An excise tax requires payment by law on specific goods or services at the time of purchase. They are not international taxes that are levied across lines but rather international taxes that are levied within a government’s infrastructure.
An excise tax return typically increases the price of gasoline, plane tickets, marijuana, and various other goods and services. Besides, businesses are the ones that pay excise taxes the most. Businesses pay for many of them, then charge customers more to cover the cost.
An Overview of Excise Tax
The United States government excises tax on the sale of some goods, activities, and services through plane tickets, gas, cigarettes, brinks, and gaming. Excise tax credits are usually collected when a commodity is sold or used either by a producer or merchant, when it is sold or used by a dealer or store, or when a customer employs the product.
Businesses importing goods into the United States pay excise taxes on those goods at the time of importation or when they sell or use them subsequent to bringing the items into the United States. More often, the retailer, manufacturer, or distributor will add tax to the goods and collect them from the customer. However, the state excise tax is not as clear to the customer because, unlike general sales tax, it is not generally listed on paper. It’s also known as a hidden tax because of this.
Who Needs to File Excise Tax?
The United States’ excise tax brought in 76 billion dollars. The estimate says that by 2034, excise tax income will have grown to about 98 billion dollars. An excise tax is a tax that you pay when you buy certain things or services. Besides, most of the time, companies pay them, which indirectly raises excise tax rates for customers.
When you buy something or use a taxed service, much of your payment goes into trust funds that improve highways and airports. State excise taxes are separate from income taxes. Usually, the person who sells, makes, or brings in the goods must pay the excise tax and fill out Form 720 with the IRS. A third party collects some revenue taxes. After that, the third party files Form 720 and sends the tax to the IRS. For example, the person who buys an air ticket usually pays the tax, which the company then gathers.
How Are Excise Taxes Calculated?
There are two ways to figure out an excise tax return. They can be found as a portion of the sales price or some other number that has been set. For example, air ticket income tax is a flat percentage of the ticket price. Most businesses use a flat rate they charge on each unit for size, weight, or number on which they make or sell. Besides, the federal government sets tax rates and methods.
Procedure of Filing Excise Tax Return
Here is a short, step-by-step guide to help you understand the Form and fill it out correctly:
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Get the Form
You can get this application by either requesting it from the IRS on paper or visiting an IRS office close to you. You can also visit the official website and fill out the form online.
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Find the Tax-Paying Time
For the quarter you’re reporting, check the right box: Q1 (January–March), Q2 (April–June), Q3 (July–September), or Q4 (October–December).
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Fill in the Business Information
Here, mention the business name, location, employer identification number (EIN), or any other related information in the space provided.
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Find Out How Much Tax You Owe
Read through each part of the Form to find out which import taxes your business needs to pay. Besides, figure out how much tax you need to pay for each part. Make sure you’re using the right rates and taking into account any excise tax liabilities or refunds.
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Add Up All of Your Tax Bills
To find out how much state excise tax you owe for the quarter, add up the amounts of tax from all parts.
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Instructions for Payment
If you’re using the Form to make a payment, please describe how you will pay. Remember that you usually have to pay excise tax rates electronically if your debt is more than $2,500 for a quarter.
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A Statement and a Signature
Carefully go over the Form to make sure that all the information is correct. Put your full name and date on the Form. They will also need to sign if you hire a tax agent.
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Attach Any Plans or Papers That You Need To
There may be parts that need more plans or paperwork. Besides, make sure you attach all the papers with the form.
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Submission
Please fill out the form and mail it to the IRS address given in the directions on Form 720. You can also send the Form online using the IRS’s e-filing method or tax software.
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Make a Copy and Keep It
Please keep a copy of the Form you sent in and any other papers that go with it for your records at all times. This is very important for future use and possible checks.
Are There Exceptions to Excise Taxes?
There are exceptions to some revenue taxes. Each state or local government sets its state excise tax, but not having to pay the excise tax at the federal level doesn’t mean you won’t have to pay it at the state or local level, either. In terms of the most popular excise tax exclusions, producers may not have to pay tax on the following:
- Sales to state or local governments.
- Selling to a non-profit teaching group.
- Sales of things to the buyer who will either use them to make other things or sell them to someone else.
Also, Read – How Is an Excise Tax Different from a Sales Tax?
Conclusion
The federal and state governments tax some things and services as excise taxes. They get paid by the stores that sell them. Excise tax return can be a flat fee, called a specific excise tax, or a portion of the price of the good. Besides, all of these are different types of taxes. They might also only apply to things sold in the state where the tax is being collected.
