Overview: International Travel Excise Taxes
Traveling internationally is an adventure, but businesses in the travel and transportation industries must take care of certain tax responsibilities. One of these responsibilities is the Excise Tax on International Travel, which is reported in Form 720, the Quarterly Federal Excise Tax Return. Compliance with this obligation avoids incurring penalties and enables smooth operations. In the segments to follow, we will discuss what the excise tax on international travel covers, who files Form 720, and how one maintains compliance.
What Does International Travel Excise Tax Entail?
The excise tax on international travel applies to airline travel that both takes off from and lands in the U.S. The tax is incorporated into the cost of the ticket and is ultimately paid for by the traveler. This tax is executed to support other infrastructure and airline services provided in the U.S.
Who Needs Form 720?
Any organization that provides taxable air transport services is obligated to submit Form 720. This comprises:
- International airlines that offer ancillary international flights.
- Ticketing/Travel agencies that provide taxable tickets for airfare.
- International chartered air operators.
If your business fits any of these types, you are responsible for collecting the excise tax and filing Form 720 four times a year.
Principal Parts of Form 720 for International Travel Taxes:
For Form 720 excise taxes, there are several categories. For businesses focused on international travel, the most significant parts are:
- Air Transportation of Passengers: This covers the tax for air travel into and out of the U.S.
- Air Transportation of Cargo: If you operate international flights and deal with cargo, there are excise taxes on your business.
- Use of International Travel Facilities: There are other excise taxes for other passengers that use international traveling facilities located within the U.S.
How to Calculate the Excise Tax on International Travel:
Excise taxes can be difficult to calculate due to varying rates that depend on these factors:
- Distance flown: Longer distances can have higher rates applied to them.
- Number of passengers: The more people you fly, the greater the tax liability.
- Local airport charges: Some airports may charge additional local taxes.
Be sure you understand the tax and check IRS instructions or a tax advisor as needed.
Filing Form 720: The Instructions in Order Comply with these steps to meet legal requirements while filing Form 720:
- Collect Travel Records: Gather tickets and taxes from international travel activities.
- Working on Part One of the Form: For this section, include the excise tax that involves services connected with providing air transport services.
- Determine Remaining Tax Obligation: Determine the amount of excise tax to be settled.
- Quarterly Submission of the Form: Submit the form within the given schedule which is determined by the IRS (April, July, October, and January).
- Settling Due Taxes: Settle any outstanding amounts to avoid incurring penalties and interests.
Most Important Things Not to Do While Submitting Form 720
To maintain compliance with the guidelines, avoid making these common errors:
- Taxable air transportation revenues remain unreported.
- Deadline neglect, which adds penalties.
- Not settling the due taxes fully, which adds interest.
- Failing to substantiate proper records of air travel transactions.
Ensuring detailed records are kept and calculations are checked can aid in compliance and errors.
The Use of E-Filing Form 720 and it’s Simplification of the Process.
E-file Form 720 through the IRS e-filing system, or any trusted third-party site. Consider these advantages of e-filing:
- In most cases, e-filing lead to quicker processing and confirmation.
- The use of e-filing reduce paperwork and the chances of filing error.
- Users can access prior filings instantaneously such that record keeping become effortless.
Other Taxes Non-Compliances’ Penalties
Some imposed excise tax violations include the following penalties:
- Post Filing Fee.
- Fees of Taxes Not Paid.
- Additional Examination Scrutiny incl Tax Audit of your operations.
In order to avoid these penalties, always file Form 720 when due and avoid errors.
Avoid Penalties and Stay Compliant
Compliance and even an understanding of excise taxes relating to international travel are critical for companies within the travel and transport sector. Filing Form 720 along with maintaining good records with IRS compliance ensures that deductive penalties do not arise when it is adverse for the operations of the organization.
If you have problems completing the filing of an excise tax, you might contact a tax expert or request them to file it online through the approved channels.
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