Corporate Excise Tax: Form 720, Deposits, and Refunds

A corporate excise tax is a federal or state tax a corporation owes because it engaged in a specific taxed activity — producing fuel, importing chemicals, selling firearms, providing telephone service, extracting oil, or simply operating as a corporation in a given state — rather than because it earned a profit. The obligation is triggered by the transaction or activity, calculated on volume or sale price, and reported on a schedule separate from the corporate income tax return. At the federal level, most of it flows through Form 720 on a quarterly cycle, with semimonthly deposits along the way.

What Triggers an Excise Tax

Income tax applies to a corporation’s net profit for the year. Sales tax applies at the retail register and is paid by the end consumer. Excise tax sits in between: it applies at a specific point in the supply chain, often at manufacture, import, or wholesale, and the legal duty to calculate and remit it falls on the corporation that produces, imports, or sells the taxed item.

The corporation writes the check, but the cost is usually built into the product’s price. When a driver fills up, the station is not absorbing the 18.4-cent-per-gallon federal fuel tax. The consumer is. That pass-through is why excise taxes are classified as indirect taxes, and it is why a corporation can owe substantial excise tax in a year it reports no income tax liability at all.

Federal Excise Taxes a Corporation Is Most Likely to Owe

The IRS administers federal excise taxes under Subtitle D of the Internal Revenue Code. A handful of categories cover most corporate exposure.

Motor Fuel

A corporation that produces, imports, or sells taxable fuel owes:

Gasoline: 18.3 cents per gallon, plus a 0.1-cent-per-gallon Leaking Underground Storage Tank Trust Fund surcharge, for a combined 18.4 cents per gallon.
Diesel fuel and kerosene: 24.3 cents per gallon, plus the 0.1-cent surcharge, for a combined 24.4 cents per gallon.

These rates have not changed since 1993. The tax is calculated by volume and deposited semimonthly.¹ Receipts flow into the federal Highway Trust Fund.²

Superfund Chemical and Petroleum Taxes

Two environmental excise taxes fund hazardous waste cleanup. Under IRC Section 4661, the sale of dozens of listed hazardous chemicals by their manufacturer, producer, or importer is taxed at rates that vary by chemical, from $0.44 per ton for potassium hydroxide up to $9.74 per ton for substances like benzene, acetylene, and toluene. This tax is scheduled to expire after December 31, 2031.³

Under IRC Section 4611, crude oil received at a U.S. refinery and petroleum products imported into the country are taxed at a base Hazardous Substance Superfund financing rate of 16.4 cents per barrel, adjusted annually for inflation beginning in 2024. A separate Oil Spill Liability Trust Fund rate of 9 cents per barrel applied through the end of 2025 and expired on December 31, 2025, so only the inflation-adjusted Superfund rate remains in effect for 2026.⁴

Communications Services

A 3% federal excise tax applies to amounts paid for local telephone service, toll telephone service, and teletypewriter exchange service. The customer technically owes the tax, but the provider collects it, adds it to the bill, and remits it.⁵

Firearms and Ammunition

Manufacturers and importers of firearms and ammunition owe excise tax on each sale as a percentage of the selling price: 10% for pistols and revolvers, and 11% for other firearms, shells, and cartridges. Because the tax is ad valorem, the dollar amount rises and falls with the sale price. Revenue funds wildlife conservation programs.⁶

Remittance Transfers, New for 2026

The One, Big, Beautiful Bill Act created a 1% excise tax on certain remittance transfers, effective January 1, 2026. Remittance transfer providers must collect the tax when the sender pays with cash, a money order, a cashier’s check, or a similar physical instrument, file quarterly on Form 720, and make semimonthly deposits. The IRS has offered limited penalty relief for the first three quarters of 2026 as providers adjust.⁷

State Franchise, Severance, and Product Excise Taxes

States impose their own excise-style taxes, and the labels vary. What one state calls a franchise tax another calls a business privilege tax, but the mechanics are similar: a corporation pays for the right to exist or operate within the state’s borders.

State franchise taxes are commonly calculated on a corporation’s net worth, its issued capital stock, its tangible property within the state, or its gross receipts minus certain deductions. Some states require the corporation to use whichever method produces the higher tax, guaranteeing a minimum payment even in low-profit years. Rates, bases, and deductions differ enough that a corporation operating in multiple states has to track each jurisdiction independently.

Severance taxes fall on corporations that extract non-renewable resources such as oil, gas, and coal, calculated either per unit removed or as a percentage of market value at the point of extraction. States also collect excise taxes on alcohol and tobacco, usually from the manufacturer or wholesaler on a per-unit basis, and utility taxes on the gross receipts of electricity, gas, and water providers.

How the Tax Is Calculated

Every excise tax uses one of two calculation methods, and knowing which one applies dictates what data you have to keep.

Per-unit (specific) taxes charge a fixed dollar amount for each unit sold, regardless of price. Federal fuel taxes are the clearest example: 18.4 cents for every gallon of gasoline, whether that gallon sells for $2.50 or $4.00. Chemical excise taxes work the same way, at a fixed rate per ton. Multiply units by the per-unit rate.

Percentage-based (ad valorem) taxes charge a percentage of the sale price. On an $800 rifle, the 11% firearms excise tax comes to $88. The 3% communications tax applies the same way, against the amount the customer pays. Multiply taxable sales by the applicable percentage.

State-level calculations can get more involved. A franchise tax based on net worth requires the corporation to compute assets minus liabilities attributable to the state, then apply the state’s rate. When a state offers multiple methods and demands the largest result, the corporation runs the numbers each way every filing period.

Register With the IRS Before You Start

Before a corporation can legally engage in certain excise-taxable activities, it must register with the IRS on Form 637. Operating without registration can trigger penalties and loss of tax benefits. Activities requiring registration include:

Fuel operations: refining, terminal operations, pipeline and vessel transport, and fuel blending.
Biofuel and alternative fuel production: producing or importing alcohol fuels, agri-biodiesel, biodiesel, or renewable diesel.
Clean transportation fuel: producing sustainable aviation fuel or other clean transportation fuels.

Each activity has its own letter code, and a corporation engaged in multiple activities registers for each one separately.⁸ The IRS reviews applications and can revoke a registration if the company fails to comply.

Filing Form 720 and Making Deposits

Federal excise tax liability is reported on Form 720, the Quarterly Federal Excise Tax Return. The form covers fuel, communications, firearms, environmental, remittance transfer, and most other federal excise categories. It is due the last day of the month after each calendar quarter: April 30, July 31, October 31, and January 31.⁹

Filing quarterly is only half the obligation. The IRS generally requires semimonthly deposits. Each month is split into two deposit periods, the 1st through the 15th and the 16th through the last day, and each period’s deposit is due by the 14th day after it ends. One exception applies: if total Part I excise tax liability on Form 720 is $2,500 or less for the entire quarter, deposits are not required and the tax can be paid with the return.⁹

This is where corporations trip up. Filing Form 720 on time while missing semimonthly deposit deadlines still triggers penalties. The two obligations are tracked separately, and meeting one does not excuse the other. State excise and franchise returns follow their own schedules, often quarterly or monthly, and many states mandate electronic filing once annual liability crosses a set threshold.

Penalties for Late Filings and Deposits

Federal penalties come from two directions and can stack.

For failing to file Form 720 on time, the IRS charges 5% of the unpaid tax for each month or partial month the return is late, capped at 25%. The clock starts on the due date and stops when the IRS actually receives the late return.¹⁰

For failing to make timely semimonthly deposits, the penalty escalates by how late the deposit is:

1 to 5 days late: 2% of the underpayment.
6 to 15 days late: 5% of the underpayment.
More than 15 days late: 10% of the underpayment.
Still unpaid 10 days after the IRS issues a delinquency notice: 15% of the underpayment.

Deposit penalties apply even when the quarterly return is filed on time and paid in full with it. The IRS treats each missed deposit as its own violation.¹¹ State penalties vary and commonly include interest at rates that differ by jurisdiction.

Claiming Excise Tax Refunds

Some excise tax paid can be recovered. Form 8849 is the federal claim form, and it covers several common corporate situations:¹²

Nontaxable fuel use: taxed fuel used for an exempt purpose such as farming or off-highway equipment.
Double-taxed fuel: excise tax reported and paid twice in the supply chain, with the second payer claiming the refund.
Fuel mixtures and alternative fuels: biodiesel mixtures, renewable diesel mixtures, and alternative fuels may qualify.
Sales to exempt buyers: registered credit card issuers can claim refunds for excise tax paid on fuel sold to state and local governments or to nonprofit educational organizations.

Starting in 2026, the One, Big, Beautiful Bill Act adds another route: a corporation that paid excise tax on clear diesel fuel or kerosene can claim a payment equal to the tax previously paid if that fuel is later dyed and removed from a terminal for a nontaxable use.⁷

1
Office of the Law Revision Counsel. 26 U.S. Code 4081 – Imposition of Tax
2
Bureau of Transportation Statistics. Transportation Economic Trends – Government Transportation Revenue
3
Office of the Law Revision Counsel. 26 USC 4661 – Imposition of Tax
4
Office of the Law Revision Counsel. 26 USC 4611 – Imposition of Tax
5
Office of the Law Revision Counsel. 26 USC 4251 – Imposition of Tax
6
Office of the Law Revision Counsel. 26 USC 4181 – Imposition of Tax
7
Internal Revenue Service. One, Big, Beautiful Bill Provisions
8
Internal Revenue Service. Application for Registration (For Certain Excise Tax Activities)
9
Internal Revenue Service. Instructions for Form 720
10
Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
11
Office of the Law Revision Counsel. 26 U.S. Code 6656 – Failure to Make Deposit of Taxes
12
Internal Revenue Service. About Form 8849, Claim for Refund of Excise Taxes