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The federal levy on the sale of motor fuels—gasoline, diesel, kerosene, and alternative fuels—is called fuel excise taxes. All transportation businesses, whether running their trucks, bus companies, or freight delivery services, must be considering the effect these taxes have directly on operation costs. The Internal Revenue Service uses these taxes to fund projects maintaining roads and building improved public transport systems. Fuel tax compliance while using vehicles for commercial purposes is a core responsibility any company engaged in such activities must have.

On the general and official IRS document Form 720, as regards the quarterly federal excise tax return, fuel excise taxes can be reported and paid. Any of the businesses that are selling, using, or importing taxable fuels have to file Form 720 every fourth quarter, such as:

Gasoline and diesel distributors

Bus and motor coach operators

Aviation fuel suppliers

Freight and logistics companies using bulk fuel

The requirement of accurately completing Form 720 will also serve to show good faith compliance with IRS excise tax laws, thereby avoiding the possibility of any expensive penalties.

The several fuel types on which excise tax is imposed by the IRS come with different rates and taxes. Sample fuels include:

Heavy trucks and buses diesel fuel excise tax

Gasoline excise tax for ordinary road vehicles

Kerosene tax for heating and jet fuel purposes

Excise tax on alternative fuels such as propane, compressed natural gas (CNG), biodiesel blends

The IRS also periodically changes fuel tax rates, usually as a result of federal legislation changes or energy policy changes.

Transporters will complete and file Form 720 quarterly on the following deadlines:

Split into quarters: the due date for the first quarter is April 30, the second quarter is July 31, the third quarter is October 31, and the last quarter is January 31 of the following year.

The filing includes:

Determination of total fuel used or sold

Determination of applicable excise tax rates for the fuel types

Filling the different sections of Form 720

Submission of the documents electronically or through the postal service to the IRS

The recommendation encourages filing through e-filing as a better processing and confirmation method. Many transport companies also rely on excise tax filing software or compliance specialists in reporting.

To be fully compliant with fuel excise tax regulations, transporters must have:

Careful maintenance of records on the purchase of fuel and usage.

Follow up on the changes in federal excise tax law.

Fuel consumption automated tracking systems.

Quarterly filings are checked for accuracy before filling out submission forms.

Failure to submit this information on Form 720 or underreporting of fuel spent will likely result in audits, penalties, and interest for the taxpayer from the IRS in a later period. Proactive compliance keeps your business running without disruptions with good standing with federal tax authorities.

Fuel excise tax is more than a cost to be paid—it is a legal obligation with respect to transport businesses. Learn how to fill out Form 720 and file updates of your taxable fuel usage in due time—monthly installment payments will avoid more penalties and help boost an organization's confidence. Leverage technology to strengthen tax compliance to ensure smooth payment processing and compliance.