Form 720 Part II Excise Taxes: IRS Numbers & Filing Guide

Form 720 Part II at a Glance

The applicable rate and calculation method depend on the specific tax being reported.

What Is Form 720 Part II?

Part II is a section of Form 720, Quarterly Federal Excise Tax Return, used to report certain excise taxes and fees.

Unlike Part I, which includes many taxes subject to federal excise tax deposit requirements, Part II taxes generally are not required to be deposited before Form 720 is filed.

Instead, the applicable Part II liability is generally reported on Form 720 and included in the balance due with the return.

However, each tax has its own rules. Businesses should identify the correct IRS number and requirements before preparing Form 720.

Who May Need to Report Part II Excise Taxes?

Part II can apply to different types of businesses depending on their products, services, or activities.

Potential filers can include:

• Health insurance issuers
• Sponsors of applicable self-insured health plans
• Manufacturers and producers of sport fishing equipment
• Manufacturers of fishing rods and poles
• Manufacturers of electric outboard motors
• Manufacturers of fishing tackle boxes
• Manufacturers and producers of bows and certain archery equipment
• Manufacturers of taxable arrow shafts
• Providers of indoor tanning services
• Operators of certain commercial vessels using inland waterways
• Businesses responsible for ODC floor stocks tax
• Applicable corporations repurchasing their stock
• Manufacturers or importers responsible for designated drug excise tax

A business should determine which specific Part II tax applies before calculating its liability.

PCORI Fee – IRS No. 133

The Patient-Centered Outcomes Research Institute (PCORI) Fee generally applies to issuers of specified health insurance policies and sponsors of applicable self-insured health plans.

The basic calculation is:

The applicable PCORI dollar rate is adjusted periodically, so the current rate should be determined based on the applicable policy or plan year.

Unlike most Form 720 liabilities, the PCORI Fee is generally reported annually on the second-quarter Form 720.

Sport Fishing Equipment – IRS No. 41

A federal excise tax generally applies to the sale of certain sport fishing equipment by a manufacturer, producer, or importer.

The tax rate is generally:

Taxable equipment can include certain fishing equipment identified under the applicable federal excise tax rules.

The tax is generally based on the manufacturer's, producer's, or importer's taxable sale rather than the final retail sale to a consumer.

Fishing Rods and Fishing Poles – IRS No. 110

Fishing rods and fishing poles are subject to special manufacturer excise tax rules.

The tax is generally:

However, the tax is subject to a maximum amount per article, and that maximum is adjusted periodically.

Because the maximum can change, filers should use the applicable IRS amount for the period being reported rather than relying on an old fixed amount.

Electric Outboard Motors – IRS No. 42

A federal excise tax applies to certain electric outboard motors sold by a manufacturer, producer, or importer.

The tax rate is generally:

The applicable taxable sale and sales price should be determined under the manufacturer excise tax rules.

Fishing Tackle Boxes – IRS No. 114

Certain fishing tackle boxes are also subject to federal manufacturer excise tax.

The general tax rate is:

The tax generally applies when the taxable article is sold by the manufacturer, producer, or importer.

Bows, Quivers, Broadheads and Points – IRS No. 44

Certain archery equipment is subject to federal excise tax.

This category can include applicable:

• Bows
• Quivers
• Broadheads
• Points
• Certain related archery articles

The tax rate is generally:

Businesses manufacturing, producing, or importing these articles should determine whether their products meet the applicable taxable-article definitions.

Arrow Shafts – IRS No. 106

Taxable arrow shafts are subject to a per-shaft federal excise tax.

Unlike percentage-based manufacturer taxes, the arrow shaft tax is calculated using the applicable amount for each taxable shaft.

The amount is adjusted periodically.

For evergreen filing purposes, use the applicable IRS arrow-shaft rate for the period being reported rather than relying on an older fixed dollar amount.

Indoor Tanning Services – IRS No. 140

Certain indoor tanning services are subject to federal excise tax.

The general tax rate is:

The person receiving payment for the taxable service generally collects the tax from the customer.

Businesses should determine whether the service meets the federal definition of a taxable indoor tanning service.

If a payment includes both taxable tanning services and other goods or services, applicable allocation rules may need to be considered.

Inland Waterways Fuel – IRS No. 64

A tax can apply to fuel used in the propulsion system of certain commercial transportation vessels operating on specified inland or intracoastal waterways.

The tax is reported under IRS No. 64.

Whether the tax applies depends on factors such as:

• Type of vessel
• Commercial transportation activity
• Fuel use
• Waterway on which the vessel operates
• Applicable exemptions

Because fuel tax rules can depend on the specific use and activity, businesses should determine whether their vessel and fuel use fall within the inland waterways requirements.

LUST Tax on Inland Waterways Fuel – IRS No. 125

Certain inland waterways fuel can also be subject to the Leaking Underground Storage Tank (LUST) tax.

This liability is reported separately under IRS No. 125.

Businesses should not combine IRS No. 64 and IRS No. 125 simply because both relate to inland waterways fuel. Each IRS number represents a separate tax component that must be calculated and reported correctly.

Section 40 Fuels – IRS No. 51

Certain fuel-related liabilities associated with section 40 fuels are reported under IRS No. 51.

The applicable rules depend on the fuel, transaction, and use involved.

Fuel excise tax rules can be detailed, so businesses should review the specific transaction before reporting an amount under this IRS number.

Biodiesel Sold as but Not Used as Fuel – IRS No. 117

A tax can apply when applicable biodiesel or renewable diesel is sold as fuel but is not used as fuel.

This liability is reported under IRS No. 117.

The filer should maintain records supporting the sale, intended use, and actual treatment of the fuel when this tax applies.

ODC Floor Stocks Tax – IRS No. 20

The Ozone-Depleting Chemicals (ODC) Floor Stocks Tax can apply when a business holds certain taxable ozone-depleting chemicals on the applicable tax date.

The tax is reported under IRS No. 20.

This is different from other environmental taxes reported on Form 720 because the liability can be based on taxable ODC inventory held on a specified date rather than a normal taxable sale.

Businesses holding applicable ODCs should maintain inventory records needed to determine whether a floor stocks liability exists.

Repurchase of Corporate Stock – IRS No. 150

Certain repurchases of corporate stock can be subject to federal excise tax.

The tax applies to applicable stock repurchases by covered corporations under the federal stock repurchase excise tax rules.

The reporting requirements for this tax include special rules beyond the standard quarterly Form 720 process.

Applicable corporations should determine:

• Whether they are subject to the stock repurchase excise tax
• Which transactions are treated as repurchases
• Whether any statutory exceptions apply
• The amount used to determine the tax
• Any applicable adjustments

The stock repurchase excise tax has special annual reporting requirements, including applicable reporting using Form 7208 with Form 720.

Designated Drugs – IRS No. 142

A federal excise tax can apply to certain sales of designated drugs when the applicable statutory requirements are met.

The liability is reported under IRS No. 142.

This is a specialized excise tax, and businesses should determine whether a particular drug and sale fall within the applicable federal rules before reporting a liability.

How Are Part II Taxes Calculated?

There is no single tax rate for all Part II taxes.

The calculation depends on the applicable IRS number.

Common calculation methods include:

• Percentage of taxable sales price — Used for certain sport fishing and archery equipment.
• Percentage of amount paid — Used for taxable indoor tanning services.
• Per-unit amount — Used for taxable arrow shafts.
• Average covered lives × applicable rate — Used for the PCORI Fee.
• Tax-specific calculation — Used for taxes such as inland waterways fuel, ODC floor stocks, corporate stock repurchases, and designated drugs.

The correct tax type and IRS number should therefore be identified before calculating the liability.

Exemptions and Special Rules

Part II taxes can have exemptions, exclusions, or special rules depending on the tax.

Examples can include:

• Exempt sales or uses of certain taxable articles
• Export-related rules
• Manufacturer excise tax exemptions
• Specific fuel-use exemptions
• PCORI coverage exclusions
• Special corporate stock repurchase rules

An exemption that applies to one Part II tax should not automatically be assumed to apply to another.

Maintain documentation supporting any exemption or exclusion used on the return.

Form 720 Part II and Excise Tax Deposits

One important difference between Part I and Part II is the treatment of deposits.

Part II taxes generally are not subject to the semimonthly federal excise tax deposit requirements that apply to many Part I taxes.

The Part II liability is generally reported on Form 720 and included when determining the amount due with the return.

This does not mean Part II taxes have no filing or payment requirements. The applicable liability still must be correctly calculated, reported, and paid by the required deadline.

When Is Form 720 Due?

Form 720 is generally filed quarterly. The usual filing schedule is:

If the due date falls on a Saturday, Sunday, or legal holiday, the applicable business-day rule generally applies.

Some Part II taxes have special reporting rules. For example:

• The PCORI Fee is generally reported annually on the second-quarter Form 720.
• The corporate stock repurchase tax has special annual reporting requirements.

Information Needed for Part II Filing

Before preparing Form 720, gather information related to the specific tax being reported. This can include:

The information required will depend on the Part II tax being reported.

How to Prepare for Form 720 Part II Filing

Before filing:

1. Identify the Part II tax that applies.
2. Confirm the correct IRS number.
3. Determine who is responsible for the tax.
4. Identify the taxable transaction, product, service, or activity.
5. Determine the applicable tax rate or calculation method.
6. Calculate the Part II liability.
7. Review any exemptions or special rules.
8. Enter the liability under the correct IRS number.
9. Review the applicable filing deadline.
10. Maintain records supporting the return.

If you need to report a Part II excise tax, Excise720 can be used to prepare and electronically file Form 720 online.

Common Form 720 Part II Filing Mistakes

• Using the wrong IRS number: Each Part II tax has its own IRS number.
• Using an outdated rate: Certain Part II amounts, including PCORI and arrow-shaft amounts, can be adjusted periodically.
• Applying one calculation method to every tax: Some taxes use a percentage, while others use per-unit or tax-specific calculations.
• Confusing Part I and Part II: The two sections have different taxes and can have different deposit requirements.
• Making unnecessary deposits: Part II taxes generally are not subject to the semimonthly deposit rules that apply to many Part I taxes.
• Missing exemptions: Certain products, transactions, plans, or uses may qualify for an exemption or exclusion.
• Using the wrong filing period: Some Part II taxes have special timing rules, including PCORI and corporate stock repurchases.
• Missing supporting records: Keep records showing how the taxable amount and liability were determined.

Form 720 Part II Filing Checklist

Before filing, confirm that you have:

1. Identified the applicable Part II tax.
2. Selected the correct IRS number.
3. Determined who is liable.
4. Identified the taxable amount or units.
5. Used the applicable tax rate.
6. Used current periodically adjusted amounts where required.
7. Reviewed applicable exemptions.
8. Calculated the tax correctly.
9. Reviewed any special reporting requirements.
10. Entered the liability in Part II.
11. Verified the filing deadline.
12. Maintained supporting records.

Form 720 Part II Excise Tax Filing Pricing

Frequently Asked Questions