IRS Publication 510: Excise Taxes, Form 720, and Fuel Credits

IRS Publication 510 is the federal government’s official guide to excise taxes, laying out which goods, services, and transactions trigger a federal excise tax and how to report, pay, and recover them. It covers fuel taxes, environmental taxes, air transportation taxes, the indoor tanning tax, sport fishing and archery equipment taxes, the Patient-Centered Outcomes Research fee, the stock buyback tax, and the communications tax, along with the credit and refund rules for fuel that ends up used for a nontaxable purpose. Most of what the publication describes gets reported on Form 720, the Quarterly Federal Excise Tax Return.1Internal Revenue Service. About Form 720, Quarterly Federal Excise Tax Return

Excise taxes work differently from income or payroll taxes. Liability attaches to a specific transaction — the removal of fuel from a terminal, the purchase of an airline ticket, the manufacturer’s sale of a fishing rod — rather than accumulating over a tax year. Who owes the tax depends on the category: fuel taxes fall on the terminal operator or refiner at the point of removal, air transportation taxes are collected from passengers by the airline, and manufacturer taxes on items like fishing equipment are paid by the company selling the product.

What Publication 510 Covers

Fuel Taxes

Fuel takes up the largest share of Publication 510. The federal tax on gasoline is 18.4 cents per gallon (an 18.3-cent base rate plus 0.1 cent for the Leaking Underground Storage Tank Trust Fund). Diesel fuel and kerosene are taxed at 24.4 cents per gallon on the same structure, and aviation gasoline is taxed at 19.4 cents per gallon.2Office of the Law Revision Counsel. 26 U.S. Code 4081 – Imposition of Tax These rates have been unchanged since 1993. The tax is imposed at the point of removal from the terminal rack or upon importation, so it is collected high in the supply chain, well before the fuel reaches a retail pump.

The publication also explains the dyed diesel exemption. Diesel fuel that is physically dyed at the terminal is exempt from the highway portion of the tax when used for off-highway business purposes, farming, or home heating. Misuse of dyed fuel on public highways carries steep penalties.

Environmental Taxes

Publication 510 covers three environmental excise taxes. Crude oil received at a refinery and imported petroleum products are subject to both the Oil Spill Liability Trust Fund financing rate and the Hazardous Substance Superfund financing rate, the latter of which adjusts for inflation each year.3Internal Revenue Service. Publication 510 – Excise Taxes A separate Superfund tax applies to dozens of listed chemicals when sold by the manufacturer, producer, or importer, at per-ton rates that vary by chemical.4Internal Revenue Service. Superfund Chemical Excise Taxes Importers of taxable substances derived from those chemicals owe tax as well, and can either use the IRS’s prescribed rate or calculate their own based on the chemical inputs. A third tax applies to ozone-depleting chemicals, with the rate tied to each chemical’s ozone-depletion factor and specific exceptions for uses such as metered-dose inhalers and recycled or exported ODCs.

Air Transportation Taxes

Air travel funds the Airport and Airway Trust Fund through three passenger taxes. Domestic passenger tickets are taxed at 7.5% of the amount paid.5Office of the Law Revision Counsel. 26 USC 4261 – Imposition of Tax A domestic segment fee applies each time a passenger boards and deplanes at a different airport; for 2026 the segment fee is $5.30.6Internal Revenue Service. Instructions for Form 720 – Quarterly Federal Excise Tax Return (March 2026) An international facilities tax is charged as a flat dollar amount on each passenger departing or arriving on an international flight, with a reduced rate for flights beginning or ending in Alaska or Hawaii. A separate excise tax applies to domestic air freight. Airlines collect all of these at the time of ticket purchase and remit them to the IRS.

Other Taxes on Form 720

Publication 510 also addresses several smaller categories:

  • A 10% excise tax on amounts paid for indoor tanning services, collected by the provider from the customer.7Internal Revenue Service. Excise Tax on Indoor Tanning Services Frequently Asked Questions
  • Sport fishing equipment tax at 10% of the sale price (capped at $10 per fishing rod or pole), 3% on electric outboard motors and tackle boxes, and 11% on bows with a peak draw weight of 30 pounds or more, including parts, accessories, quivers, and broadheads. Arrow shafts carry a per-shaft tax that adjusts annually for inflation.
  • The Patient-Centered Outcomes Research fee, an annual fee owed by health insurance issuers and sponsors of self-insured health plans, with a per-covered-life amount that adjusts for inflation.
  • The excise tax on corporate stock buybacks, enacted as part of the Inflation Reduction Act, which applies to certain publicly traded corporations.
  • The federal communications tax on local and long-distance telephone service and teletypewriter exchange service.

How Excise Taxes Get Reported

Form 720, the Quarterly Federal Excise Tax Return, is the central reporting document for nearly every tax in Publication 510. The quarterly due dates are fixed:8Internal Revenue Service. Instructions for Form 720 – Quarterly Federal Excise Tax Return

  • Quarter 1 (January–March): due April 30
  • Quarter 2 (April–June): due July 31
  • Quarter 3 (July–September): due October 31
  • Quarter 4 (October–December): due January 31 of the following year

A handful of taxes qualify for annual or one-time returns rather than quarterly filing, and Publication 510 identifies which ones. Corrections to a filed Form 720 go on Form 720-X.

Filing quarterly does not mean paying quarterly. If your total Part I liability on Form 720 exceeds $2,500 in a quarter, you generally must make semimonthly deposits through the Electronic Federal Tax Payment System.8Internal Revenue Service. Instructions for Form 720 – Quarterly Federal Excise Tax Return Semimonthly means twice a month, so a high-volume fuel distributor or airline can be making 24 deposits a year even while filing only four returns. Missing a deposit deadline triggers a penalty even if the full amount is paid with the quarterly return.

Fuel Tax Credits and Refunds

A large part of Publication 510 exists because fuel is taxed at the terminal regardless of how it eventually gets used. When fuel goes to a nontaxable use, the tax has to come back through a claim. Qualifying nontaxable uses for gasoline include farming, off-highway business use, export, commercial fishing vessels, intercity and local buses, school buses, and exclusive use by nonprofit educational organizations or state and local governments. Similar lists apply to diesel, kerosene, and aviation fuel.

There are three routes for recovering the tax, and they are not interchangeable:

  • Form 8849, Claim for Refund of Excise Taxes, produces a direct refund check from the IRS. Its schedules split the claim types: Schedule 1 for nontaxable use of fuels, Schedule 2 for sales by registered ultimate vendors, Schedule 3 for biodiesel and alternative fuel mixtures, and Schedule 6 for other claims.9Internal Revenue Service. About Form 8849, Claim for Refund of Excise Taxes
  • Form 720, Schedule C claims the amount as a credit against the current quarter’s excise tax liability, which is faster than waiting for a separate refund if you already file Form 720.
  • Form 4136, Credit for Federal Tax Paid on Fuels, runs through the annual income tax return. It is the only option if your total nontaxable-use fuel tax for the year is under $750 or if the fuel was used in mobile machinery that traveled fewer than 7,500 miles on public highways.

Two rules catch people. First, the same gallon cannot appear on more than one form; a gallon refunded on Form 8849 cannot also be claimed on Form 4136 or Schedule C. Second, if you already deducted the full cost of the fuel (including the excise tax) as a business expense, the refund or credit has to be included in gross income when you get it back. Publication 510 walks through how that works under both cash and accrual methods.

Penalties for Late Deposits and Payments

Deposit penalties escalate quickly:10Office of the Law Revision Counsel. 26 U.S. Code 6656 – Failure To Make Deposit of Taxes

  • 1 to 5 days late: 2% of the unpaid amount
  • 6 to 15 days late: 5%
  • More than 15 days late: 10%
  • Still unpaid 10 days after the first IRS delinquency notice: 15%

Interest runs on top of these penalties at the federal short-term rate plus three percentage points, compounded daily. For the quarter beginning April 1, 2026, the underpayment rate is 6%, or 8% for large corporate underpayments.11Internal Revenue Service. Internal Revenue Bulletin: 2026-08

Collected excise taxes carry an additional risk. Air transportation taxes are the clearest case: the airline collects them from passengers and holds them for the government. If a person with authority over the company’s finances willfully fails to turn those collected taxes over, the IRS can assess the Trust Fund Recovery Penalty equal to the full unpaid amount against that person individually.12Internal Revenue Service. Employment Taxes and the Trust Fund Recovery Penalty (TFRP) The penalty reaches officers, directors, and anyone else with control over paying the bills.

What Publication 510 Does Not Cover

Three categories of federal excise tax are handled elsewhere:3Internal Revenue Service. Publication 510 – Excise Taxes

  • The heavy highway vehicle use tax on vehicles with a taxable gross weight of 55,000 pounds or more is reported on Form 2290, not Form 720. The tax year runs July 1 through June 30, and the filing deadline for vehicles first used in July is August 31.13Internal Revenue Service. About Form 2290, Heavy Highway Vehicle Use Tax Return14Internal Revenue Service. When Form 2290 Taxes Are Due
  • Wagering taxes and the occupational tax for accepting wagers are reported on Forms 730 and 11-C.
  • Alcohol, tobacco, and firearms taxes are administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB), not the IRS, and are covered on TTB.gov.

A business that handles both fuel and heavy commercial vehicles needs Publication 510 and the Form 2290 instructions to stay compliant across both sides of its operations.