The federal fuel excise tax is critical for the transportation sector, affecting fuel-dependent businesses like trucking companies, freight operators, and construction companies. Knowing the rates and filing requirements of the tax is essential for compliance and avoiding fines. In this blog, we will address federal fuel excise tax rates, who is required to file, and how to remain compliant with federal guidelines.
What is the Federal Fuel Excise Tax?
The federal fuel excise tax is applied to the sale of gasoline, diesel, and other fuel used for highway vehicles. Revenues generated through this tax can be allocated to other utilities concerning transportation such as the building and repairing of roads. The taxes differ based on the type of fuel. For the year 2024 gasoline has an excise tax of 18.4 cents per gallon, whereas diesel is set at 24.4 cents. This value can be subjected to changes, hence businesses should put effort towards being informed about any changes brought upon by the Congress or the IRS.
Who Must Submit the Federal Fuel Excise Tax?
All businesses that engage in the buying, selling and distribution of fuel, as well as those that import, manufacture or sell taxable fuels, usually have a federal fuel excise tax to file. For example, trucking companies have an excise tax on fuel usos in their business activities. Furthermore, you as a carrier who tax free buys fuel and later sells it as a taxable entity must show the tax due for the distribution. Generally, the taxes are in the control of the purported fuel manufacturers’ imports and retailers but the obligation to file these taxes does not stop at those entities.
Documents Needed to Submit for the Federal Fuel Excise Tax
Submission of the federal fuel excise tax involves the use of IRS Form 720, which is filed on a quarterly basis. For each quarter, detailed information on the usage, purchase, or sale of fuel, as well as the corresponding tax liability, is required. Companies that meet the threshold of owing $2,500 or less may file annually, but those that surpass this limit must file quarterly. It is imperative to maintain an accurate record of fuel purchases and sales so that the right amount of tax is reported. Submitting late or wrong information can result in incurring penalties and interest, therefore businesses must act responsibly regarding their submission practices to avoid tax complications.
Stay Compliant and Avoid Penalties
It is vital for businesses involved in fuel transactions to understand the federal fuel excise taxable amount, rates, and filing requirements as it can save a business from getting unwanted penalties and also help the business contribute to infrastructure projects. Staying updated on quarterly submissions along with the latest tax rates using IRS Form 720 will ease compliant issues. When unsure regarding your filling, working with an accountant or tax professional is recommended to ensure proper filing without facing issues from the IRS.
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