Federal Excise Tax (FET) is a federal tax charged on specific goods, services, and activities that are listed under IRS regulations. Unlike general sales or income taxes, excise taxes apply only to selected categories. Businesses that produce, sell, import, or use these taxable items are responsible for reporting the tax and making payments to the IRS.
In most cases, the federal excise tax is included in the price of the product or service instead of being shown separately to customers. The tax may be collected at different stages, such as during manufacturing, importation, sale, or usage, depending on the type of taxable activity.
Common examples of items and services subject to federal excise tax include fuel, air transportation services, indoor tanning services, PCORI, heavy trucks and tires, certain chemicals, and other regulated categories.
Businesses that are required to pay federal excise taxes generally file Form 720, Quarterly Federal Excise Tax Return, to report and submit their tax payments to the IRS.
Form 720, also called the Quarterly Federal Excise Tax Return, is an IRS form used by businesses to report and pay federal excise taxes on certain goods, services, and activities. It covers a wide range of tax categories, including PCORI fees, indoor tanning services, heavy truck and trailer taxes, fuel taxes, environmental taxes, communications services, air transportation services, ozone-depleting chemicals, manufacturers excise taxes, corporate stock repurchase taxes, and other regulated excise tax items.
Businesses that are subject to excise taxes must file Form 720 four times per year. Each quarter has a specific IRS filing deadline(Jan, April, July, and October), and failing to file on time or submitting incorrect payment amounts may result in penalties, interest charges, or IRS compliance actions.
