report and remit it to the IRS falls on the business, not the end customer.

Which Industries Must File Form 720?

The industries most commonly affected include fuel producers and distributors, who pay excise taxes on gasoline, diesel, and aviation fuel. Airlines and air cargo operators pay taxes on passenger tickets and freight. Businesses providing certain communications services are subject to excise tax on those revenues. Indoor tanning salon operators pay a 10% excise tax on tanning services. Manufacturers of certain vaccines and importers of specific chemicals also fall under Form 720 obligations. Employers with self-insured health plans face a separate obligation covered in the next section.

The PCORI Fee: What Employers Need to Know

Employers who sponsor self-insured health plans are required to pay the Patient-Centered Outcomes Research Institute (PCORI) fee through Form 720, Part II. The fee funds comparative clinical effectiveness research and is calculated based on the average number of lives covered under the plan during the year.

Unlike the rest of Form 720, the PCORI fee is not a quarterly obligation. It's reported and paid once annually, due July 31 of the year following the plan year. Many employers with self-insured arrangements aren't aware they're subject to it, particularly smaller businesses that moved to self-insured plans to manage health benefit costs. If your business sponsors a self-insured health plan, confirm whether the PCORI fee applies before the July 31 deadline passes.

Form 720 Filing Deadlines

Form 720 follows the same quarterly schedule as other federal tax returns. Q1 (January through March) is due April 30. Q2 (April through June) is due July 31. Q3 (July through September) is due October 31. Q4 (October through December) is due January 31.

The PCORI fee is the notable exception. It's due July 31 annually, reported on the Q2 filing, regardless of when your plan year ends. If you have both standard excise tax obligations and a PCORI fee obligation, both appear on the July 31 return.

How to Complete Form 720

Form 720 is organized into three main parts. Part I covers environmental taxes and communications and air transportation taxes, each identified by an IRS number corresponding to the specific tax category. Part II covers a broader set of excise taxes including the PCORI fee, vaccines, and indoor tanning. Part III handles claims for overpayments and refunds.

Because the form uses a numbering system tied to specific tax provisions, identifying which lines apply to your business requires knowing exactly which excise tax categories you're subject to. Many businesses that file Form 720 work with a tax professional for this reason, particularly in the first year of filing.

How Slash Supports Businesses with Quarterly Tax Obligations

Excise tax is due every quarter, which means it competes with payroll, rent, and operating expenses for cash on hand. Businesses that don't track their excise tax liability as it accrues can find themselves short when the quarterly deadline arrives.

A Slash business bank account gives you real-time visibility into available funds throughout the quarter, making it straightforward to set aside excise tax as liability builds rather than funding the full payment at once. When quarterly obligations are planned for in advance, Form 720 deadlines stop being cash flow events.