publication 510 (rev. november 1998)

ContentsImportant Changes ............................ 2

Introduction ........................................ 2

Excise Taxes Not Covered ................ 2

Registration for Certain Activities .... 2

Environmental Taxes ......................... 2Ozone-Depleting Chemicals ........... 3

Communications and AirTransportation Taxes .................. 4

Communications Tax ...................... 4Air Transportation Taxes ................ 5

Fuel Taxes ........................................... 7Registration Requirements ............. 7Gasoline .......................................... 7Gasohol ........................................... 10Diesel Fuel and Kerosene .............. 11Aviation Fuel ................................... 14Special Motor Fuels ........................ 15Compressed Natural Gas ............... 16Fuels Used on Inland Waterways .. 16Alcohol Sold As Fuel But Not Used

As Fuel ..................................... 17

Manufacturers Taxes ......................... 17Tax Liability ..................................... 17Sport Fishing Equipment ................ 18Bows ............................................... 18Arrows ............................................. 18Coal ................................................. 18Tires ................................................ 19Gas Guzzler Tax ............................. 19Vaccines ......................................... 20

Tax on Heavy Trucks, Trailers, andTractors ........................................ 20

Ship Passenger Tax ........................... 22

Luxury Tax .......................................... 23

Other Excise Taxes ............................ 23Policies Issued by Foreign Insurers 23Obligations Not in Registered Form 24

Filing Form 720 .................................. 24

Paying the Taxes ................................ 24Deposit Requirements .................... 24

Penalties and Interest ........................ 26

Examination and Appeal Procedures 26

Help With Unresolved Tax Issues .... 26

Rulings Program ................................ 26

Appendix A—Wagering Taxes .......... 27

Appendix B—Imported ProductsTable ............................................. 28

Appendix C—Model Certificates ...... 33

How To Get More Information .......... 42

Index .................................................... 42

Departmentof theTreasury

InternalRevenueService

Publication 510(Rev. November 1998)Cat. No. 15014I

Excise Taxesfor 1999

Important ChangesAir transportation taxes. For transportationbeginning in 1999, the taxes on transportationof persons by air are as follows.

For 1999, the tax on the use of interna-tional air travel facilities is $12.20 for botharrivals and departures. For air transportationbetween the continental United States andAlaska or Hawaii or between Alaska andHawaii, the tax on departures is $6.10.

Luxury tax. For 1999, the luxury tax on apassenger vehicle is 6% of the amount of thesales price that exceeds the base amount of$36,000. The base amount is increased forelectric vehicles and clean-fuel vehicles.

Vaccines. Any vaccine against rotavirusgastroenteritis is subject to the tax on vac-cines. This applies to sales or deliveries afterOctober 21, 1998.

Electronic deposit requirement. You mustmake electronic deposits for all depository taxliabilities that occur after December 31, 1998,if you meet either of the following conditions.

• Your Medicare, social security, railroadretirement, and withheld income taxeswere more than $50,000 in 1997.

• You did not deposit employment taxes,but you had deposits of other depositorytaxes (such as excise taxes) that weremore than $50,000 in 1997.

If you were first required to use the Elec-tronic Federal Tax Payment System (EFTPS)to deposit taxes after June 30, 1997, you willnot be subject to a penalty for failure to makeelectronic deposits before July 1, 1999. SeeDeposit Requirements under Paying theTaxes.

IntroductionThis publication covers the excise taxes forwhich you may be liable during 1999. It cov-ers the excise taxes reported on Form 720,Quarterly Federal Excise Tax Return. It alsoprovides information on wagering activitiesreported on Forms 11–C and 730.

Useful ItemsYou may want to see:

Publication

m 378 Fuel Tax Credits and Refunds

Form (and Instructions)

m 11–C Occupational Tax and Registra-tion Return for Wagering

m 637 Application for Registration (ForCertain Excise Tax Activities)

m 720 Quarterly Federal Excise Tax Re-turn

m 730 Tax on Wagering

m 1363 Export Exemption Certificate

m 6197 Gas Guzzler Tax

m 6627 Environmental Taxes

m 8849 Claim for Refund of Excise Taxes

See How To Get More Information nearthe end of this publication for informationabout getting publications and forms.

Excise TaxesNot CoveredIn addition to the taxes discussed in thispublication, you may have to use other formsto report certain other excise taxes.

These forms and taxes are as follows.

• IRS Form 2290: Heavy Vehicle Use Tax.

• ATF Form 5630.5: Alcohol, Tobacco.

• ATF Form 5630.7: Firearms.

• ATF Form 5300.26: Firearms.

If any of these taxes appear to apply to you,see the following discussions for informationabout them.

Bureau of Alcohol, Tobacco, andFirearms (ATF). If you need formsor information about the ATF forms,

write to or call:

Tax Processing CenterSpecial Occupational TaxP.O. Box 145433Cincinnati, OH 45250–5433(513) 684–2979 or 1–800–937–8864

National Revenue CenterExcise Tax550 Main StreetCincinnati, OH 45250–3263(513) 684–3334 or 1–800–398–2282

IRS Form 2290:Highway Use TaxYou report the federal excise tax on the useof certain trucks, truck tractors, and buses onpublic highways on Form 2290. The tax ap-plies to highway motor vehicles with taxablegross weights of 55,000 pounds or more.Vans, pickup trucks, panel trucks, and similartrucks generally are not subject to this tax.

A public highway is any road in the UnitedStates that is not a private roadway. This in-cludes federal, state, county, and city roads.Canadian and Mexican heavy vehicles oper-ated on U.S. highways may be liable for thistax. For more information, get the instructionsfor Form 2290.

Registration of vehicles. Generally, youmust prove that you paid your federal high-way use tax before registering your taxablevehicle with your state motor vehicle depart-ment. Generally, a copy of Schedule 1 ofForm 2290, stamped after payment and re-turned to you by the IRS, is acceptable proofof payment.

ATF Form 5630.5:Alcohol, Tobacco;ATF Form 5630.7: FirearmsA number of excise taxes apply to alcoholicbeverages, tobacco products, and firearms.If you produce, sell, or import guns, tobacco,or alcoholic products, or if you manufactureequipment for their production, you may beliable for one or more excise taxes. Use Form5630.5 (Alcohol, Tobacco) or Form 5630.7(Firearms), Special Tax Registration and Re-turn, to register your place of business andpay an annual tax. The businesses coveredby Form 5630.5 include:

• Brewers and dealers of liquor, wine, orbeer.

• Distillers, importers, wholesale and retaildealers of distilled spirits.

• Manufacturers who use alcohol toproduce nonbeverage products.

• Importers and wholesalers of importedperfumes.

The businesses covered by Form 5630.7include manufacturers, importers, and dealersin firearms (National Firearms Act).

ATF Form 5300.26: FirearmsUse ATF Form 5300.26, Federal Firearmsand Ammunition Excise Tax Return, to de-termine your firearms excise tax liability. Mailall domestic firearms excise tax returns to thespecial purpose post office box (lockbox) asindicated on the return form. File returns forPuerto Rico and Virgin Islands with the Chief,Puerto Rico Operations, Alcohol, Tobacco,and Firearms.

Registration forCertain ActivitiesYou must register for certain excise tax ac-tivities. See the instructions for Form 637 forthe list of activities for which you must regis-ter. Each business unit that has, or shouldhave, a separate employer identificationnumber must register.

To apply for registration, use Form 637and provide the information requested in itsinstructions. File the form with the district di-rector for the district in which your books andrecords and principal place of business arelocated.

If the district director approves your appli-cation, you will receive a letter of registrationshowing the activities for which you are reg-istered, the effective date of the registration,and your registration number. A copy of Form637 is not a letter of registration.

Environmental TaxesEnvironmental taxes are imposed on ozone-depleting chemicals. Figure the environ-mental tax on Form 6627. Enter the tax on theappropriate lines of Form 720. Attach Form6627 to Form 720 as a supporting schedule.

For environmental tax purposes, UnitedStates includes the 50 states, the District ofColumbia, the Commonwealth of Puerto Rico,any possession of the United States, theCommonwealth of the Northern Mariana Is-

TransportationBeginning

Percent-age Tax

Domestic-Segment

Tax

Before October 1, 1999 ...... 8% $2.00

After September 30, 1999 .. 7.5% $2.25

lands, the Trust Territory of the Pacific Is-lands, the continental shelf areas (applyingthe principles of section 638 of the InternalRevenue Code), and foreign trade zones.No one is exempt from the environmentaltaxes, including the federal government, stateand local governments, Indian tribal govern-ments, and nonprofit educational organiza-tions.

Credits or refunds of environmental taxes.You can make a claim for credit or refund ofany overpayment of environmental taxes. Setforth in detail the grounds upon which youbase your claim and provide sufficient factsto support the claim.

You make a claim for refund of anyoverpayment of the tax on Form 8849. Youmake a claim for credit for any overpaymentof the tax on Form 720. Complete ScheduleC if you are filing a claim for a credit.

You may file a claim for refund for anyamount at any time within the 3-year statutoryperiod for filing a claim. There is no limit onthe number of claims for refund of environ-mental taxes that you may file in a year.There is no minimum dollar amount neces-sary for a claim.

Ozone-Depleting Chemicals(ODCs)Tax is imposed on chemicals that deplete theozone layer and on imported products con-taining or manufactured with these chemicals.In addition, a floor stocks tax is imposed onODCs held on January 1 by any person (otherthan the manufacturer or importer of theODCs) for sale or for use in further manufac-ture.

Taxable ODCsTax is imposed on an ODC when it is firstused or sold by its manufacturer or importer.The manufacturer or importer is liable for thetax.

For the taxable ODCs and tax rates, seeForm 6627.

Use of ODCs. You use an ODC if you put itinto service in a trade or business or for pro-duction of income. An ODC also is used if youuse it in the making of an article, includingincorporation into the article, chemical trans-formation, or release into the air. The loss,destruction, packaging, repackaging, orwarehousing of ODCs is not a use of theODC.

The creation of a mixture is treated as useof the ODC contained in the mixture. An ODCis contained in a mixture only if the chemicalidentity of the ODC is not changed. Generally,tax is imposed when the mixture is createdand not on its sale or use. However, you canchoose to have the tax imposed on its saleor use by checking the appropriate box in PartII of Form 6627. You can revoke this choiceonly with IRS consent.

The creation of a mixture for export or foruse as a feedstock is not a taxable use of theODCs contained in the mixture.

Exceptions. There is no tax on ODCs usedor sold for use as propellants in metered-doseinhalers.

Recycled. There is no tax on any ODCdiverted or recovered in the United States aspart of a recycling process (and not as partof the original manufacturing or productionprocess). There is no tax on recycled halon

1301 or 2402 imported from a country thathas signed the Montreal Protocol on Sub-stances that Deplete the Ozone Layer(Montreal Protocol).

The Montreal Protocol is administered bythe United Nations (U.N.). To determine if acountry has signed the Montreal Protocol,contact the U.N. The Internet address iswww.un.org/Depts/Treaty.

Export. Generally, there is no tax onODCs sold for export if certain requirementsare met. The tax benefit of this exemption islimited. For information on the requirementsand limit see section 52.4682-5 of the Envi-ronmental Tax Regulations.

Feedstock. There is no tax on ODCs soldfor use or used as a feedstock. An ODC isused as a feedstock only if the ODC is entirelyconsumed in the manufacture of anotherchemical. The transformation of an ODC intoone or more new compounds qualifies, butuse of an ODC in a mixture does not qualify.

For a sale to be nontaxable, you mustobtain a registration certificate that you relyon in good faith from the purchaser. Theregistration certificate must be in substantiallythe form set forth in section 52.4682–2(d)(2)of the regulations. Keep the certificate withyour records.

Imported Taxable ProductsTax is imposed on imported products con-taining or manufactured with ODCs when theproduct is first sold or used by its importer.The importer is liable for the tax. A product issubject to tax if it is entered into the UnitedStates for consumption, use, or warehousingand is listed in the Imported Products Table,discussed later.

Use of imported products. You use an im-ported product if you put it into service in atrade or business or for production of incomeor use it in the making of an article, includingincorporation into the article. The loss, de-struction, packaging, repackaging, ware-housing, or repair of an imported product isnot a use of that product.

Entry as use. The importer may chooseto treat the entry of products into the UnitedStates as the use of the product. Tax is im-posed on the date of entry. The choice ap-plies to all imported taxable products that youown and have not used when you make thechoice and all later entries. Make the choiceby checking the box in Part II of Form 6627.The choice is effective as of the beginning ofthe calendar quarter to which the Form 6627applies. You can revoke this choice only withIRS consent.

Sale of article incorporating importedproduct. The importer may treat the sale ofan article manufactured or assembled in theUnited States as the first sale or use of animported taxable product incorporated in thatarticle if:

• You have consistently treated the sale ofsimilar items as the first sale or use ofsimilar taxable imported products, and

• You have not chosen to treat entry intothe United States as use of the product.

Imported Products Table. The ImportedProducts Table appears in Appendix B at theend of this publication. Each listing in the ta-ble identifies a product by name and includesonly products that are described by thatname. Most listings identify a product by bothname and Harmonized Tariff Schedule (HTS)

heading. In those cases, a product is includedin that listing only if the product is describedby that name and the rate of duty on theproduct is determined by reference to thatHTS heading. A product is included in thelisting even if it is manufactured with or con-tains a different ODC than the one specifiedin the table.

Part II of the table contains a listing forelectronic items that are not included withinany other listing in the table. An importedproduct is included in this listing only if theproduct meets one of the following tests.

• It is a component whose operation in-volves the use of nonmechanical amplifi-cation or switching devices such astubes, transistors, and integrated circuits.

• It contains these components and morethan 15% of the cost of the product isfrom these components.

These components do not include passiveelectrical devices, such as resistors andcapacitors. Items such as screws, nuts, bolts,plastic parts, and similar specially fabricatedparts that may be used to construct an elec-tronic item are not themselves included in thelisting for electronic items.

Rules for listing products. Products arelisted in the table according to the followingrules.

1) A product is listed in Part I of the tableif it is a mixture containing ODCs.

2) A product is listed in Part II of the tableif the Commissioner has determined thatthe ODCs used as materials in themanufacture of the product under thepredominant method are used for pur-poses of refrigeration or air conditioning,creating an aerosol or foam, or manu-facturing electronic components.

3) A product is listed in Part III of the tableif the Commissioner has determined thatthe product meets both the followingtests.

a) It is not an imported taxable prod-uct.

b) It would otherwise be includedwithin a listing in Part II of the table.

For example, floppy disk drive units arelisted in Part III because they are not importedtaxable products and would have been in-cluded in the Part II listing for electronic itemsnot specifically identified, but for their listingin Part III.

The table gives the ODC weight in poundsper single unit of product unless otherwisespecified.

Base the tax on the weight of the ODCsused in the manufacture of the product. Fig-ure the tax based on either of the followingmeasures.

• The actual weight of the ODCs used inmanufacturing the product.

• The ODCs weight listed in the ImportedProducts Table for the product.

However, if you cannot determine the ac-tual ODC weight and the table does not listan ODC weight for the product, the rate of taxis 1% of the entry value of the product.

Modifying the table. A manufacturer orimporter of a product may request the IRS toadd a product and its ODC weight to the ta-ble. They also may request IRS to remove a

product from the table, or change or specifythe ODC weight of a product. Your requestmust include all the following information foreach product to be modified.

• The name of the product.

• The HTS heading or subheading.

• The type of modification requested.

• The ODC weight that should be specified(unless the product is being removed).

• The data supporting the request.

Include your name, address, taxpayeridentification number, and principalplace of business in your request.

Send your request to the following address.

Internal Revenue ServiceP.O. Box 7604Ben Franklin StationAttn: CC:DOM:CORP:R (ImportedProducts Table)Room 5228Washington, DC 20044

Floor Stocks TaxTax is imposed on any ODC held (other thanby the manufacturer or importer of the ODC)on January 1 for sale or use in further manu-facturing. The person holding title (as deter-mined under local law) to the ODCs is liablefor the tax.

These chemicals are taxable without re-gard to the type or size of storage containerin which the ODCs are held. The tax mayapply to an ODC whether it is in a 14-ouncecan or a 30-pound tank.

You are liable for the floor stocks tax if onJanuary 1 you hold any of the following.

1) At least 400 pounds of ODCs subject totax and not described in item (2) or (3).

2) At least 50 pounds of ODCs that areHalons subject to tax.

3) At least 1,000 pounds of ODCs that aremethyl chloroform subject to tax.

If you are liable for the tax, on January 1prepare an inventory of the taxable ODCsheld on that date for sale or for use in furthermanufacturing. You must pay this floor stockstax by June 30 of each year.

For the tax rates, see Form 6627.

Communications andAir TransportationTaxesExcise taxes are imposed on the users ofcertain facilities and services. If you are in thebusiness of furnishing communication ser-vices or air transportation and you receiveany payment on which tax is imposed, youare required to collect the tax, file returns, andpay the tax to the government. Ordinarily, thetax attaches at the time the payment is made.

If you fail to collect and pay over the taxes,you may be liable for the trust fund recoverypenalty. See Penalties and Interest, later.

Communications TaxThe 3% telephone excise tax is imposed onamounts paid for all the following services.

• Local telephone service.

• Toll telephone service.

• Teletypewriter exchange service.

Local telephone service. Local telephoneservice is access to a local telephone systemand the privilege of telephonic quality com-munication with most people who are part ofthe system and any facility or services pro-vided in connection with the service. The taxapplies to lease payments for certain cus-tomer premises equipment (CPE) eventhough the lessor does not also provide ac-cess to a local telecommunications system.

Private communication service. Privatecommunication service is not local telephoneservice. Private communication service in-cludes accessory-type services provided inconnection with a Centrex, PBX, or othersimilar systems for dual use accessoryequipment. However, the charge for the ser-vice must be stated separately from thecharge for the basic system, and the acces-sory must function in connection with inter-communication among the subscriber'sstations.

The tax applies to a communications sys-tem with direct inward and outward dialing,set up for a single subscriber (such as aCentrex-type PBX system) that does not in-clude any internal service for which a sepa-rate charge is made.

Toll telephone service. This means a tele-phonic quality communication for which a tollis charged that varies with the elapsed trans-mission time of each communication. The tollmust be paid within the United States. It alsoincludes a long distance service that entitlesthe subscriber to make unlimited calls(sometimes limited as to the maximum num-ber of hours) within a certain area for a flatcharge. Microwave relay service used for thetransmission of television programs and notfor telephonic communication is not a tolltelephone service.

Teletypewriter exchange service. Thismeans access from a teletypewriter or otherdata station to a teletypewriter exchangesystem and the privilege of intercommuni-cation by that station with most persons hav-ing teletypewriter or other data stations in thesame exchange system.

Figuring the tax. The tax is based on thesum of all charges for local or toll telephoneservice included in the bill. However, if the billgroups individual items for billing and taxpurposes, the tax is based on the sum of theindividual items within that group. The tax onthe remaining items not included in any groupis based on the charge for each item sepa-rately. Do not include state or local taxes thatare separately stated (such as a retail salesor excise tax) on the taxpayer's bill in thecharges for the services.

If the tax on toll telephone service is paidby inserting coins in coin-operated tele-phones, figure the tax to the nearest multipleof 5 cents. When the tax is midway between5 cent multiples, the next higher multiple ap-plies.

Prepaid telephone cards. A prepaidtelephone card is any card or any other simi-lar arrangement that allows its holder to getlocal or toll telephone service that it may payfor in advance. The tax is imposed when thecard is transferred by a telecommunicationscarrier to any person who is not a telecom-munications carrier. The tax is based on theface amount of the card. This applies whetherthe card provides the holder with a dollaramount or number of minutes (or units) oftelephone service.

ExemptionsPayments for certain services or from certainusers are exempt from the communicationstax.

Installation charges. The tax does not applyto payments received for the installation ofany instrument, wire, pole, switchboard, ap-paratus, or equipment. The tax does apply topayments for the repair or replacement ofthose items, incidental to ordinary mainte-nance.

Answering services. The tax does not applyto amounts paid for a private line, an an-swering service, and a one-way paging ormessage service if they do not provide ac-cess to a local telephone system and theprivilege of telephonic communication as partof the local telephone system.

Mobile radio telephone service. The taxdoes not apply to payments for a two-wayradio service that does not provide access toa local telephone system.

Coin-operated telephones. Paymentsmade for services by inserting coins in coin-operated telephones available to the publicare not subject to tax for local telephone ser-vice. They also are not subject to tax for tolltelephone service if the charge is less than25 cents. But the tax applies if the coin-operated telephone service is furnished for aguaranteed amount. Figure the tax on theamount paid under the guarantee plus anyfixed monthly or other periodic charge.

Telephone-operated security systems.The tax does not apply to amounts paid fortelephones used only to originate calls to alimited number of telephone stations for se-curity entry into a building. In addition, the taxdoes not apply to any amounts paid for rentedcommunication equipment used in the secu-rity system.

News services and radio broadcasts ofnews and sporting events. The tax on tolltelephone service and teletypewriter ex-change service does not apply to news ser-vices and radio broadcasts of news andsporting events. This exemption applies topayments received for messages from onemember of the news media to another mem-ber (or to or from their bona fide correspond-ents). However, the tax applies to local tele-phone services and related charges. The taxdoes not apply to charges for services dealingexclusively with the collection or dissem-ination of news for the public press. It alsodoes not apply to charges for services usedin the collection or dissemination of news bya news ticker service furnishing a generalnews service similar to that of the publicpress. For the exemption to apply, the chargefor these services or facilities must be billed

in writing to the person paying for the serviceand that person must certify in writing that theservices are used for one of these exemptpurposes. However, toll telephone service inconnection with celebrities or special guestson talk shows is subject to tax.

Common carriers and communicationscompanies. The tax on toll telephone ser-vice does not apply to WATS or WATS-likeservice used by common carriers, telephoneand telegraph companies, or radio broad-casting stations or networks in their business.A common carrier is one holding itself out tothe public as engaged in the business oftransportation of persons or property forcompensation, offering its services to thepublic generally.

Military personnel serving in a combatzone. The tax on toll telephone services doesnot apply to telephone calls originating in acombat zone that are made by members ofthe U.S. Armed Forces serving there if theperson receiving payment for the call receivesa properly executed certificate of exemption.The signed and dated exemption certificatemust contain all the following information.

• The name of the person who called fromthe combat zone and that the person wasa member of the U.S. Armed Forcesperforming services in the combat zone.

• The toll charges, point of origin, andname of carrier.

• A statement that the charges are exemptfrom tax under section 4253(d) of theInternal Revenue Code.

• The name and address of the telephonesubscriber.

This exemption also applies to members ofthe Armed Forces serving in a qualified haz-ardous duty area. A qualified hazardous dutyarea means Bosnia and Herzegovina,Croatia, or Macedonia. A qualified hazardousduty area includes a country only while thespecial pay provision is in effect for thatcountry.

International organizations and the Amer-ican Red Cross. The tax does not apply tocommunication services furnished to aninternational organization or to the AmericanNational Red Cross.

Nonprofit hospitals. The tax does not applyto telephone services furnished to incometax-exempt nonprofit hospitals for their use.Also, the tax does not apply to amounts paidby these hospitals to provide local telephoneservice in the homes of its personnel whomust be reached during their off-duty hours.

Nonprofit educational organizations. Thetax does not apply to payments received forservices and facilities furnished to a nonprofiteducational organization for its use. Anonprofit educational organization is one thatsatisfies all the following requirements.

• It normally maintains a regular faculty andcurriculum.

• It normally has a regularly enrolled bodyof pupils or students in attendance at theplace where its educational activities areregularly carried on.

• It is exempt from income tax under IRC501(a).

This includes a school operated by an or-ganization that is exempt under IRC 501(c)(3)if the school meets the above qualifications.

Federal, state, and local government. Thetax does not apply to communication servicesprovided to the government of the UnitedStates, the government of any state or itspolitical subdivisions, the District of Columbia,or the United Nations. Treat an Indian tribalgovernment as a state for the exemptionfrom the communications tax only if the ser-vices involve the exercise of an essentialtribal government function.

Exemption certificate. Any form of ex-emption certificate will be acceptable if it in-cludes all the information required by thepertinent sections of the Internal RevenueCode and Regulations. File the certificate withthe provider of the communication services.

The following users that are exempt fromthe communications tax do not have to filean annual exemption certificate after theyhave filed the initial certificate of exemptionfrom the communications tax.

• Red Cross and other international or-ganizations.

• Nonprofit hospitals.

• Nonprofit educational organizations.

• State and local governments.

The federal government does not have tofile any exemption certificate.

All other organizations must furnish ex-emption certificates when required.

Air Transportation TaxesThe air transportation taxes apply to amountspaid for all the following services.

• Transportation of persons by air.

• Use of international air travel facilities.

• Transportation of property by air.

Transportationof Persons by AirThe tax on transportation of persons by air ismade up of the following two parts.

• The percentage tax.

• The domestic-segment tax.

However, see Rural airports, later.

Percentage tax. The percentage tax appliesto amounts paid for taxable transportation ofpersons by air. Amounts paid for transporta-tion include charges for layover or waitingtime and movement of aircraft in deadheadservice. The percentage tax applies to pay-ments to air carriers (and related persons) forthe right to award air travel benefits, such asfrequent-flyer miles. See Air travel benefits,later.

The percentage tax rate depends on whenthe transportation begins. (However, see Ru-ral airports, later.) The rates and the periodsto which they apply are shown in the followingtable.

Air travel benefits. The percentage taxapplies at the rate of 7.5% to any amount paid(in cash or in kind) to an air carrier for the right

to award air travel benefits. These includemileage awards and other reductions in thecost of any transportation of persons by air.This applies to frequent-flyer miles purchasedby credit card companies, telephone compa-nies, restaurants, hotels, etc.

Domestic-segment tax. The domestic-segment tax is a flat dollar amount for eachsegment of taxable transportation for whichan amount is paid. However, see Rural air-ports, later. A segment is a single takeoff anda single landing. The domestic-segment taxrate depends on when the segment begins.The amounts and the periods to which theyapply are listed in the following table.

After 2002, the domestic-segment tax will beadjusted for inflation.

Example. In January 1999, Frank Jonespays $220 to a commercial airline for a flightin January from Washington to Chicago withan intermediate stop in Cleveland. The flightcomprises two segments. The price includesthe $200 fare and $20 excise tax [($200 ×8%) + (2 × $2)] for which Frank is liable. Theairline collects the tax from Frank and pays itto the government.

Rural airports. If a segment is to or from arural airport, the percentage tax rate is 7.5%.The domestic-segment tax does not apply.An airport is a rural airport for a calendar yearif it satisfies both the following requirements.

1) Fewer than 100,000 commercial pas-sengers departed from the airport duringthe second preceding calendar year.

2) The airport:

a) Is not located within 75 miles ofanother airport from which 100,000or more commercial passengersdeparted during the second pre-ceding calendar year, or

b) Was receiving essential air servicesubsidies as of August 5, 1997.

Revenue Procedure 98–18, 1998–6 I.R.B. 20,contains a list of rural airports.

Taxable transportation. Taxable transpor-tation is transportation by air that meets eitherof the following tests.

• It begins and ends either in the UnitedStates or at any place in Canada orMexico not more than 225 miles from thenearest point on the continental UnitedStates boundary (this is the225-mile-zone rule ).

• It is directly or indirectly from one port orstation in the United States to another inthe United States, but only if it is not apart of uninterrupted international airtransportation.

Round trip. A round trip is consideredtwo separate trips. The first trip is from thepoint of departure to the destination. Thesecond trip is the return trip from that desti-nation.

Time Period TaxJanuary 1, 1999—September 30, 1999 ........ $2.00October 1, 1999—December 30, 1999 ......... $2.25January 1, 2000—December 31, 2000 ......... $2.50January 1, 2001—December 31, 2001 ......... $2.75January 1, 2002—December 31, 2002 ......... $3.00

Time Period TaxJanuary 1, 1999—September 30, 1999 ......... 8%After September 30, 1999 .............................. 7.5%

Uninterrupted international air trans-portation. This means transportation entirelyby air that does not begin and end in theUnited States or in the 225-mile zone if thereis not more than a 12-hour scheduled intervalbetween arrival and departure at any stationin the United States. For a special rule thatapplies to military personnel, see Exemptionsfrom tax, later.

Transportation between the continentalU.S. and Alaska or Hawaii. The tax ontransportation of persons by air does not ap-ply to the part of the trip between the pointat which the route of transportation leaves orenters the continental United States (or a portor station in the 225-mile zone) and the pointat which it enters or leaves Hawaii or Alaska.Leaving or entering occurs when the route ofthe transportation passes over either theUnited States border or a point 3 nauticalmiles (3.45 statute miles) from low tide on thecoast line, or when it leaves a port or stationin the 225-mile zone. Therefore, this trans-portation is subject to the percentage tax onthe part of the trip in U.S. airspace, thedomestic-segment tax for each domesticsegment, and a single use-of-international-facilities tax of $6.10 per one-way flight.

Transportation within Alaska or Hawaii.The tax on transportation of persons by airapplies to the entire fare paid in the case offlights between any of the Hawaiian Islands,and between any ports or stations in theAleutian Islands or other ports or stationselsewhere in Alaska. The tax applies eventhough parts of the flights may be over inter-national waters or over Canada, if no pointon the direct line of transportation betweenthe ports or stations is more than 225 milesfrom the United States (Hawaii or Alaska).

Package tours. The air transportation taxesapply to complimentary air transportation fur-nished solely to participants in package holi-day tours. The amount paid for these packagetours includes a charge for air transportationeven though it may be advertised as “free.”This also applies to the tax on the use ofinternational air travel facilities, discussedlater.

Liability for tax. The person paying for tax-able transportation is liable for the tax and,ordinarily, the person receiving the paymentcollects the tax and files the returns. How-ever, the tax must be collected by the personfurnishing the initial transportation providedfor under a prepaid order, exchange order,etc., paid for outside the United States.

A travel agency that is an independentbroker licensed by the ICC and sells tours onaircraft that it charters is required to collectthe transportation tax, file the returns, and paythe tax. However, a travel agency that sellstours as the agent of an airline must collectthe tax and remit it to the airline for the filingof returns and for the payment of the tax.

The fact that aircraft may not use publicor commercial airports in taking off and land-ing has no effect on the tax. But see Certainhelicopter uses, later.

For taxable transportation that begins andends in the United States, the tax applies re-gardless of whether the payment is made inor outside the United States.

Secondary liability. If the tax is not paidwhen payment for the transportation is made,the air carrier providing the initial segment of

the transportation that begins or ends in theUnited States becomes liable for the tax.

Exemptions from tax. The tax on transpor-tation of persons by air does not apply in thefollowing situations.

Special rule for military personnel.When traveling in uniform at their own ex-pense, United States military personnel onauthorized leave are exempt from the tax onthe domestic part of uninterrupted interna-tional air transportation (defined earlier) evenif the scheduled interval between arrival anddeparture at any station in the United Statesis actually more than 12 hours. However, theymust buy their tickets within 12 hours afterlanding at the first domestic airport and ac-cept the first available accommodation of thetype called for by their tickets. The trip mustbegin or end outside the United States andthe 225-mile zone.

Certain helicopter uses. The tax ontransportation of persons by air does not ap-ply to air transportation by helicopter if thehelicopter is used for any of the followingpurposes.

• Transporting individuals, equipment, orsupplies in the exploration for, or the de-velopment or removal of, hard minerals,oil, or gas.

• Planting, cultivating, cutting, transporting,or caring for trees (including logging op-erations).

However, the tax applies if the helicoptertakes off from, or lands at, a facility eligible forassistance under the Airport and Airway De-velopment Act of 1970, or otherwise usesservices provided under section 44509 or44913(b) or subchapter I of chapter 471 oftitle 49, United States Code, during such use.For helicopters used in exploration for, ordevelopment or removal of, hard minerals, oil,or gas, treat each flight segment as a sepa-rate flight.

Emergency medical transportation.The tax on transportation of persons by airdoes not apply to air transportation by heli-copter or fixed-wing aircraft if used for emer-gency medical transportation. The exemptionapplies to fixed-wing aircraft equipped for andexclusively dedicated on that flight to acutecare emergency medical services.

Skydiving. The tax does not apply to anyair transportation exclusively for the purposeof skydiving.

Bonus tickets. The tax does not applyto free bonus tickets issued by an airlinecompany to its customers who have satisfiedall requirements to qualify for the bonus tick-ets. However, the tax applies to amounts paidby customers for advance bonus tickets whencustomers have traveled insufficient mileageto fully qualify for the free advance bonustickets.

Use of InternationalAir Travel FacilitiesA $12.20 tax is imposed on amounts paid(whether in or outside the United States) forinternational flights that begin or end in theUnited States. This tax does not apply if allof the transportation is subject to the per-centage tax, discussed earlier.

For a domestic segment that begins orends in Alaska or Hawaii, a $6.10 tax appliesto departures.

Transportationof Property by AirA tax of 6.25% is imposed on amounts paid(whether in or outside the United States) fortransportation of property by air. The fact thatthe aircraft may not use public or commercialairports in taking off and landing has no effecton the tax. The tax applies only to amountspaid to a person engaged in the business oftransporting property by air for hire.

The tax applies only to transportation (in-cluding layover time and movement of aircraftin deadhead service) that begins and endsin the United States. Thus, the tax does notapply to transportation of property by air thatbegins or ends outside the United States.

The tax on transportation of property byair does not apply to amounts paid forcropdusting, aerial firefighting service, or useof helicopters in construction to settle heatingand air conditioning units on roofs ofbuildings, to dismantle tower cranes, and toaid in construction of power lines and ski lifts.

The tax does not apply to payments fortransportation of property by air in the courseof uninterrupted exportation (including toUnited States possessions). Get Form 1363,Export Exemption Certificate, for more de-tails.

The tax does not apply to air transporta-tion by helicopter or fixed-wing aircraft for thepurpose of providing emergency medicaltransportation. The exemption applies tofixed-wing aircraft equipped for and exclu-sively dedicated on that flight to acute careemergency medical services.

The tax does not apply to any air trans-portation exclusively for the purpose ofskydiving.

Alaska and Hawaii. For transportation ofproperty to and from Alaska and Hawaii, thetax in general does not apply to the portionof the transportation that is entirely outsidethe continental United States (and the225-mile zone). But the tax on transportationof property applies to flights between portsor stations in Alaska and the Aleutian Islands,as well as between ports or stations in Hawaii.The tax applies even though parts of theflights may be over international waters orover Canada, if no point on a line drawn fromwhere the route of transportation leaves theUnited States (Alaska) to where it reentersthe United States (Alaska) is more than 225miles from the United States.

Liability for tax. The person paying for tax-able transportation pays the tax and, ordinar-ily, the person engaged in the business oftransporting property by air for hire who re-ceives the payment collects the tax and filesreturns.

If tax is not included in a taxable paymentmade outside the United States, the personfurnishing the last segment of air transporta-tion collects the tax from the person to whomthe property is delivered in the United States.

Baggage. Regular and excess baggage ac-companying a passenger on an aircraft oper-ated on an established line is not propertyunder these rules.

Mixed load of persons and property. If youreceive a flat amount for air transportation ofa mixed load of persons and property, allo-cate the payment between the amount sub-ject to the tax on transportation of personsand the amount subject to the tax on trans-

portation of property. Your allocation must bereasonable and supported by adequate rec-ords.

Special Rules onTransportation TaxesIn certain circumstances, the taxes on trans-portation of persons and property by air donot apply to amounts paid for those services.

Aircraft used by affiliated corporations.The taxes on transportation by air do not ap-ply to payments received by one member ofan affiliated group of corporations from an-other member for services furnished in con-nection with the use of an aircraft. However,the aircraft must be owned or leased by amember of the affiliated group and cannot beavailable for hire by a nonmember of the af-filiated group. Determine whether an aircraftis available for hire by a nonmember of anaffiliated group on a flight-by-flight basis.

An affiliated group of corporations, for thisrule, is any group of corporations connectedwith a common parent corporation through80% or more stock ownership.

Small aircraft. Transportation taxes do notapply to transportation furnished by an aircrafthaving a maximum certificated takeoff weightof 6,000 pounds or less. However, the taxesdo apply if the aircraft is operated on an es-tablished line. “Operated on an establishedline” means the aircraft operates with somedegree of regularity between definite points.

Consider aircraft operated on a charterbasis between two cities that are served bythat carrier on a regularly scheduled basis tobe operated on an established line.

Airline aircraft. Consider an aircraft usedby an airline not only on scheduled flights butalso to train its own pilots and carry its exec-utives on business flights to be used exclu-sively in commercial aviation. Thus, thetransportation taxes apply to its use—not thetax on fuels.

Fuel TaxesExcise taxes are imposed on all the followingfuels.

• Gasoline.

• Gasohol.

• Diesel fuel.

• Kerosene.

• Aviation fuel other than gasoline.

• Special motor fuels.

• Compressed natural gas.

• Fuels used in commercial transportationon inland waterways.

Registration RequirementsThe following discussion applies to registra-tion for purposes of the excise taxes on gas-oline, diesel fuel, and kerosene. The termsused in this discussion are explained later.See Registration for Certain Activities, earlier,for more information about registration.

Persons that must register. You must reg-ister if you are any of the following persons.

• A blender.

• An enterer.

• A refiner.

• A terminal operator.

• A position holder.

In addition, bus and train operators mustregister if they will incur liability for tax at thebus or train rate.

Persons that may register. You may, butare not required to, register if you are any ofthe following persons.

• A gasohol blender.

• An industrial user.

• A throughputter that is not a positionholder.

• A kerosene feedstock user.

• An ultimate vendor of diesel fuel orkerosene.

Ultimate vendors do not need to register tobuy or sell diesel fuel or kerosene. However,they must be registered for filing certainclaims for the excise tax on these fuels.

Taxable fuel registrant. An enterer, an in-dustrial user, a refiner, a terminal operator,or a position holder who receives a letter ofregistration under this provision is a taxablefuel registrant if the registration has not beenrevoked or suspended. The term taxable fuelmeans gasoline, diesel fuel, and kerosene.The term registrant as used in the dis-cussions of these fuels means a taxable fuelregistrant.

Kerosene. For kerosene, a special ruleallows a person to be treated as a taxable fuelregistrant if, on June 30, 1998, either of thefollowing conditions are met.

• The person is an enterer, refiner, terminaloperator, or throughputter of keroseneand is registered as a producer orimporter of aviation fuel.

• The person operates one or more termi-nals that store only kerosene and eachposition holder at each terminal is a tax-able fuel registrant.

A person can only be treated as a regis-trant under this special rule until the earlierof:

• The effective date of a registration issuedfor kerosene,

• The effective date of a revocation orsuspension of registration, or

• April 1, 1999.

Additional information. See the Form637 instructions for the information you mustsubmit when you apply for registration.

GasolineThe following discussion provides definitionsand an explanation of events relating to theexcise tax on gasoline.

DefinitionsThe following terms are used throughout thediscussion of gasoline. Some of these termsare also used in the discussions of diesel fueland kerosene. Other terms are defined in thediscussion to which they pertain.

Gasoline. This means finished gasoline andgasoline blendstocks. Finished gasolinemeans all products (including gasohol) thatare commonly or commercially known or soldas gasoline and are suitable for use as motorfuel. The product must have an octane ratingof 75 or more. Gasoline blendstocks are dis-cussed later.

To figure the number of gallons on whichtax is imposed, you may base your meas-urement on the actual volumetric gallons,gallons adjusted to 60 degrees Fahrenheit,or any other temperature adjustment methodapproved by the IRS.

Approved terminal or refinery. This is aterminal operated by a registrant that is aterminal operator or a refinery operated by aregistrant that is a refiner.

Aviation gasoline. This means all specialgrades of gasoline that are suitable for use inaviation reciprocating engines, as describedin ASTM Specification D 910 and MilitarySpecification MIL-G-5572.

Blended taxable fuel. This means any tax-able fuel that is produced outside the bulktransfer/terminal system by mixing taxablefuel on which excise tax has been imposedand any other liquid on which that excise taxhas not been imposed. This does not includea mixture removed or sold during the calendarquarter if all such mixtures removed or soldby the blender contain less than 400 gallonsof a liquid on which the tax has not been im-posed. Blended taxable fuel does not includegasohol that receives an excise tax benefit.

Blender. This is the person that producesblended taxable fuel.

Bulk transfer. This is the transfer of fuel bypipeline or vessel.

Bulk transfer/terminal system. This is thefuel distribution system consisting of refin-eries, pipelines, vessels, and terminals. Fuelin the supply tank of any engine, or in anytank car, railcar, trailer, truck, or other equip-ment suitable for ground transportation is notin the bulk transfer/terminal system.

Enterer. This is the importer of record for thefuel. However, if the importer of record isacting as an agent, the person for whom theagent is acting is the enterer. If there is noimporter of record, the owner at the time ofentry into the United States is the enterer.

Position holder. This is the person thatholds the inventory position in the fuel in theterminal, as reflected on the records of theterminal operator. You hold the inventory po-sition when you have a contractual agreementwith the terminal operator for the use of thestorage facilities and terminaling services forthe fuel. A terminal operator that owns the fuelin its terminal is a position holder.

Rack. This is a mechanism for delivering fuelfrom a refinery or terminal into a truck, trailer,railroad car, or other means of nonbulktransfer.

Refiner. This is any person that owns, op-erates, or otherwise controls a refinery.

Registrant. This is a taxable fuel registrant(see Registration Requirements, earlier).

Removal. This is any physical transfer offuel. It also means any use of fuel other thanas a material in the production of taxable orspecial fuels. However, fuel is not removedwhen it evaporates or is otherwise lost ordestroyed.

Sale. For fuel not in a terminal, this is thetransfer of title to, or substantial incidents ofownership in, fuel to the buyer for money,services, or other property. For fuel in a ter-minal, this is the transfer of the inventory po-sition if the transferee becomes the positionholder for that fuel.

State. This includes any state, any of itspolitical subdivisions, the District of Columbia,and the American Red Cross. Treat an Indiantribal government as a state only if trans-actions involve the exercise of an essentialtribal government function.

Terminal operator. This is any person thatowns, operates, or otherwise controls a ter-minal. A terminal is a storage and distributionfacility that is supplied by pipeline or vessel,and from which fuel may be removed at arack. It does not include a facility at whichgasoline blendstocks are used in the manu-facture of products other than finished gaso-line if no gasoline is removed from the facility.A terminal does not include a facility operatedby a registrant if all the finished gasoline andundyed diesel fuel stored at the facility hasbeen taxed previously upon removal from arefinery or terminal.

Throughputter. This is any person that is aposition holder or that owns fuel within thebulk transfer/terminal system (other than in aterminal).

Taxable EventsThe tax on gasoline is 18.4 cents a gallon. Itis imposed on each of the following events.However, see the special rules that apply togasoline blendstocks, later. Also, see thediscussion under Gasohol, if applicable.

If the tax is paid on the gasoline in morethan one event, a refund may be allowed forthe “second” tax paid on the gasoline. SeeRefunds, later.

CAUTION!

Aviation gasoline is taxable under thesame rules as other gasoline. How-ever, the tax on aviation gasoline is

19.4 cents a gallon.

Removal from terminal. All removals ofgasoline at a terminal rack are taxable. Theposition holder for that gasoline is liable forthe tax.

Terminal operator's liability. The termi-nal operator is jointly and severally liable forthe tax if the position holder is a person otherthan the terminal operator and is not a regis-trant.

However, a terminal operator meeting thefollowing conditions at the time of the removalwill not be liable for the tax. The terminaloperator must meet all the following condi-tions.

• Be a registrant.

• Have an unexpired notification certificate(discussed later) from the position holder.

• Have no reason to believe that any in-formation on the certificate is false.

Removal from refinery. The removal ofgasoline from a refinery is taxable if the re-moval meets either of the following condi-tions.

• It is made by bulk transfer and the refineror the owner of the gasoline immediatelybefore the removal is not a registrant.

• It is made at the refinery rack.

The refiner is liable for the tax.The tax does not apply to a removal of

gasoline at the refinery rack if all the followingrequirements are met.

• The gasoline is removed from an ap-proved refinery that is not served bypipeline (other than for receiving crudeoil) or vessel.

• The gasoline is received at a facility thatis operated by a registrant and is withinthe bulk transfer/terminal system.

• The removal from the refinery is byrailcar.

• The same person operates the refineryand the facility at which the gasoline isreceived.

Entry into the United States. The entry ofgasoline into the United States is taxable ifthe entry meets either of the following condi-tions.

• It is made by bulk transfer and the entereris not a registrant.

• It is not made by bulk transfer.

The enterer is liable for the tax.Fuel is entered into the United States if it

is brought into the United States and appli-cable customs law requires that it be enteredfor consumption, use, or warehousing. Thisdoes not apply to fuel brought into PuertoRico (which is part of the U.S. customs terri-tory), but does apply to fuel brought into theUnited States from Puerto Rico.

Removal from a terminal by unregisteredposition holder. The removal by bulktransfer of gasoline from a terminal is taxableif the position holder for the gasoline is not aregistrant. The position holder is liable for thetax. The terminal operator is jointly and se-verally liable for the tax if the position holderis a person other than the terminal operator.However, see Terminal operator's liabilityunder Removal from terminal, earlier, for anexception.

Bulk transfers not received at an approvedterminal or refinery. The removal by bulktransfer of gasoline from a terminal or refin-ery, or the entering of gasoline by bulk trans-fer into the United States, is taxable, if thefollowing conditions apply.

1) No tax was imposed (as discussed ear-lier) on any of the following events.

a) The removal from the refinery.

b) The entry into the United States.

c) The removal from a terminal by anunregistered position holder.

2) Upon removal from the pipeline or ves-sel, the gasoline is not received at anapproved terminal or refinery (or at an-other pipeline or vessel).

The owner of the gasoline when it is re-moved from the pipeline or vessel is liable forthe tax. However, an owner meeting the fol-lowing conditions at the time of the removalfrom the pipeline or vessel will not be liablefor the tax. The owner must meet all the fol-lowing conditions.


• Have an unexpired notification certificate(discussed later) from the operator of theterminal or refinery where the gasoline isreceived.


The operator of the facility where the gasolineis received is liable for the tax if the ownermeets these conditions. The operator is jointlyand severally liable if the owner does notmeet these conditions.

Sales to unregistered person. The sale ofgasoline located within the bulk transfer/terminal system to a person that is not aregistrant is taxable if tax was not imposedunder any of the events discussed earlier.

The seller is liable for the tax. However,a seller meeting the following conditions atthe time of the sale will not be liable for thetax. The seller must meet all the followingconditions.


• Have an unexpired notification certificate(discussed later) from the buyer.


The buyer of the gasoline is liable for the taxif the seller meets these conditions. The buyeris jointly and severally liable if the seller doesnot meet these conditions.

The tax on these sales does not apply ifall of the following apply.

• The buyer's principal place of business isnot in the United States.

• The sale occurs as the fuel is deliveredinto a transport vessel with a capacity ofat least 20,000 barrels of fuel.

• The seller is a registrant and the exporterof record.

• The fuel was exported.

Removal or sale of blended gasoline. Theremoval or sale of blended gasoline by theblender is taxable. See Blended taxable fuelunder Definitions, earlier.

The blender is liable for the tax. The taxis figured on the number of gallons of blendedgasoline that was not previously subject to thetax on gasoline.

Notification certificate. The notificationcertificate is used to notify a person of theregistration status of the registrant. A copy ofthe registrant's letter of registration cannot beused as a notification certificate. A modelnotification certificate is shown in AppendixC as Model Certificate A. Your notificationcertificate must contain all information nec-essary to complete the model.

The certificate may be included as part ofany business records normally used for asale. A certificate expires on the earlier of thedate the registrant provides a new certificate,or the date the recipient of the certificate isnotified that the registrant's registration has

been revoked or suspended. The registrantmust provide a new certificate if any informa-tion on a certificate has changed.

Additional persons liable. When the personliable for the tax willfully fails to pay the tax,joint and several liability for the tax is imposedon:

• Any officer, employee, or agent of theperson who is under a duty to ensure thepayment of the tax and who willfully failsto perform that duty, or

• Any other person who willfully causesthat person to fail to pay the tax.

Gasoline BlendstocksGasoline includes gasoline blendstocks. Theprevious discussions apply to theseblendstocks. However, if certain conditionsare met, the removal, entry, or sale of gaso-line blendstocks is not taxable. Generally, thisapplies if the gasoline blendstock is not usedto produce finished gasoline or is received atan approved terminal or refinery.

Blendstocks. The following are gasolineblendstocks.

• Alkylate

• Butane

• Butene

• Catalytically cracked gasoline

• Coker gasoline

• Ethyl tertiary butyl ether (ETBE)

• Hexane

• Hydrocrackate

• Isomerate

• Methyl tertiary butyl ether (MTBE)

• Mixed xylene (not including any sepa-rated isomer of xylene)

• Natural gasoline

• Pentane

• Pentane mixture

• Polymer gasoline

• Raffinate

• Reformate

• Straight-run gasoline

• Straight-run naphtha

• Tertiary amyl methyl ether (TAME)

• Tertiary butyl alcohol (gasoline grade)(TBA)

• Thermally cracked gasoline

• Toluene

• Transmix containing gasoline

However, gasoline blendstocks do not in-clude any products that cannot be used with-out further processing in the production offinished gasoline.

Not used to produce finished gasoline.Gasoline blendstocks that are not used toproduce finished gasoline are not taxable ifthe following conditions are met.

Removals and entries not connected tosale. Nonbulk removals and entries are nottaxable if the person otherwise liable for thetax (position holder, refiner, or enterer) is aregistrant.

Removals and entries connected tosale. Nonbulk removals and entries are nottaxable if the person otherwise liable for thetax (position holder, refiner, or enterer) is aregistrant, and at the time of the sale, thatperson meets the following requirements.

• Has an unexpired certificate (discussedlater) from the buyer.

• Has no reason to believe that any infor-mation in the certificate is false.

Sales after removal or entry. The saleof a gasoline blendstock that was not subjectto tax on its nonbulk removal or entry, asdiscussed earlier, is taxable. The seller is lia-ble for the tax. However, the sale is not tax-able if, at the time of the sale, the seller meetsthe following requirements.

• Has an unexpired certificate (discussednext) from the buyer.


Certificate of buyer. The certificate from thebuyer certifies that the gasoline blendstockswill not be used to produce finished gasoline.The certificate may be included as part of anybusiness records normally used for a sale. Amodel certificate is shown in Appendix C asModel Certificate B. Your certificate mustcontain all information necessary to completethe model.

A certificate expires on the earliest of thefollowing dates.

• The date 1 year after the effective date(not earlier than the date signed) of thecertificate.

• The date that a new certificate is providedto the seller.

• The date that the seller is notified that thebuyer's right to provide a certificate hasbeen withdrawn.

The buyer must provide a new certificate ifany information on a certificate has changed.

The right to provide a certificate can bewithdrawn by the IRS if that buyer uses thegasoline blendstocks in the production of fin-ished gasoline or resells the blendstockswithout getting a certificate from its buyer.

Received at an approved terminal or re-finery. The nonbulk removal or entry ofgasoline blendstocks that are received at anapproved terminal or refinery is not taxable ifthe person otherwise liable for the tax (posi-tion holder, refiner, or enterer) meets all thefollowing requirements.

• Is a registrant.

• Has an unexpired notification certificate(discussed earlier) from the operator ofthe terminal or refinery where the gaso-line blendstocks are received.

• Has no reason to believe that any infor-mation on the certificate is false.

Bulk transfers to registered industrialuser. The removal of gasoline blendstocksfrom a pipeline or vessel is not taxable if theblendstocks are received by a registrant thatis an industrial user. An industrial user is anyperson that receives gasoline blendstocks bybulk transfer for its own use in the manufac-ture of any product other than finished gaso-line.

RefundsIf the tax is paid on more than one taxableevent, the person paying the “second tax”may claim a refund of that tax if certain con-ditions and reporting requirements are met.No credit against any tax is allowed for thistax.

Conditions for allowance of refund. Aclaim for refund of the tax is allowed only ifall the following conditions are met.

1) A tax on the fuel was paid to the gov-ernment and not credited or refunded(the “first tax”).

2) After the first tax was imposed, anothertax was imposed on the same fuel andwas paid to the government (the “secondtax”).

3) The person that paid the second tax filesa claim for refund containing the infor-mation required (see Refund claim,later).

4) The person that paid the first tax hasmet the reporting requirements, dis-cussed next.

Reporting requirements. Generally, theperson that paid the first tax must file with itsForm 720 for that quarter a “First Taxpayer'sReport.” A model first taxpayer's report isshown in Appendix C as Model Certificate C.Your report must contain all informationneeded to complete the model.

By the due date for filing the Form 720,you must send a separate copy of the reportto the following address.

Internal Revenue ServiceCincinnati, OH 45999–0002

Write “EXCISE-FIRST TAXPAYER'S RE-PORT” across the top of that copy.

Optional report. A first taxpayer's reportis not required for the tax imposed on a re-moval from a terminal rack, nonbulk entriesinto the United States, or removals or salesby blenders. However, if the person liable forthe tax expects that another tax will be im-posed on that fuel, that person should (but isnot required to) file a first taxpayer's report.

Providing information. The first tax-payer must give a copy of the report to thebuyer of the fuel within the bulktransfer/terminal system or, if the first tax-payer is not the owner at the time, to theperson that owned the fuel immediately be-fore the first tax was imposed. If the optionalreport is filed, a copy should (but is not re-quired to) be given to the buyer or owner.

A person that receives a copy of the firsttaxpayer's report and later sells the fuel mustgive the copy and a “Statement of Subse-quent Seller” to the buyer. If the later sale isoutside the bulk transfer/terminal system andthat person expects that another tax will beimposed, that person should (but is not re-quired to) give the copy and the statement tothe buyer. A model statement of subsequentseller is shown in Appendix C as Model Cer-tificate D. Your statement must contain all in-formation necessary to complete the model.

If the first taxpayer's report relates to fuelsold to more than one buyer, copies of thatreport must be made when the fuel is divided.Each buyer must be given a copy of the re-port.

Refund claim. You must make your claim forrefund on Form 8849. You must have filedForm 720 and paid the second tax before youfile for a refund of that tax. Do not include thisclaim with a claim under another tax pro-vision. You must attach the following infor-mation to your claim.

• A copy of the first taxpayer's report (dis-cussed earlier).

• A copy of the statement of subsequentseller if the fuel was bought from otherthan the first taxpayer.

Credits and RefundsA credit or refund of the gasoline tax may beallowable if gasoline is, by any person:

• Exported,

• Used or sold for use as supplies for ves-sels or aircraft (as defined in section4221(d)(3) of the Internal RevenueCode),

• Sold to a state for its exclusive use,

• Sold to a nonprofit educational organiza-tion for its exclusive use,

• Sold to the United Nations for its exclu-sive use, or

• Used or sold in the production of specialfuels.

Claims by wholesale distributors. A creditor refund is allowable to a gasoline wholesaledistributor who buys gasoline tax paid andthen sells it to the ultimate purchaser (includ-ing an exporter) for a purpose listed in theprevious list. A wholesale distributor includesany person who makes retail sales of gaso-line at 10 or more retail motor fuel outlets.

A wholesale distributor must submit withits claim a statement that it has done the fol-lowing.

• Sold the gasoline at a price that did notinclude the tax, and did not otherwisecollect the tax from its buyer.

• Obtained a certificate of ultimate pur-chaser or proof of export.

Claims by persons who paid the tax to thegovernment. A credit or refund is allowableto the person that paid the tax to the govern-ment if the gasoline was sold to the user (in-cluding an exporter) by either that person orby a retailer. A credit or refund also is allow-able to that person if the gasoline was soldto the user by a wholesale distributor and ei-ther of the following is true.

• The distributor bought the gasoline at aprice that did not include the tax.

• The sale to the user was charged on anoil company credit card.

The person must submit the following with itsclaim.

1) One of the three items below:

a) Proof of exportation,

b) A certificate of ultimate purchaser,or

c) A certificate of ultimate vendor.

2) A statement that it:

a) Has neither included the tax in theprice of the gasoline nor collected

the amount of the tax from thebuyer,

b) Has repaid, or agreed to repay, theamount of the tax to the ultimatevendor of the gasoline, or

c) Has gotten the written consent ofthe ultimate vendor to the allowanceof the credit or refund.

Claims by the ultimate purchaser. A creditor refund is allowable to the ultimate pur-chaser of tax-paid gasoline used for an ex-empt purpose. See Publication 378 for moreinformation about these claims.

GasoholGenerally, the same rules that apply to theimposition of tax on the removal and entry ofgasoline (discussed earlier) apply to gasohol.

However, the removal of gasohol from arefinery is taxable if the removal from an ap-proved refinery is by bulk transfer and theregistered refiner chooses to be treated asnot registered. This is in addition to the taxa-ble events discussed earlier under Removalfrom refinery.

Gasohol. Gasohol is a blend of gasoline andalcohol that satisfies the alcohol requirement.Eligible blends include those made withethanol and methanol. The term “alcohol”does not include alcohol produced from pe-troleum, natural gas, coal, or peat, or alcoholthat is less than 190 proof. Methanolproduced from methane gas formed in wastedisposal sites is not “alcohol produced fromnatural gas.” Alcohol used to produce ethyltertiary butyl ether (ETBE) generally qualifiesas alcohol for this purpose.

Alcohol requirement. To qualify as gasohol,the mixture must contain a specific amountof alcohol by volume, without rounding. Figurethe alcohol content on a batch-by-batch basis.

• 10% gasohol. This is a mixture thatcontains at least 9.8% alcohol.

• 7.7% gasohol. This is a mixture thatcontains at least 7.55%, but less than9.8%, alcohol.

• 5.7% gasohol. This is a mixture thatcontains at least 5.59%, but less than7.55%, alcohol.

If the mixture is produced within the bulktransfer/terminal system, such as at a refin-ery, determine whether the mixture is gasoholwhen the taxable removal or entry of themixture occurs.

If the mixture is produced outside the bulktransfer/terminal system, determine whetherthe mixture is gasohol immediately after themixture is produced. If you splash blend abatch in an empty tank, figure the volume ofalcohol (without adjustment for temperature)by dividing the metered gallons of alcohol bythe total metered gallons of alcohol and gas-oline as shown on each delivery ticket. How-ever, if you add the metered gallons to a tankalready containing more than 0.5% of its ca-pacity in a liquid, include the amount of alco-hol and non-alcohol fuel contained in that liq-uid in figuring the volume of alcohol in thatbatch.

Example 1. John uses an empty 8,000gallon tank to blend alcohol and gasoline. Hisdelivery tickets show that he blended Batch1 using 7,200 metered gallons of gasoline

and 800 metered gallons of alcohol. John di-vides the gallons of alcohol (800) by the totalgallons of alcohol and gasoline delivered(8,000). Batch 1 qualifies as 10% gasohol.

Example 2. John blends Batch 2 in anempty tank. According to his delivery tickets,he blended 7,220 gallons of gasoline and 780gallons of alcohol. Batch 2 contains 9.75%alcohol (780 ÷ 8,000); it qualifies as 7.7%gasohol.

Batches containing at least 9.8% alco-hol. If a mixture contains at least 9.8%, butless than 10%, alcohol, part of the mixture isconsidered to be 10% gasohol. To figure thatpart, multiply the number of gallons of alcoholin the mixture by 10. The other part of themixture is excess liquid that is subject to therules on failure to blend, discussed later.

Batches containing at least 7.55% al-cohol. If a mixture contains at least 7.55%,but less than 7.7%, alcohol, part of the mix-ture is considered to be 7.7% gasohol. Tofigure that part, multiply the number of gallonsof alcohol in the mixture by 12.987. The otherpart of the mixture is excess liquid that issubject to the rules on failure to blend, dis-cussed later.

Batches containing at least 5.59% al-cohol. If a mixture contains at least 5.59%,but less than 5.7%, alcohol, part of the mix-ture is considered to be 5.7% gasohol. Tofigure that part, multiply the number of gallonsof alcohol in the mixture by 17.544. The otherpart of the mixture is excess liquid that issubject to the rules on failure to blend, dis-cussed later.

Gasohol blender. A gasohol blender is anyperson that regularly buys gasoline and alco-hol and produces gasohol for use in its tradeor business or for resale. A “registered gaso-hol blender” is one that has been registeredby the IRS. See Registration Requirements,earlier.

Tax RatesThe tax rate depends on the type of gasohol.These rates are less than the regular tax ratefor gasoline. The reduced rate also dependson whether you are liable for the tax on theremoval or entry of gasoline used to makegasohol, or on the removal or entry of gaso-hol. You may be liable for additional tax if youlater separate the gasohol or fail to blendgasoline into gasohol.

Tax on gasoline. The tax on gasoline thatis removed or entered for the production ofgasohol depends on the type of gasohol thatis to be produced. The rates apply to the taximposed on the removal at the terminal orrefinery, or on the nonbulk entry into theUnited States (as discussed under Gasoline,earlier). The rates for gasoline used toproduce gasohol containing ethanol areshown on Form 720. The rates for gasolineused to produce gasohol containing methanolare shown in the instructions for Form 720.

Requirements. The reduced rates applyif the person liable for the tax (position holder,refiner, or enterer) is a registrant and:

1) A registered gasohol blender and thatperson produces gasohol with the gaso-line within 24 hours after removing orentering the gasoline, or

2) That person, at the time that the gasolineis sold in connection with the removalor entry:

a) Has an unexpired certificate fromthe buyer, and

b) Has no reason to believe that anyinformation in the certificate is false.

Certificate. The certificate from the buyercertifies that the gasoline will be used toproduce gasohol within 24 hours after pur-chase. The certificate may be included aspart of any business records normally usedfor a sale. A copy of the registrant's letter ofregistration cannot be used as a gasoholblender's certificate. A model certificate isshown in Appendix C as Model Certificate E.Your certificate must contain all informationnecessary to complete the model.


• The date 1 year after the effective date(which may be no earlier than the datesigned) of the certificate.


• The date that the seller is notified that thegasohol blender's registration has beenrevoked or suspended.

The buyer must provide a new certificate ifany information on a certificate has changed.

Tax on gasohol. The tax on the removal orentry of gasohol depends on the type of gas-ohol. The rates for gasohol containing ethanolare shown on Form 720. The rates for gaso-hol containing methanol are shown in the in-structions for Form 720.

Later separation. If a person separatesgasoline from gasohol on which a reduced taxrate was imposed, that person is treated asthe refiner of the gasoline. Tax is imposed onthe removal of the gasoline. This tax rate isthe difference between the regular tax rate forgasoline and the tax rate imposed on the priorremoval or entry of the gasohol.

Failure to blend. Tax is imposed on the re-moval, entry, or sale of gasoline on which areduced rate of tax was imposed if the gaso-line was not blended into gasohol, or wasblended into gasohol taxable at a higher rate.If the gasoline was not sold, the person liablefor this tax is the person that was liable for thetax on the entry or removal. If the gasolinewas sold, the person that bought the gasolinein connection with the taxable removal orentry is liable for this tax. This tax is the dif-ference between the tax that should haveapplied and the tax actually imposed.

Example. John uses an empty 8,000gallon tank to blend gasoline and alcohol. Thedelivery tickets show that he blended 7,205metered gallons of gasoline and 795 meteredgallons of alcohol. He bought the gasolineat a reduced tax rate of 14.444 cents pergallon. The batch contains 9.9375% alcohol(795 ÷ 8,000). John determines that 7,950gallons (10 × 795) of the mixture qualifies as10% gasohol. See Batches containing at least9.8% alcohol, earlier. The other 50 gallons isexcess liquid that he failed to blend into gas-ohol. He is liable for a tax of 3.956 cents pergallon (18.40 (full rate) − 14.444 (reducedrate)) on this excess liquid.

Diesel Fuel and KeroseneGenerally, diesel fuel and kerosene are taxedin the same manner as gasoline (discussedearlier). The following discussion provides in-formation about the excise tax on diesel fueland kerosene.

DefinitionsThe following terms are used in this dis-cussion of the tax on diesel fuel andkerosene. Other terms used in this discussionare defined under Gasoline.

Diesel fuel. This is any liquid (other thangasoline) that, without further processing orblending, is suitable for use as a fuel in adiesel-powered highway vehicle or a diesel-powered train. It does not include kerosene.

Kerosene. This means the following fuels.

• The two grades of kerosene (No. 1–K andNo. 2–K) described in ASTM Specifica-tion D 3699.

• Aviation-grade kerosene.

Aviation-grade kerosene. This iskerosene-type jet fuel described in ASTMSpecification D 1655 and military specifica-tions MIL-T-5624R and MIL-T-83133D(Grades JP-5 and JP-8).

Diesel-powered highway vehicle. This isany self-propelled vehicle designed to carrya load over the public highways (whether ornot also designed to perform other functions)and propelled by a diesel-powered engine.Generally, do not consider specially designedmobile machinery for nontransportation func-tions and vehicles specially designed for off-highway transportation as diesel-poweredhighway vehicles. For information about ve-hicles not considered highway vehicles, getPublication 378.

Diesel-powered train. This is any diesel-powered equipment or machinery that rideson rails. The term includes a locomotive, worktrain, switching engine, and track mainte-nance machine.

Taxable EventsThe tax on diesel fuel and kerosene is 24.4cents a gallon. It is imposed on each of thefollowing events. The tax does not apply todyed diesel fuel or dyed kerosene, discussedlater.

If the tax is paid on the diesel fuel orkerosene in more than one event, a refundmay be allowed for the “second” tax paid.See Refunds, earlier under Gasoline.

Removal from terminal. All removals ofundyed diesel fuel or undyed kerosene at aterminal rack are taxable. The position holderfor that fuel is liable for the tax.

Terminal operator's liability. The termi-nal operator is jointly and severally liable forthe tax if the terminal operator provides anyperson with any bill of lading, shipping paper,or similar document indicating that undyeddiesel fuel or undyed kerosene is dyed (dis-cussed later).

The terminal operator is jointly and se-verally liable for the tax if the position holderis a person other than the terminal operatorand is not a registrant. However, a terminaloperator will not be liable for the tax in this

situation if, at the time of the removal, theterminal operator meets all the following re-quirements.

• Is a registrant.

• Has an unexpired notification certificate(discussed under Gasoline) from the po-sition holder.

• Has no reason to believe that any infor-mation on the certificate is false.

Removal from refinery. The removal of un-dyed diesel fuel or undyed kerosene from arefinery is taxable if the removal is:

• By bulk transfer and the refiner or ownerof the fuel immediately before the re-moval is not a registrant, or

• At the refinery rack.

The refiner is liable for the tax.The tax does not apply to a removal of

undyed diesel fuel or undyed kerosene at therefinery rack if all the following conditions aremet.

1) The undyed diesel fuel or undyedkerosene is removed from an approvedrefinery that is not served by pipeline(other than for receiving crude oil) orvessel.

2) The undyed diesel fuel or undyedkerosene is received at a facility that isoperated by a registrant and is within thebulk transfer/terminal system.

3) The removal from the refinery is by:

a) Railcar and the same person oper-ates the refinery and the facility atwhich the undyed diesel fuel or un-dyed kerosene is received, or

b) For diesel fuel only, a trailer orsemi-trailer used exclusively totransport undyed diesel fuel from arefinery (described in (1)) to a facil-ity (described in (2)) that is less than20 miles from the refinery.

Entry into the United States. The entry ofundyed diesel fuel or undyed kerosene intothe United States is taxable if the entry is:

• By bulk transfer and the enterer is not aregistrant, or

• Not by bulk transfer.

The enterer is liable for the tax.For information about fuel entered into the

United States, see Entry into the UnitedStates under Gasoline.

Removal from a terminal by an unregis-tered position holder. The removal by bulktransfer of undyed diesel fuel or undyedkerosene from a terminal is taxable if the po-sition holder for that fuel is not a registrant.The position holder is liable for the tax. Theterminal operator is jointly and severally liablefor the tax if the position holder is a personother than the terminal operator. However,see Terminal operator's liability under Re-moval from terminal, earlier, for an exception.

Bulk transfers not received at an approvedterminal or refinery. The removal by bulktransfer of undyed diesel fuel or undyedkerosene from a terminal or refinery or theentering of undyed diesel fuel or undyedkerosene by bulk transfer into the United

States is taxable if the following conditionsapply.

1) No tax was imposed (as discussed ear-lier) on:

a) The removal from the refinery,

b) The entry into the United States, or

c) The removal from a terminal by anunregistered position holder.

2) Upon removal from the pipeline or ves-sel, the undyed diesel fuel or undyedkerosene is not received at an approvedterminal or refinery (or at another pipe-line or vessel).

The owner of the undyed diesel fuel orundyed kerosene when it is removed from thepipeline or vessel is liable for the tax. How-ever, an owner meeting the following condi-tions at the time of the removal from thepipeline or vessel will not be liable for the tax.The owner must:

• Be a registrant,

• Have an unexpired notification certificate(discussed under Gasoline) from the op-erator of the terminal or refinery wherethe undyed diesel fuel or undyedkerosene is received, and


The operator of the facility where the undyeddiesel fuel or undyed kerosene is received isliable for the tax if the owner meets theseconditions. The operator is jointly and se-verally liable if the owner does not meet theseconditions.

Sales to unregistered person. The sale ofundyed diesel fuel or undyed kerosene lo-cated within the bulk transfer/terminal systemto a person that is not a registrant is taxableif tax was not imposed under any of theevents discussed earlier.

The seller is liable for the tax. However,a seller meeting the following conditions atthe time of the sale will not be liable for thetax. The seller must:

• Be a registrant,

• Have an unexpired notification certificate(discussed under Gasoline) from thebuyer, and


The buyer of the undyed diesel fuel or undyedkerosene is liable for the tax if the sellermeets these conditions. The buyer is jointlyand severally liable if the seller does not meetthese conditions.

The tax on these sales does not apply ifall the following tests are met.

• The buyer's principal place of business isnot in the United States.

• The sale occurs as the fuel is deliveredinto a transport vessel with a capacity ofat least 20,000 barrels of fuel.

• The seller is a registrant and the exporterof record.

• The fuel was exported.

Removal or sale of blended diesel fuel orkerosene. The removal or sale of blendeddiesel fuel or blended kerosene by the

blender is taxable. See Blended taxable fuelin Definitions under Gasoline, earlier.

The blender is liable for the tax. The taxis figured on the number of gallons of blendeddiesel fuel or kerosene that were not previ-ously subject to the tax.




Aviation-grade kerosene. The excise taxon kerosene is not imposed on aviation-gradekerosene if the following conditions are met.

Not connected to sale. The removal orentry of aviation-grade kerosene not in con-nection with a sale is not subject to the taxon kerosene if all the following conditions aremet.

1) The person otherwise liable for the tax(position holder, refiner, or enterer) is aregistrant.

2) In the case of a removal from a terminal,the terminal is an approved terminal.

3) The kerosene will be used in an aircraftand one of the following applies.

a) The person otherwise liable for thetax subsequently delivers thekerosene into the fuel supply tankof an aircraft.

b) The person otherwise liable for thetax is a registered aviation fuelproducer or commercial airline.

c) The tax on aviation fuel has beenimposed on the kerosene.

Connected to sale. The removal or entryof aviation-grade kerosene in connection witha sale is not subject to the tax on keroseneif all the following conditions are met.

1) The person otherwise liable for the tax(position holder, refiner, or enterer) is aregistrant.


3) The kerosene will be used in an aircraftand one of the following applies.

a) The buyer is a registered aviationfuel producer, commercial airline,or importer.

b) The buyer is buying the kerosenefor its own use in a nontaxable use(as discussed under Aviation FuelExemptions, later).

c) The tax on aviation fuel is, or hasbeen, imposed on the kerosene.

Condition (3) is met only if the personotherwise liable for the tax has an unexpiredcertificate from the buyer and has no reasonto believe any information in the certificate isfalse. The certificate may be included as partof any business records normally used for asale. A model certificate is shown in AppendixC as Model Certificate G. Your certificate

must contain all information necessary tocomplete the model.


• The date 1 year after the effective date(not earlier than the date signed) of thecertificate.

• The date the buyer provides a new cer-tificate or notice that the current certif-icate is invalid to the seller.

• The date the seller is notified that thebuyer's right to provide a certificate hasbeen withdrawn.

The buyer must provide a new certificateif any information on a certificate haschanged.

The buyer's right to provide a certificatecan be withdrawn by the IRS if the buyer usesor disposes of the aviation-grade keroseneother than as a fuel in an aircraft.

Bulk transfers to kerosene feedstock user.The removal of kerosene from a pipeline orvessel is not taxable if the kerosene is re-ceived by a kerosene feedstock user. Akerosene feedstock user is a registrant thatreceives kerosene by bulk transfer for its ownuse in the manufacture or production of anysubstance (other than gasoline, diesel fuel,or special fuels).

Dyed Diesel Fueland Dyed KeroseneThe excise tax is not imposed on the removal,entry, or sale of diesel fuel or kerosene if allthe following tests are met.

• The person otherwise liable for tax (forexample, the position holder) is a regis-trant.

• In the case of a removal from a terminal,the terminal is an approved terminal.

• The diesel fuel or kerosene satisfies thedyeing requirements (described next).

Dyeing requirements. Diesel fuel orkerosene satisfies the dyeing requirementsonly if it satisfies one of the following re-quirements.

• Contains the dye Solvent Red 164 (andno other dye) at a concentrationspectrally equivalent to at least 3.9pounds of the solid dye standard SolventRed 26 per thousand barrels of fuel.

• Contains any dye of a type and in aconcentration that has been approved bythe Commissioner.

Notice required. A legible and conspicuousnotice stating either: DYED DIESEL FUEL,NONTAXABLE USE ONLY, PENALTY FORTAXABLE USE or DYED KEROSENE,NONTAXABLE USE ONLY, PENALTY FORTAXABLE USE must be:

1) Provided by the terminal operator to anyperson that receives dyed diesel fuel ordyed kerosene at a terminal rack of thatoperator, and

2) Posted by a seller on any retail pump orother delivery facility where it sells dyeddiesel fuel or dyed kerosene for use byits buyer.

The notice under item (1) must be pro-vided by the time of the removal and mustappear on shipping papers, bills of lading, andsimilar documents accompanying the removalof the fuel.

Any seller that fails to post the requirednotice under item (2) is presumed to knowthat the fuel will be used for a taxable use.That seller is subject to the penalty describednext.

Penalty. A penalty is imposed on personswho:

1) Know or have reason to know that theysold or held for sale dyed diesel fuel ordyed kerosene for a taxable use,

2) Know or have reason to know that theyused or held for use dyed diesel fuel ordyed kerosene for a taxable use, or

3) Alter or attempt to alter the strength orcomposition of the dye in any dyed die-sel fuel or dyed kerosene.

The penalty is the greater of $1,000 or $10per gallon of the dyed diesel fuel or dyedkerosene involved. After the first violation, the$1,000 portion of the penalty increases de-pending on the number of violations.

This penalty is in addition to any tax im-posed on the fuel.

If the penalty is imposed, each officer,employee, or agent of a business entity whowillfully participated in any act giving rise tothe penalty is jointly and severally liable withthat entity for the penalty.

Exception to penalty. The penalty underitem (3) will not apply in any of the followingsituations.

• Diesel fuel meeting the dyeing require-ments is blended with any undyed liquidand the resulting product meets the dye-ing requirements.

• Diesel fuel meeting the dyeing require-ments is blended with any other liquid(other than diesel fuel) that contains thetype and amount of dye required to meetthe dyeing requirements.

• The alteration or attempted alteration oc-curs in an exempt area of Alaska.

• Diesel fuel meeting the dyeing require-ments is blended with diesel fuel notmeeting the dyeing requirements and theblending occurs as part of a nontaxableuse (other than export), discussed later.

Alaska. Diesel fuel or kerosene removed,entered, or sold in Alaska for ultimate sale oruse in an exempt area of Alaska does nothave to meet the dyeing requirements to beexempt from the excise tax on diesel fuel orkerosene. The removal or entry of any dieselfuel or kerosene is not taxable if all the fol-lowing requirements are satisfied.

1) The person that would be liable for thetax as discussed under Taxable Events,earlier:

a) Is a registrant,

b) Can show satisfactory evidence ofthe nontaxable nature of the trans-action, and

c) Has no reason to believe the evi-dence is false.


3) The owner of the fuel immediately afterthe removal or entry holds the fuel for itsown use in a nontaxable use or is aqualified dealer.

Subsequent sales of diesel fuel orkerosene by a qualified dealer are subject totax unless all of the following are true.

• The fuel is sold in an exempt area ofAlaska.

• The buyer buys the fuel for its own usein a nontaxable use or is a qualifieddealer.

• The seller can show satisfactory evidenceof the nontaxable nature of the trans-action and has no reason to believe thatevidence is false.

A qualified dealer is any person thatholds a qualified dealer license from the stateof Alaska or has been registered by the dis-trict director as a qualified retailer. Satisfac-tory evidence may include copies of qualifieddealer licenses or exemption certificates ob-tained for state tax purposes.

Back-Up TaxExcise tax is imposed on dyed diesel fuel ordyed kerosene that is delivered into the fuelsupply tank of a diesel-powered highway ve-hicle or diesel-powered train and used forother than a nontaxable purpose.

This “back-up tax” also applies if the de-livery consists of any of the following.

• Any diesel fuel or kerosene on which acredit or refund (for fuel not used for ataxable purpose) has been allowed.

• Any liquid other than gasoline, diesel fuel,or kerosene.

Generally, the back-up tax is imposed ata rate of 24.4 cents a gallon. The rate fordelivery of the fuel into a train is 4.4 cents agallon. The rate for delivery into certain inter-city buses is 7.4 cents a gallon.

If you are liable for the back-up tax, youmay be liable for the penalty discussed underDyed Diesel Fuel and Dyed Kerosene. How-ever, the penalty applies only to dyed dieselfuel and dyed kerosene, while the back-up taxcan apply to other fuels. The penalty mayapply if the fuel is held for sale or use for ataxable use while the back-up tax does notapply until the fuel is delivered into the fuelsupply tank.

Liability for tax. The operator of the vehicleor train into which the fuel is delivered is liablefor the tax. In addition, the seller of the dieselfuel or kerosene is jointly and severally liablefor the tax if the seller knows or has reasonto know that the fuel will be used for a taxableuse. Generally, a seller of diesel fuel orkerosene is not liable for tax on fuel deliveredinto the fuel supply tank of a bus or train.However, the person that delivers the fuel intothe supply tank of a train is liable for the taxif, at the time of delivery, the deliverer and thetrain operator are both registered as trainoperators and a written agreement betweenthem requires the deliverer to pay the tax.

Exemptions from the back-up tax. Theback-up tax does not apply to a delivery ofdiesel fuel or kerosene for uses (1) through(9) listed under Nontaxable Uses, next.

In addition, since the back-up tax is im-posed only on the delivery into the fuel supply

tank of a diesel-powered vehicle or train, thetax does not apply to diesel fuel or keroseneused as heating oil or in stationary engines.

Nontaxable UsesDiesel fuel or kerosene intended for a non-taxable use generally is not subject to theexcise tax if the fuel meets the dyeing re-quirements discussed earlier under DyedDiesel Fuel and Dyed Kerosene.

The following are nontaxable uses of die-sel fuel and kerosene.

1) Use on a farm for farming purposes(discussed later).

2) Exclusive use of a state (defined earlierunder Gasoline).

3) Use in a vehicle owned by an aircraftmuseum (as discussed later under Avi-ation Fuel).

4) Use in a school bus (discussed later).

5) Use in a qualified local bus (discussedlater).

6) Use in a highway vehicle that:

a) Is not registered (and is not re-quired to be registered) for highwayuse under the laws of any state orforeign country, and

b) Is used in the operator's trade orbusiness or for the production ofincome.

7) Exclusive use of a nonprofit educationalorganization.

8) Use in a vehicle owned by the UnitedStates that is not used on a highway.

9) Use in any vessel of war of any foreignnation.

10) Diesel fuel or kerosene that is exported.

11) Use other than as a fuel in a propulsionengine of a diesel-powered highway ve-hicle (such as home heating oil).

12) Use as a fuel in a propulsion engine ofa diesel-powered train (subject toback-up tax, discussed earlier).

13) Use in an intercity bus meeting certainqualifications, discussed later (subject toback-up tax, discussed earlier).

For information about filing a claim for re-fund or credit for the tax paid on undyed die-sel fuel or undyed kerosene used for a non-taxable purpose, see Publication 378.

Used on a farm for farming purposes.Diesel fuel or kerosene is used on a farm forfarming purposes if it is bought by the owner,tenant, or operator of the farm and used forany of the following purposes.

1) To cultivate the soil, or to raise or harvestany agricultural or horticultural commod-ity.

2) To raise, shear, feed, care for, train ormanage livestock, bees, poultry, fur-bearing animals, or wildlife.

3) To operate, manage, conserve, improve,or maintain your farm, tools, or equip-ment.

4) To handle, dry, pack, grade, or store anyraw agricultural or horticultural commod-ity (as provided below).

5) To plant, cultivate, care for, or cut treesor to prepare (other than sawing intolumber, chipping, or other milling) treesfor market, but only if the planting, etc.,is incidental to your farming operations(as provided below).

Diesel fuel or kerosene is used on a farmfor farming purposes if it is bought by a per-son other than the owner, tenant, or operatorand used on a farm for any of the purposesin item (1) or (2).

Item (4) applies only if more than one-halfof the commodity that was so treated duringthe tax year was produced on the farm.Commodity refers to a single raw product. Forexample, apples would be one commodityand peaches another. The more-than-one-half test applies separately to each commod-ity.

Item (5) applies if the operations are minorin nature when compared to the total farmingoperations.

If undyed diesel fuel or undyed keroseneis used on a farm for farming purposes, thefuel cannot be considered as being used forany other nontaxable purpose.

A farm includes livestock, dairy, fish,poultry, fruit, fur-bearing animal, and truckfarms, orchards, plantations, ranches, nurs-eries, ranges, and feedyards for fatteningcattle. It also includes structures such asgreenhouses used primarily for raising agri-cultural or horticultural commodities. A fishfarm is an area where fish are grown orraised—not merely caught or harvested. Thefarm must be operated for profit and locatedin any of the 50 states or the District ofColumbia.

Diesel fuel or kerosene is not used forfarming purposes if it is used in any of thefollowing ways.

• Off the farm, such as on the highway,even if the fuel is used in transportinglivestock, feed, crops, or equipment.

• For personal use, such as mowing thelawn.

• In processing, packaging, freezing, orcanning operations.

• To process crude gum into gum spiritsof turpentine or gum resin or to processmaple sap into maple syrup or maplesugar.

Buses. Generally, diesel fuel or keroseneused in a bus is used for a nontaxable use.However, fuel used in certain buses is subjectto a reduced rate of excise tax.

School bus. No tax is imposed on dyedfuel used in a bus while the bus is engagedin the transportation of students and schoolemployees.

Qualified local bus. No tax is imposedon dyed fuel used in a bus while the bus isengaged in furnishing intracity passengerland transportation for compensation, if thebus meets all the following tests.

• Is available to the general public.

• Operates along scheduled, regularroutes.

• Has a seating capacity of at least 20adults (excluding the driver).

• Is under contract with or receiving morethan a nominal subsidy from any stateor local government to furnish that trans-portation.

Intercity bus. A reduced rate of tax (7.4cents a gallon) is imposed on dyed fuel de-livered into the tank of an intercity bus. (SeeBack-Up Tax, earlier.) This is a bus used tofurnish (for compensation) passenger landtransportation that is available to the generalpublic and:

• The transportation is scheduled andalong regular routes, or

• The seating capacity of the bus is at least20 adults (not including the driver).

A bus is available to the general public if thebus is available for hire to more than a limitednumber of persons, groups, or organizations.

Other buses. The full amount of tax (24.4cents a gallon) is imposed on dyed fuel de-livered into the tank of a bus not previouslydescribed.

Credit or refund. If undyed diesel fuelor undyed kerosene is bought and used in abus for a nontaxable use, a credit or refundof the tax can be claimed by the buyer of thefuel used in the bus. See Publication 378 formore information.

Aviation FuelTax of 21.9 cents per gallon is imposed on thesale of aviation fuel by its producer orimporter. The person making the taxable saleis liable for the tax. The use of aviation fuel(other than a nontaxable use) by a produceris considered a sale of that fuel. This appliesif there was no tax on the sale of the fuel orthe tax had been credited or refunded.




Aviation fuel. This is kerosene and anyother liquid (other than gasoline or diesel fuel)that is suitable for use as fuel in an aircraft.

Producers. Producers include refiners,blenders, and wholesale distributors of avi-ation fuel and dealers selling aviation fuelexclusively to producers of aviation fuel ifthese persons have been registered by theIRS. The term also includes the actual pro-ducer of aviation fuel. See Registration forCertain Activities, earlier.

Any person buying aviation fuel at a re-duced rate is the producer of that fuel.

Wholesale distributors. To qualify as awholesale distributor, you must hold yourselfout to the public as being engaged in thetrade or business of:

1) Selling aviation fuel to producers orretailers or to users who purchase in bulkquantities (25 gallons or more) and ac-cept delivery into bulk storage tanks, andone of the following applies.

a) At least 30% of your sales of avi-ation fuel in a year are to thesebuyers, or

b) At least 50% of the volume of avi-ation fuel is sold to these buyers

and at least 500 of your sales dur-ing a year are made to these buy-ers, or

2) Selling aviation fuel for nontaxable uses(such as use on a farm for farming pur-poses) and sell at least 70% of yourvolume of aviation fuel during the yearto these users.

Bulk storage tanks. A bulk storage tankis a container that holds at least 50 gallonsand is not the fuel supply tank of any enginethat is mounted on, or attached to, an aircraft.

RefundsA registered aviation fuel producer holdingaviation fuel on which tax was paid (and notcredited or refunded), can get a refund of thetax. Generally, this applies when a producerbuys tax-paid fuel from a retailer.

Conditions for allowance of refund. Aclaim for refund of the tax is allowed only ifall the following conditions are met.

1) A tax on the aviation fuel was paid to thegovernment by an importer or producer(the first producer) and the tax has notbeen credited or refunded.

2) After the tax was imposed, the fuel wasacquired by a person that is a registeredaviation fuel producer (the second pro-ducer).

3) The second producer has filed a timelyclaim for refund that contains the infor-mation required (see Refund claim,later).

4) The first producer and any person thatowns the fuel after its sale by the firstproducer and before its purchase by thesecond producer (a subsequent seller)have met the reporting requirements,discussed next.

Reporting requirements. Generally, the firstproducer must file a report (the first produc-er's report). A model first producer's report isshown in Appendix C as Model Certificate H.The report must contain all informationneeded to complete the model.

Providing information. The first pro-ducer must give a copy of the report to theperson to whom the first producer sells theaviation fuel.

Each subsequent seller must give to itsbuyer a statement that provides all the infor-mation necessary to complete the “Statementof Subsequent Seller (Aviation Fuel)” shownin Appendix C as Model Certificate I. Thestatement can be at the bottom or on the backof the copy of the first producer's report (or inan attached document).

If the first producer's report relates to avi-ation fuel that is divided among more thanone buyer, copies of that report should bemade when the fuel is divided and a copygiven to each buyer.

Refund claim. You must make your claim forrefund on Form 8849. Do not include thisclaim with a claim under another tax pro-vision. See the form instructions for how andwhere to file the claim. You must include allthe following information.

• Volume and type of aviation fuel.

• Date on which you acquired the aviationfuel to which the claim relates.

• Amount of tax the first producer paid tothe government on the fuel and a state-ment that you have not included this taxin the sales price of the fuel and have notcollected it from any person who boughtthe fuel from you.

• Name, address, and employer identifica-tion number of the first person that paidthe tax to the government.

• A copy of the first producer's report (dis-cussed earlier).

• A copy of the statement of subsequentseller if the fuel was bought from otherthan the first taxpayer.

Aviation Fuel ExemptionsRegistered producers may sell aviation fueltax free or at a tax-reduced rate for purposesdescribed below, but only if certain pre-scribed conditions are met. No seller of avi-ation fuel is eligible to claim a credit or refundfor aviation fuel used by the buyer for thesepurposes.

Sales to other producers. Registered pro-ducers may sell aviation fuel tax free to otherregistered producers of aviation fuel. Thebuyer must give the seller a written statementcontaining the buyer's registration number.

Sales for nontaxable uses. A registeredproducer may sell aviation fuel tax free for anyof the following uses.

• In military aircraft owned by the UnitedStates or a foreign country.

• In a domestic air carrier engaged in for-eign trade or trade between the UnitedStates and any of its possessions.

• In a foreign air carrier engaged in foreigntrade or trade between the United Statesand any of its possessions, but only if thecountry in which the foreign carrier isregistered allows U.S. carriers reciprocalprivileges. See Revenue Rulings 74–346,1974–2 C.B. 361; 75–526, 1975–2 C.B.435; 75–398, 1975–2 C.B. 434; and75–109, 1975–1 C.B. 348, for a list ofthese countries.

In addition, registered producers may sellaviation fuel tax free for certain uses in anaircraft. These include the following uses.

• Use on a farm for farming purposes, asdiscussed earlier under Diesel Fuel.

• Use by certain aircraft museums, dis-cussed next.

• Use by certain helicopters, discussedlater.

• Use for emergency medical transporta-tion, discussed later.

• Use by a state, as discussed earlier un-der Gasoline.

• Exclusive use by the United Nations.

A buyer for these uses gives its suppliera signed exemption certificate stating thebuyer's name, address, taxpayer identificationnumber, registration number (if applicable),and intended use. A buyer may give a sepa-rate exemption certificate for each purchaseor may give one certificate to cover all pur-chases from a particular seller for up to 1year.

Aircraft museums. Aviation fuel may besold tax free for use in an aircraft that isowned by an aircraft museum and used ex-clusively for purposes in item (3) of the fol-lowing definition.

An aircraft museum is an organization withall the following characteristics.

1) Exempt from income tax as an organ-ization described in section 501(c)(3) ofthe Internal Revenue Code.

2) Operated as a museum under a state (orDistrict of Columbia) charter.

3) Operated exclusively for acquiring, ex-hibiting, and caring for aircraft of the typeused for combat or transport in WorldWar II.

Helicopter uses. Aviation fuel may be soldtax free for use in a helicopter that does nottake off from, or land at, a facility eligible forassistance under the Airport and Airway De-velopment Act of 1970, or otherwise use ser-vices provided pursuant to section 44509 or44913(b) or subchapter I of chapter 471 oftitle 49, United States Code, during the useand is used for one of the following purposes.

• Transporting individuals, equipment, orsupplies in the exploration for, or the de-velopment or removal of, hard minerals,oil, or gas.

• Planting, cultivating, cutting, transporting,or caring for trees (including logging op-erations).

For helicopters used in exploration for, ordevelopment or removal of, hard minerals, oil,or gas, each flight segment is treated as aseparate flight.

Emergency medical transportation. Avi-ation fuel may be sold tax free for use in ahelicopter or a fixed-wing aircraft that is pro-viding emergency medical transportation. Theexemption applies to fixed-wing aircraftequipped for and exclusively dedicated onthat flight to acute care emergency medicalservices.

Sales to commercial airlines. Registeredproducers may sell aviation fuel at the tax-reduced rate of 4.4 cents a gallon to a regis-tered commercial aircraft operator for use asa fuel in commercial aviation.

Commercial aviation is any use of an air-craft in the business of transporting personsor property by air for pay. However, com-mercial aviation does not include any of thefollowing uses.

• Any use of an aircraft that has a maxi-mum certificated takeoff weight of 6,000pounds or less, unless the aircraft is op-erated on an established line.

• Any use exclusively for the purpose ofskydiving.

• Any use of an aircraft owned or leasedby a member of an affiliated group andunavailable for hire by nonmembers.(Whether an aircraft is available for hireto nonmembers is determined on aflight-by-flight basis.)

To buy at a tax-reduced rate, the airline givesthe seller a written exemption certificatestating the buyer's name, address, taxpayeridentification number, registration number,and intended use of the fuel. An airline may

give a separate exemption certificate for eachpurchase or may give one certificate to coverall purchases from a particular seller for up to1 year.

Special Motor FuelsTax is imposed on special motor fuel if it issold to an owner, lessee, or other operator foruse as a fuel in the propulsion engine of amotor vehicle or motorboat, or is acquired inany manner other than through a taxable saleand used as fuel for a motor vehicle ormotorboat.

Special motor fuels include any liquidother than gasoline, diesel fuel, kerosene,gas oil, and fuel oil. The tax rates for thesefuels are shown in the Form 720 instructions.

Motor vehicle. For this purpose, motor ve-hicles include all types of vehicles, whetheror not registered (or required to be registered)for highway use, that have both the followingcharacteristics.

• Propelled by a motor.

• Designed for carrying or towing loadsfrom one place to another, regardless ofthe type of material or load carried ortowed.

Motor vehicles do not include any vehicle thatmoves exclusively on rails, or any of the fol-lowing items.

Special motor fuel/alcohol mixture. Tax isimposed on the sale or use of a blend of al-cohol with special motor fuels. The blendmust be at least 10% alcohol that is 190 proofor more. Figure the proof of any alcoholwithout regard to any added denaturants.

The alcohol includes methanol or ethanol.But it does not include alcohol produced frompetroleum, natural gas, or coal (includingpeat), or from a derivative of any of theseproducts. Methanol produced from methanegas formed in waste disposal sites is not “al-cohol produced from natural gas.”

Later separation. Treat the separationof special motor fuel from an alcohol mixtureon which tax has been paid at a reduced rateas a sale of special motor fuel. The tax on thesale is imposed on the person who makes theseparation. Reduce the tax on special motorfuel by the tax already paid on the alcoholmixture.

Qualified methanol and ethanol fuels.These consist of at least 85% methanol,ethanol, or other alcohol produced from asubstance other than petroleum or naturalgas.

Partially exempt methanol and ethanolfuels. These consist of at least 85%methanol, ethanol, or other alcohol producedfrom natural gas.

Special Motor Fuel ExemptionsSpecial motor fuels are exempt from the taxif sold for use or used in any of the followingways.

• In an off-highway business use (dis-cussed later).

Farm tractors Trench diggersPower shovels BulldozersRoad graders Road rollersSimilar equipment that does

not carry or tow a load

• In a vessel used in commercial fishing.

• On a farm for farming purposes, as dis-cussed earlier under Diesel Fuel.

• By a state for its exclusive use, as men-tioned earlier under Gasoline.

• By nonprofit educational organizations fortheir exclusive use, as discussed earlierunder Communications Tax.

• By the United Nations for its official use.

• By aircraft museums as discussed earlierunder Aviation Fuel.

Off-highway use. This is use in a highwayvehicle that is not registered (or required tobe registered) for highway use under the lawsof any state or foreign country and is used inthe operator's trade or business or for theproduction of income. It also includes use ina vehicle owned by the United States that isnot used on a highway.

Compressed Natural GasTax is imposed on the delivery of compressednatural gas (CNG) into the fuel supply tankof the propulsion engine of a motor vehicleor motorboat unless tax was imposed underthe bulk sales rule discussed next. If the de-livery is in connection with a sale, the selleris liable for the tax. If not in connection witha sale, the operator of the boat or vehicle isliable for the tax.

Bulk sales. Tax is imposed on the sale ofCNG that is not in connection with deliveryinto the fuel supply tank of the propulsionengine of a motor vehicle or motorboat if, bythe time of sale, the seller has done both thefollowing.

• Received the buyer's written statementthat the entire quantity of the CNG is foruse as a fuel in a motor vehicle ormotorboat.

• Given the buyer written acknowledgmentof receipt of the statement.

The seller of the CNG is liable for the tax.

Tax rate. The rate is 48.54 cents per thou-sand cubic feet (determined at standard tem-perature and pressure).

Motor vehicle. For this purpose, motor ve-hicle has the same meaning as given underSpecial Motor Fuels, earlier.

CNG ExemptionsCNG is exempt from the tax if delivered orsold for the for any of the following uses.

• In an off-highway business use, as dis-cussed earlier under Special Motor Fuels.

• In a vessel used in commercial fishing.

• In a school bus or qualified local bus, asdiscussed earlier under Diesel Fuel.

• On a farm for farming purposes, as dis-cussed earlier under Diesel Fuel.

• By a state for its exclusive use, as men-tioned earlier under Gasoline.

• By nonprofit educational organizations fortheir exclusive use, as discussed earlierunder Communications Tax.

• By the United Nations for its official use.

• By aircraft museums, as discussed earlierunder Aviation Fuel.

• Use in any boat operated by the UnitedStates for its exclusive use or any vesselof war of any foreign nation.

The exemption applies to the sale of CNGonly if, by the time of sale, the seller meetsboth the following conditions.

• Has an unexpired certificate from thebuyer.


Certificate. The certificate from the buyercertifies that the CNG will be used in a non-taxable use. The certificate may be includedas part of any business records normally usedfor a sale. A model certificate is shown inAppendix C as Model Certificate F. Your cer-tificate must contain all information necessaryto complete the model.


• The date 1 year after the effective date(which may be no earlier than the datesigned) of the certificate.


• The date that the seller is notified that thebuyer's right to provide a certificate hasbeen withdrawn.

Fuels Used onInland WaterwaysTax of 24.4 cents a gallon is imposed on anyliquid fuel used in the propulsion system ofcommercial transportation vessels while trav-eling on certain inland and intracoastalwaterways. The tax generally applies to alltypes of vessels, including ships, barges, andtugboats.

The person who operates the vessel inwhich the fuel is consumed is the user andmust file returns and pay the tax. The tax ispaid with the Form 720. No tax deposits arerequired.

Inland and intracoastal waterways. Inlandand intracoastal waterways on which fuelconsumption is subject to tax are listed insection 206 of the Inland Waterways RevenueAct of 1978, as amended.

Commercial waterway transportation.Commercial waterway transportation is theuse of a vessel on inland or intracoastalwaterways for either of the following pur-poses.

• In the business of transporting propertyfor compensation or hire.

• To transport property in the business ofthe owner, lessee, or operator of thevessel, whether or not a fee is charged.

The operation of all vessels (except cer-tain fishing vessels) meeting either of theserequirements is commercial waterway trans-portation regardless of whether the vessel isactually transporting property on a particularvoyage. The tax is imposed on vessels whileengaged in any of the following activities.

• Moving without cargo.

• Awaiting passage through locks.

• Moving to or from a repair facility.

• Dislodging vessels grounded on a sandbar.

• Fleeting barges into a single tow.

• Maneuvering around loading and un-loading docks.

Fishing vessels exception. The taxdoes not apply to fuel used by a fishing vesselwhile traveling to a fishing site, while engagedin fishing, or while returning from the fishingsite with its catch. A vessel is not transportingproperty in the business of the owner, lessee,or operator by merely transporting fish orother aquatic animal life caught on the voy-age.

However, the tax does apply to fuel usedby a commercial vessel along the specifiedwaterways while traveling to pick up aquaticanimal life caught by another vessel and whiletransporting the catch of that other vessel.

Liquid fuel. Liquid fuel includes diesel fuel,bunker C residual fuel oil, special motor fuel,or gasoline. The tax is imposed on liquid fuelactually consumed by a vessel's propulsionengine and not on the unconsumed fuel putinto a vessel's tank.

Dual use of liquid fuels. The tax applies toall taxable liquid used as a fuel in the propul-sion of the vessel, regardless of whether theengine (or other propulsion system) is usedfor another purpose. The tax applies to allliquid fuel consumed by the propulsion engineeven if it operates special equipment bymeans of a power take-off or power transfer.For example, the fuel used in the engine bothto operate an alternator, generator, or pumps,and to propel the vessel is taxable.

The tax does not apply to fuel consumedin engines that are not used to propel thevessel.

If you draw liquid fuel from the same tankto operate both a propulsion engine and anonpropulsion engine, figure the fuel used inthe nonpropulsion engine. IRS will accept areasonable estimate of the fuel based on youroperating experience, but you must keeprecords to support your allocation.

Voyages crossing boundaries of the taxa-ble waterways. The tax applies to fuel con-sumed by a vessel crossing the boundariesof the specified waterways only to the extentof fuel consumed for propulsion within thosewaterways. Generally, the operator may fig-ure the amount of fuel so used during a par-ticular voyage by multiplying total fuel con-sumed in the propulsion engine by a fraction.The numerator of the fraction is the time spentoperating on the specified waterways, and thedenominator is the total time spent on thevoyage. This calculation may not be usedwhere it is found to be unreasonable.

Exceptions. Certain types of commercialwaterway transportation are excluded fromthe tax.

Deep-draft ocean-going vessels. Fuelis not taxable when used by a vessel de-signed primarily for use on the high seas if ithas a draft of more than 12 feet on the voy-age. For each voyage, figure the draft whenthe vessel has its greatest load of cargo andfuel. A voyage is a round trip. If a vessel hasa draft of more than 12 feet on at least oneway of the voyage, the vessel satisfies the

12-foot draft requirement for the entire voy-age.

Passenger vessels. Fuel is not taxablewhen used by vessels primarily for the trans-portation of persons. The tax does not applyto fuel used in commercial passenger vesselswhile transporting property in addition totransporting passengers. Nor does it apply toferryboats carrying passengers and their cars.

Ocean-going barges. Fuel is not taxablewhen used in tugs to move LASH andSEABEE ocean-going barges released byocean-going carriers solely to pick up or de-liver international cargoes.

However, it is taxable when any of thefollowing conditions applies.

• One or more of the barges in the tow isnot a LASH barge, SEABEE barge, orother ocean-going barge carried aboardan ocean-going vessel.

• One or more of the barges is not on aninternational voyage.

• Part of the cargo carried is not beingtransported internationally.

State or local governments. No tax isimposed on the fuel used in a vessel operatedby a state or local government in transportingproperty on official business. The ultimate useof the cargo must be for a function ordinarilycarried out by governmental units. An Indiantribal government is treated as a state only ifthe fuel is used in the exercise of an essentialtribal government function.

RECORDS

All operators of vessels used in com-mercial waterway transportation whoacquire liquid fuel must keep ade-

quate records of all fuel used for taxablepurposes. Operators who are seeking an ex-clusion from the tax must keep records thatwill support any exclusion claimed.

Your records should include all of the fol-lowing information.

• The date and quantity of fuel deliveredinto storage tanks or the tanks on yourvessel.

• The identification number and name ofeach vessel using the fuel.

• The departure time, departure point,route traveled, destination, and arrivaltime for each vessel.

If you claim an exemption from the tax,include in your records the following addi-tional information as it pertains to you.

• The draft of the vessel on each voyage.

• The type of vessel in which you used thefuel.

• The type of cargo that you transport.

• The final use of the cargo (for vesselsoperated by state or local governments).

Alcohol Sold As FuelBut Not Used As FuelAlcohol (either mixed or straight) designatedfor use as fuel may be eligible for a credit.Use Form 6478, Credit for Alcohol Used asFuel, to figure the credit. If you claimed thecredit for alcohol used as fuel, you are liablefor an excise tax if you do any of the following.

• Use the mixture or straight alcohol otherthan as a fuel.

• Separate the alcohol from a mixture.

• Mix the straight alcohol.

Report the tax on Form 720. The rate oftax depends on the rate at which the creditwas allowed. No tax deposits are required.

For more information about this credit, seeAlcohol Fuels Credit in Publication 378.

Manufacturers TaxesIf you are a manufacturer, producer, orimporter, and you sell, lease, or use an articlesubject to a manufacturers excise tax, you areliable for the tax unless an exemption applies.

Registration. Certain transactions maybe made tax free, but only if the manufacturer,first purchaser, and second purchaser areregistered. See the Form 637 instructions formore information.

Note. The discussion from this point to TaxLiability, later, does not apply to the man-ufacturers tax on the following items.

• Coal when the tax is based on weight.

• Tires.

• Gas guzzlers.

• Vaccines.

Lease considered sale. The lease of anarticle (including any renewal or extension ofthe lease) by the manufacturer, producer, orimporter is generally considered a taxablesale.

Determination of sales price. The “price”for which an article is sold includes the totalconsideration paid for the article, whether thatconsideration is in the form of money, ser-vices, or other things. However, you includecertain charges made when a taxable articleis sold while you exclude others. To figure theprice on which you base the tax, use the fol-lowing rules.

1) Include both the following charges in theprice.

a) Any charge for coverings or con-tainers (regardless of their nature).

b) Any charge incident to placing thearticle in a condition packed readyfor shipment.

2) Exclude all the following charges fromthe price.

a) The manufacturers excise tax,whether or not it is stated as aseparate charge.

b) The cost of transportation. (Thecost of transportation of goods to awarehouse before their bona fidesale is not excludable.)

c) Delivery, insurance, installation, re-tail dealer preparation costs, andother charges that you incur inplacing the article in the hands ofthe purchaser under a bona fidesale.

d) Discounts, rebates, and similar al-lowances actually granted to thepurchaser.

e) Local advertising charges. A chargemade separately when the article is

sold and that qualifies as a chargefor “local advertising” may, withincertain limits, be excluded from thesale price.

f) Charges for warranty paid at thepurchaser's option. However, acharge for a warranty of an articlethat the manufacturer, producer, orimporter requires the purchaser topay to obtain the article is includedin the sale price on which the tax isfigured.

g) Bonus goods. Allocate the salesprice if you give free nontaxablegoods with the purchase of taxablemerchandise. Impose the tax onlyon the sale price attributable to thetaxable articles.

Example. A manufacturer sells a quantityof taxable articles and gives the purchasercertain nontaxable articles as a bonus. Thesale price of the shipment is $1,500. Thenormal sale price is $2,000: $1,500 for thetaxable articles and $500 for the nontaxablearticles. Since the taxable items represent75% of the normal sale price, the tax is basedon 75% of the actual sale price, or $1,125(75% of $1,500). The remaining $375 is allo-cated to the nontaxable articles.

Tax LiabilityThe following discussions apply to all man-ufacturers taxes in this section unless other-wise stated.

Tax attaches when the title to the articlesold passes from the manufacturer to thebuyer. When the title passes depends on theintention of the parties as gathered from thecontract of sale. In the absence of expressedintention, the legal rules of presumption fol-lowed in the jurisdiction where the sale occursdetermine when title passes.

Partial payments. The tax applies toeach partial payment received when taxablearticles are:

• Leased,

• Sold conditionally,

• Sold on installment with chattel mortgage,or

• Sold on installment with title to pass in thefuture.

To figure the tax, multiply the partial paymentby the tax rate in effect at the time of thepayment.

Uncollectible accounts. You cannottake a credit or claim a refund for the tax youhave paid on articles sold on open accountsthat become uncollectible.

ExemptionsAll the following sales are exempt from themanufacturers tax.

• Of certain supplies for vessels and air-craft.

• Of articles of native Indian handicraftmanufactured or produced by Indians.

• For further manufacture of other taxablearticles.

• For export or for resale to someone whointends to export.

Indian products. The tax does not apply tonative Indian products, such as bows and ar-rows (or their parts and accessories), manu-factured by Indians on reservations, in Indianschools, or under U.S. jurisdiction in Alaska.

Further manufacturing. If you buy articlestax free and resell or use them other than inthe manufacture of another article, you areliable for the tax on their resale or use justas if you had manufactured and sold them.

Export returned to United States. If an ar-ticle is sold tax free for export and subse-quently is returned to the United States in anunused and undamaged condition, theimporter must pay the tax on any later saleor use of the article in the United States.

Other exemptions. Also exempt are salesto any of the following buyers.

• State and local governments for their ex-clusive use.

• Indian tribal governments, but only ifsales involve the exercise of an essentialtribal government function.

• American National Red Cross for its ex-clusive use.

• Nonprofit educational organizations fortheir exclusive use.

• The United Nations for its exclusive use.

The exemptions listed above do not applyto all the manufacturers tax in every situation.For example, the American Red Cross is notexempt from the tax on the purchase of eitherof the following items.

• Automobiles that do not meet certain fueleconomy standards (see Gas GuzzlerTax, later).

• Coal.

Credits and refunds. You may obtain acredit or refund of the manufacturers taxespaid on the sale of an article if the article isresold for certain uses or used for an exemptpurpose.

The manufacturer may be eligible to file aclaim for any of the following users.

• Nonprofit educational organizations.

• State and local governments.

• Indian tribal governments.

• United Nations.

• Vessels and aircraft as supplies.

The tax will be refunded to the person whofiled and paid the tax.

The manufacturer must get a writtenstatement from the purchasing organizationstating all the following.

• The type of article, both as to nature andquantity.

• The address of the organization.

• The name and address of the personfrom whom the article was purchased.

• The exempt use made, or to be made,of the article.

• That the organization will notify the man-ufacturer if the article is not used for anexempt purpose.

If the article passed through a chain ofsales to the organization, the person whomade the final sale to the organization mayprovide the manufacturer a certificate that theseller has the statement described above.

In addition, the manufacturer must submitwith its claim a statement that the manufac-turer has done one of the following.

• Has not collected the tax from the dealerinvolved.

• Has repaid the tax to the dealer involvedin return for the dealer's written consentto the allowance of any possible creditor refund involved.

If a taxable article is bought from a dealerby an organization listed above at a reducedprice (the reduction equal to the tax) and thedealer bought the article from the manufac-turer tax paid, the dealer should give themanufacturer the required statement obtainedfrom the organization. Then, the manufacturermay file a claim for a credit or refund.

Sport Fishing EquipmentA tax of 10% of the sale price is imposed onmany articles of sport fishing equipment soldby the manufacturer, producer, or importer.This includes any parts or accessories soldon or in connection with, or with the sale of,those articles.

Pay the tax with your return. No tax de-posits are required.

Sport fishing equipment includes all thefollowing items.

1) Fishing rods and poles (and componentparts), fishing reels, fly fishing lines, andother fishing lines not over 130 poundstest, fishing spears, spear guns, andspear tips.

2) Items of terminal tackle, including lead-ers, artificial lures, artificial baits, artificialflies, fishing hooks, bobbers, sinkers,snaps, drayles, and swivels (but not in-cluding natural bait or any item of termi-nal tackle designed for use and ordinarilyused on fishing lines not described in (1)above).

3) The following items of fishing suppliesand accessories: fish stringers, creels,tackle boxes, bags, baskets, and othercontainers designed to hold fish, port-able bait containers, fishing vests, land-ing nets, gaff hooks, fishing hookdisgorgers, and dressing for fishing linesand artificial flies.

4) Fishing tip-ups and tilts.

5) Fishing rod belts, fishing rodholders,fishing harnesses, fish fighting chairs,fishing outriggers, and fishingdownriggers.

See Revenue Ruling 88–52, 1988–1 C.B.356, for a more complete description of theitems of taxable equipment.

Electric outboard boat motors and sonardevices. A tax of 3% of the sale price isimposed on electric outboard motors and so-nar devices suitable for finding fish, sold bythe manufacturer, producer, or importer. Thisincludes any parts or accessories sold on orin connection with, or with the sale of, thosearticles. The tax on any sonar device, how-ever, cannot exceed $30. A sonar devicesuitable for finding fish does not include any

device that is a graph recorder, a digital type,a meter readout, a combination graph re-corder, or a combination meter readout.

Certain equipment resale. The tax on thesale of sport fishing equipment is imposed asecond time under the following circum-stances. If the manufacturer (including a pro-ducer or importer) sells a taxable article toany person, the manufacturer is liable for thetax. If the purchaser or any other person thensells it to a person who is related (discussedlater) to the manufacturer, that related personis liable for a second tax. The second tax,however, is not imposed if the constructivesale price rules under section 4216(b) of theInternal Revenue Code apply to the sale bythe manufacturer, producer, or importer.

If the second tax is imposed, a credit fortax previously paid by the manufacturer, pro-ducer, or importer is available provided therelated person can document the amount oftax paid. The documentation requirement isgenerally satisfied only through submissionof copies of actual records of the person thatpreviously paid the tax.

Related person. For the tax on sportfishing equipment, a person is a related per-son of the manufacturer, producer, orimporter if that person and the manufacturer,producer, or importer have the relationshipdescribed in Internal Revenue Code section465(b)(3)(C).

BowsA tax of 11% of the sale price is imposed onthe sale by the manufacturer, producer, orimporter of any bow having a draw weight of10 pounds or more. The tax also is imposedon the sale of any part or accessory suitablefor inclusion in or attachment to a taxable bowand any quiver suitable for use with arrowsdescribed next. For a list of taxable and non-taxable articles, see Revenue Ruling 98–5,1998–2 Internal Revenue Bulletin.

Pay this tax with your return. No tax de-posit is required.

ArrowsA tax of 12.4% of the sale price is imposedon the sale by the manufacturer, producer,or importer of any shaft, point, nock, or vaneof a type used in the manufacture of any ar-row that after its assembly meets either of thefollowing conditions.

• Measures 18 inches or more in overalllength.

• Measures less than 18 inches in overalllength but is suitable for use with a taxa-ble bow discussed earlier.

Pay this tax with your return. No tax de-posit is required.

CoalProducers of coal from mines in the UnitedStates are liable for the tax on the first saleor use of the coal. The producer is the per-son who has vested ownership of the coalunder state law immediately after the coal issevered from the ground. Determine vestedownership without regard to the existence ofany contractual arrangement for the sale orother disposition of the coal or the paymentof any royalties between the producer andthird parties. A producer includes any personwho extracts coal from the coal waste refuse

piles (or from the silt waste product) that re-sults from the wet washing of coal.

The tax is not imposed on coal extractedfrom a riverbed by dredging if it can be shownthat the coal has been taxed previously.

Tax rates. The tax on underground-minedcoal is the lower of:

• $1.10 a ton, or

• 4.4% of the sale price.

The tax on surface-mined coal is the lowerof:

• 55 cents a ton, or

• 4.4% of the sale price.

Coal will be taxed at the 4.4% rate if theselling price is less than $25 a ton for under-ground coal and less than $12.50 a ton forsurface coal. Apply the tax proportionately ifa sale or use includes a portion of a ton.

Example. If you sell 21,000 pounds (10.5tons) of coal from an underground mine for$525, the tax is the lower of 4.4% of $525($23.10) or $1.10 times 10.5 tons ($11.55).In this case, the tax is $11.55.

Coal production. Coal is produced fromsurface mines if all geological matter (trees,earth, rock) above the coal is removed beforethe coal is mined. Treat coal removed byauger and coal reclaimed from coal refusepiles as produced from a surface mine.

Treat coal as produced from an under-ground mine when the coal is not producedfrom a surface mine. In some cases, a singlemine may yield coal from both surface miningand underground mining. Determine if thecoal is from a surface mine or an undergroundmine for each ton of coal produced and noton a mine-by-mine basis.

Determining the selling price. The pro-ducer pays the tax on coal at the time of saleor use. In figuring the selling price for applyingthe tax, the point of sale is f.o.b. (free onboard) mine or f.o.b. cleaning plant if youclean the coal before selling it. This applieseven if you sell the coal for a delivered price.Thus, f.o.b. mine or f.o.b. cleaning plant is thepoint at which you figure the number of tonssold for applying the applicable tonnage rate,and the point at which you figure the saleprice for applying the 4.4% rate.

The tax applies to the full amount of coalsold. However, the IRS allows a calculatedreduction of the taxable weight of the coal forthe weight of the moisture in excess of thecoal's inherent moisture content. Include anyadditional charge for a freeze-conditioningadditive in figuring the tax.

Coal used by the producer. This meansthat you used the coal in other than a miningprocess. A mining process means the samefor this purpose as for percentage depletion.For example, the tax does not apply if youbreak the coal, clean it, size it, or apply anyother process considered mining under therules for depletion before selling the coal. Inthis case, the tax applies only when you sellthe coal. But the tax does apply when you usethe coal as fuel or as an ingredient in makingcoke. The tax does not apply to coal used asfuel in the coal drying process.

You must use a constructive sale price tofigure the tax under the 4.4% rate if you use

the coal in other than a mining process. Baseyour constructive sale price on sales of a likekind and grade of coal by you or other pro-ducers made f.o.b. mine or cleaning plant.Normally, you use the same constructiveprice used to figure your percentage depletiondeduction.

Blending. If you blend surface-mined coalwith underground-mined coal during thecleaning process, you must figure the excisetax on the sale of the blended, cleaned coal.But figure the tax separately for each type ofcoal in the blend. Base the tax on the amountof each type in the blend if you can determinethe proportion of each type of coal containedin the final blend. Base the tax on the ratioof each type originally put into the cleaningprocess if you cannot determine the propor-tion of each type of coal in the blend. How-ever, the tax is limited to 4.4% of the saleprice per ton of the blended coal.

Exemption from tax. The tax does not applyto sales of lignite coal and imported coal.There are no exemptions from the tax on thesales of taxable coal.

TiresTax is imposed on the sale or use by themanufacturer, producer, or importer of tiresof the type used on highway vehicles andmade all or in part of rubber.

The tax is based on the weight of eachtire. The tax rate is shown in the Form 720instructions.

Determination of weight. Do not includemetal rims or rim bases in figuring the totalweight of a tire. But include wire staples,darts, clips, and other material or fasteningdevices that form a part of the tire or are re-quired for its use in the total weight of the tire.

Consider studs as part of a tire, and in-clude them in the total weight. The totalweight of a tubeless tire includes the weightof the air valve and stem or any other mech-anism that functions as a part of the tire andis used in connection with inflating the tire ormaintaining its air pressure.

When you sell tires with metal rims or rimbases attached, you must keep records es-tablishing what portion of the total weight ofthe finished product represents the tire with-out the metal rim or rim base.

Alternative method of determiningweight. If you have received permission fromthe IRS, you may determine total weight oftires that you manufactured and sold usingthe average weight for each type, size, grade,and classification.

See Revenue Procedure 92–82 for sev-eral alternative methods that you may use todetermine tire weight.

Manufacturer's retail stores. The excise taxon tires is imposed at the time the tires aredelivered to the manufacturer-owned orimporter-owned retail stores, not at the timeof sale.

Articles not subject to tax. The tax doesnot apply to the following items.

• Tires of extruded tiring with an internalwire fastening agent.

• Tires manufactured from a thermoplasticsubstance known commercially aspolyethylene.

• Recapped or retreaded tires if the tireshave been sold previously in the UnitedStates and were taxable tires at the timeof sale.

• Tire carcasses not suitable for commer-cial use.

• Tires used on qualifying intercity, local,or school buses.

A qualifying intercity or local bus. Thisis any bus used mainly (more than 50%) totransport the general public for a fee and thateither operates on a schedule along regularroutes or seats at least 20 adults (excludingthe driver). A qualifying school bus is any busused mainly (85% or more) to transport stu-dents and employees of schools.

Gas Guzzler TaxTax is imposed on the sale by the manufac-turer or importer of automobiles of a modeltype that has a fuel economy standard asmeasured by the Environmental ProtectionAgency (EPA) of less than 22.5 miles pergallon. If you import an automobile for per-sonal use, you may have to pay this tax.Figure the tax on Form 6197, Gas GuzzlerTax, as discussed later.

Sale. Sale includes the manufacturer's useof an automobile or the first lease of an au-tomobile. For rules on paying the tax in thecase of a first lease, see IRC section4217(e)(2).

Manufacturer. Manufacturer includes a pro-ducer or importer. The tax applies to auto-mobiles imported for business or personaluse. Consider the lengthening of an existingautomobile (for example, to make a stretchlimousine) to be the manufacture of an auto-mobile.

Automobiles. An automobile is any four-wheeled vehicle that is:

• Rated at an unloaded gross vehicleweight of 6,000 pounds or less,

• Propelled by an engine powered by gas-oline or diesel fuel, and

• Intended for use mainly on public streets,roads, and highways.

Limousines. The tax applies to limou-sines (including stretch limousines) regard-less of their weight.

Vehicles not subject to tax. For the gasguzzler tax, the following vehicles are notconsidered automobiles.

1) Vehicles operated exclusively on a railor rails.

2) Vehicles sold for use and used primarily:

a) As ambulances or combinationambulance-hearses,

b) For police or other law enforcementpurposes by federal, state, or localgovernments, or

c) For firefighting purposes.

3) Vehicles defined in 49 CFR 523.5 (1978)as non-passenger automobiles.

You can sell a vehicle described in item(2) tax free only when you make the sale di-rectly to a purchaser for the described emer-gency use. However, if the purchaser paysthe tax on a vehicle that is used or resold for

an emergency use described, you can eitherfile a claim for the refund of the tax paid onthe sale on Form 8849 or take a credit onForm 720. You must support the claim byevidence of the intended use. You must es-tablish that you repaid the tax to the pur-chaser.

Treat an Indian tribal government as astate only if the police or other law enforce-ment purposes are an essential tribal gov-ernment function.

Model type. Model type is a particular classof automobile as determined by EPA regu-lations.

Fuel economy. Fuel economy is the averagenumber of miles that the automobile travelson a gallon of gasoline (or diesel fuel)rounded to the nearest 0.1 mile as figured bythe EPA.

Imported automobiles. The tax applies toautomobiles that do not have a prototype-based fuel economy rating assigned by theEPA. An automobile that is imported into theUnited States without a certificate of con-formity to United States emission standardsand which has no assigned fuel economyrating must be either:

• Converted by installation of emissioncontrols to conform in all material re-spects to an automobile that is alreadycertified for sale in the United States, or

• Modified by installation of emission con-trol components and individually testedto demonstrate emission compliance.

An imported automobile that has beenconverted to conform to an automobile al-ready certified for sale in the United Statesmay use the fuel economy rating assigned tothe conformed automobile.

A fuel economy rating is not generallyavailable for those imported automobiles thathave been modified because the EPA doesnot require a highway fuel economy test onthem. A separate highway fuel economy testwould be required to devise a fuel economyrating (otherwise the automobile is presumedto fall within the lowest fuel economy rating).

For more information about imported au-tomobiles, see Revenue Ruling 86–20,1986–1 C.B. 319, Revenue Procedure 86–9,1986–1 C.B. 530, and Revenue Procedure87–10, 1987–1 C.B. 545.

Exemptions. No one is exempt from the gasguzzler tax, including the federal government,state and local governments, and nonprofiteducational organizations. However, see Ve-hicles not subject to tax, earlier.

Form 6197. Use Form 6197 to figure your taxliability for each quarter. Attach Form 6197to your Form 720 for the quarter. See the in-structions for Form 6197 for more informationabout filing and the requirements for filing ifyou import an automobile for personal use.

VaccinesTax is imposed on certain vaccines sold in theUnited States. A vaccine is taxable if it meetsany of the following conditions.

• Contains diphtheria toxoid.

• Contains tetanus toxoid.

• Contains pertussis bacteria, extracted orpartial cell bacteria, or specific pertussisantigens.

• Contains polio virus.

• Is against measles.

• Is against mumps.

• Is against rubella.

• Is against hepatitis B.

• Is against chicken pox.

• Is against rotavirus gastroenteritis.

• Is any HIB vaccine.

You are liable for the tax if you are themanufacturer, producer, or importer of thevaccine. The tax is 75 cents per dose of eachtaxable vaccine. The tax on a vaccine thatcontains more than one taxable vaccine is 75cents times the number of doses of eachtaxable vaccines.

Exemptions. The tax does not apply if thesale is:

• To the first or second purchaser for fur-ther manufacture, or

• For export, other than to a U.S. pos-session.

Credit or refund. A credit or refund is avail-able if the vaccine is:

• Returned to the person who paid the tax(other than for resale), or

• Destroyed.

Tax on Heavy Trucks,Trailers, and TractorsA tax of 12% of the sales price is imposedon the first retail sale of the following articles,including related parts and accessories soldon or in connection with, or with the sale of,the articles.

• Truck chassis and bodies.

• Truck trailer and semitrailer chassis andbodies.

• Tractors of the kind chiefly used forhighway transportation in combinationwith a trailer or semitrailer.

A sale of a truck, truck trailer, or semitraileris considered a sale of a chassis and a body.

Tire credit. A credit is allowed against thistax if tires are sold on or in connection withthe sale of the article. The credit is equal tothe manufacturers excise tax imposed on thetires (discussed earlier).

Chassis or body. A chassis or body is tax-able only if you sell it for use as a componentpart of a highway vehicle that is a truck, trucktrailer or semitrailer, or a tractor of the kindchiefly used for highway transportation incombination with a trailer or semitrailer.

A highway vehicle is one designed to carrya load over highways, whether or not it is alsodesigned to perform other functions.

Gross vehicle weight. The tax does notapply to truck chassis and bodies suitable foruse with a vehicle that has a gross vehicle

weight of 33,000 pounds or less. It also doesnot apply to truck trailer and semitrailerchassis and bodies suitable for use with atrailer or semitrailer that has a gross vehicleweight of 26,000 pounds or less. Tractors(and truck chassis completed as tractors) aresubject to tax without regard to gross vehicleweight.

Generally, the gross vehicle weight mustbe determined by the seller solely on thestrength of the chassis frame and the axlecapacity and placement and, in the case ofsemitrailers, the weight to be borne by thetowing vehicle. In making this determination,the seller may not take into account readilyattachable components to lower the grossvehicle weight rating. “Readily attachablecomponents” include springs, brakes, rims,and tires.

Parts or accessories. The tax applies toparts or accessories sold on or in connectionwith, or with the sale of, a taxable article. Forexample, if at the time of the sale by theretailer, the part or accessory has been or-dered from the retailer, the part or accessorywill be considered as sold in connection withthe sale of the vehicle. The tax applies in thiscase whether or not the retailer bills the partsor accessories separately.

If the retailer sells a taxable chassis, body,or tractor without parts or accessories con-sidered essential for the operation or ap-pearance of the taxable article, the sale of theparts or accessories by the retailer to thepurchaser is considered made in connectionwith the sale of the taxable article eventhough they are shipped separately, at thesame time or on a different date. The tax ap-plies unless there is evidence to the contrary.For example, if a retailer sells to any persona chassis and the bumpers for the chassis,or sells a taxable tractor and the fifth wheeland attachments, the tax applies to the partsor accessories regardless of the method ofbilling or the time at which the shipments weremade. The tax does not apply to parts andaccessories that are spares or replacements.

Separate purchase. The tax applies tothe price of a part or accessory and its in-stallation if the following conditions are met.

• The owner, lessee, or operator of anyvehicle that contains a taxable item in-stalls, or causes to be installed, any partor accessory on the vehicle.

• The installation occurs within 6 monthsafter the vehicle is first placed in service.

A vehicle is placed in service on the datethat the owner takes actual possession of thevehicle. This date is established by a signeddelivery ticket or other comparable documentindicating delivery to and acceptance by theowner.

The tax does not apply if the installed partor accessory is a replacement part. The taxalso does not apply if the total price of theparts and accessories, including installationcharges, during the 6-month period is $1,000or less. However, if the total price is morethan $1,000, the tax applies to the cost of allparts and accessories (and installationcharges) during that period.

Example. You bought a taxable vehicleand placed it in service on April 8. On May3, you bought and installed parts and acces-sories at a cost of $850. On July 15, youbought and installed parts and accessories for$300. Tax of $138 applies (12% of $1150) on

July 15. Also, tax will apply to any costs ofadditional parts and accessories installed onthe vehicle before October 8.

The owners of the trade or business in-stalling the parts or accessories aresecondarily liable for the tax.

First retail sale defined. The sale of an ar-ticle is treated as a first retail sale, and theseller will be liable for the tax imposed on thesale unless one of the following exceptionsapplies.

• There has been a prior taxable sale,lease, or use of the article (except in thecase of a chassis or body of a trailer orsemitrailer).

• The sale qualifies as a tax-free sale undersection 4221 of the Code (see Sales ex-empt from tax, later).

• The seller in good faith accepts a propercertification from the purchaser that thepurchaser intends to resell the article orlease it on a long-term basis.

A long-term lease is a lease with a termof 1 year or more. A long-term lease beforea first retail sale is treated as a taxable sale.The tax is imposed on the lessor at the timeof the lease.

A short-term lease (a lease with a term ofless than 1 year) by a manufacturer, pro-ducer, importer, related person, or purchaserbefore a taxable sale is treated as a taxableuse. The tax is imposed on the lessor at thetime of the lease.

A vehicle that is exported before its firstretail sale, used in a foreign country, and thenreturned to the U.S., is subject to the retail taxon its first retail sale after importation.

Tax on resale of tax-paid trailers andsemitrailers. The tax applies to a trailer orsemitrailer resold within 6 months after havingbeen sold in a taxable sale. The seller liablefor the tax on the resale can claim a creditequal to the tax paid on the prior taxable sale.The credit cannot exceed the amount of taxon the resale.

Use treated as sale. If any person usesa taxable article before the first retail sale ofthe article, that person is liable for the tax asif the article had been sold at retail by thatperson. Figure the tax on the price at whichsimilar articles are sold in the ordinary courseof trade by retailers. The tax attaches whenthe use begins.

If the seller of an article regularly sells thearticles at retail in arm's-length transactions,figure the tax on its use on the lowest estab-lished retail price for the articles in effect atthe time of the taxable use.

If the seller of an article does not regularlysell the articles at retail in arm's-length trans-actions, a constructive price on which the taxis figured will be determined by the IRS afterconsidering the selling practices and pricestructures of sellers of similar articles.

If a seller of an article incurs liability for taxon the use of the article and later sells orleases the article in a transaction that other-wise would be taxable, liability for tax is notincurred on the later sale or lease.

Presumptive retail sales price. There arerules to ensure that the tax base of trans-actions considered to be taxable sales in-cludes either an actual or presumed markuppercentage. The following discussions will

Table 1. Tax Base

Transaction Figuring the Base

Sale by the manufacturer, producer,importer, or related person

Sale by the dealer

Long-term lease by the manufacturer,producer, importer, or related person

Short-term lease by the manufacturer,producer, importer, or related person

Short-term lease by a lessor other than themanufacturer, producer, importer, or relatedperson

Short-term lease where the articles areregularly sold at arm’s length

Sales price plus (presumed markuppercentage 3 sales price)

Total consideration paid for the itemincluding any charges incident to placing itin a condition ready for use

Constructive sales price plus (presumedmarkup percentage 3 constructive salesprice)

Constructive sales price at which such orsimilar articles are sold

Price for which the article was sold to thelessor plus the cost of parts andaccessories installed by the lessor plus apresumed markup percentage

Lowest established retail price in effect atthe time of the taxable use

show how you figure the presumptive retailsales price depending on the type of trans-action and the persons involved in the trans-action.

The presumed markup percentage tobe used for trucks and truck-tractors is 4%.But for truck trailers and semitrailers and re-manufactured trucks and tractors, the pre-sumed markup percentage is zero.

Sale. Generally, you figure the tax im-posed on a sale by a manufacturer, producer,importer, or related person on a tax base ofthe sales price plus an amount equal to thepresumed markup percentage times thatsales price.

Long-term lease. In the case of a long-term lease by a manufacturer, producer,importer, or related person, figure the tax ona tax base of the constructive sales price plusan amount equal to the presumed markuppercentage times the constructive sales price.

Short-term lease. When a manufacturer,producer, importer, or related person leasesan article in a short-term lease that is con-sidered a taxable use, figure the tax on aconstructive sales price at which those orsimilar articles generally are sold in the ordi-nary course of trade by retailers.

But if the lessor in this situation regularlysells articles at retail in arm's-length trans-actions, figure the tax on the lowest estab-lished retail price in effect at the time of thetaxable use.

If a person other than the manufacturer,producer, importer, or related person leasesan article in a short-term lease that is con-sidered a taxable use, figure the tax on a taxbase of the price for which the article was soldto the lessor plus the cost of parts and ac-cessories installed by the lessor and a pre-sumed markup percentage.

Related person. A related person is anyperson that is a member of the same con-trolled group as the manufacturer, producer,or importer. Do not treat a person that sellsthe articles through a permanent retail estab-lishment in the normal course of being aretailer as a related person if that person hasrecords to prove that the article was sold fora price that included a markup equal to orgreater than the presumed markup percent-age.

General rule for sales by dealers to theconsumer. In the case of a taxable sale,other than a long-term lease, by a personother than a manufacturer, producer,importer, or related person, your tax base isthe retail sales price as discussed later underDetermination of tax base.

When you sell an article to the consumer,generally you do not add a presumed markupto the tax base. However, you do add amarkup if all the following apply.

• You do not perform any significant activ-ities relating to the processing of the saleof a taxable article.

• The main reason for processing the salethrough you is to avoid or evade thepresumed markup.

• You do not have records proving that thearticle was sold for a price that includeda markup equal to or greater than thepresumed markup percentage.

In these cases, your tax base is the salesprice plus an amount equal to the presumedmarkup percentage times that selling price.

Determination of tax base. These rulesapply to both normal retail sales price andpresumptive retail sales price computations.To arrive at the amount on which the tax isbased, the price is the total consideration paid(including trade-in allowance) for the item andincludes any charge incident to placing thearticle in a condition ready for use. However,see Presumptive retail sales price, earlier.

Exclusions from tax base. Exclude fromthe tax base the retail excise tax imposed onthe sale. Exclude any state or local retailsales tax if stated as a separate charge fromthe price whether the sales tax is imposed onthe vendor or vendee. Also exclude the valueof any used component of the article fur-nished by the first user of the article.

CAUTION!

The value of tires can no longer beexcluded from the tax base. See Tirecredit, earlier.

Exclude charges for transportation, deliv-ery, insurance, and installation (other thaninstallation charges for parts and accessories,discussed earlier) and other expenses in-

curred in connection with the delivery of anarticle to a purchaser. These expenses arethose incurred in delivery from the retaildealer to the customer. In the case of deliverydirectly from the manufacturer to the dealer'scustomer, include the transportation and de-livery charges to the extent the charges donot exceed what it would have cost to ship thearticle to the dealer.

In figuring the tax base for an industrialvacuum loader vehicle, exclude amountscharged for the vacuum pump and hose, filtersystem, material separator, silencer ormuffler, control cabinet, and ladder. In figuringthe tax base on the sale of a sewer cleaningvehicle, do not include amounts charged forthe high pressure water pump, hose compo-nents, and the vacuum pipe.

Sales not at arm's length. For any tax-able article sold (not at arm's length) at lessthan the fair market price, figure the excisetax on the price for which similar articles aresold at retail in the ordinary course of trade.

A sale is not at arm's length if either of thefollowing apply.

• One of the parties is controlled (in law orin fact) by the other or there is commoncontrol, whether or not the control is ac-tually exercised to influence the salesprice.

• The sale is made under special arrange-ments between a seller and a purchaser.

Restoration of worn vehicles. The taxdoes not apply to the sale or use of a wornvehicle restored to a usable condition if thecost of the restoration is not more than 75%of the cost of a comparable new vehicle. Ifthe restoration includes the use of a glider kit,the tax does not apply on the sale or use ofthe restored vehicle as long as the total costof the repair is not more than the 75% limit.Add the cost of non-emergency repairs,modifications, and upgrades occurring overany 6-month period in figuring the 75% limit.

Repairs and modifications. The taxdoes not apply to the sale or use of an articlethat has been repaired or modified unless thecost of the repairs and modifications is morethan 75% of the cost of a comparable newarticle. This includes modifications thatchange the transportation function of an arti-cle or restore a wrecked article to a functionalcondition. However, this exception generallydoes not apply to an article that was notsubject to the tax when it was new.

Installment sales. If the first retail saleis an installment sale, or other form of sale inwhich the sales price is paid in installments,the tax arises at the time of the sale. The taxis figured on the entire sales price. No partof the tax is deferred because the sales priceis paid in installments.

Further manufacture. The tax does notapply to the use of a taxable article as mate-rial in the manufacture or production of, or asa component part of, another article to bemanufactured or produced by that person.Do not treat a person as engaged in themanufacture of any article merely becausethat person combines the article with any ofthe following items.

• Coupling device (including any fifthwheel).

• Wrecker crane.

• Loading and unloading equipment (in-cluding any crane, hoist, winch, or powerlift gate).

• Aerial ladder or tower.

• Ice and snow control equipment.

• Earth moving, excavation and con-struction equipment.

• Spreader.

• Sleeper cab.

• Cab shield.

• Wood or metal floor.

Merely combining articles as described heredoes not give rise to taxability.

Articles exempt from tax. The tax on heavytrucks, trailers, and tractors does not apply tothe following articles.

Rail trailers and rail vans. Any chassisor body of a trailer or semitrailer designed foruse both as a highway vehicle and a railroadcar (including any parts and accessories de-signed primarily for use on and in connectionwith it). Do not treat a piggyback trailer orsemitrailer as designed for use as a railroadcar.

Parts or accessories sold separatelyfrom the truck or trailer, except as describedearlier in Parts or accessories and Separatepurchase.

Trash containers. Any box, container,receptacle, bin or similar article that meetsall the following conditions.

• Designed to be used as a trash container.

• Not designed to carry freight other thantrash.

• Not designed to be permanently mountedor permanently affixed to a truck chassisor body.

House trailers (regardless of size) suit-able for use in connection with either pas-senger automobiles or trucks.

Camper coaches or bodies for self-propelled mobile homes designed to bemounted or placed on trucks, truck chassis,or automobile chassis and to be used prima-rily as living quarters or camping accommo-dations on and off the trucks. Further, the taxdoes not apply to chassis specifically de-signed and constructed to accommodate andtransport self-propelled mobile home bodies.

Farm feed, seed, and fertilizer equip-ment primarily designed to process or pre-pare, haul, spread, load, or unload feed,seed, or fertilizer to or on farms. This ex-emption applies only to the farm equipmentbody (and parts and accessories) and not tothe chassis upon which the farm equipmentis mounted.

Ambulances, hearses, and combina-tion ambulance-hearses.

Truck-tractors specifically designed foruse in shifting semitrailers in and aroundfreight yards and freight terminals.

Concrete mixers designed to be placedor mounted on a truck, truck trailer, or semi-trailer chassis to be used to process or pre-pare concrete.

Sales exempt from tax. The following salesare ordinarily exempt from tax.

• To a state or local government for its ex-clusive use.

• To Indian tribal governments, but only ifthe transaction involves the exercise ofan essential tribal government function.

• To a nonprofit educational organizationfor its exclusive use.

• For further manufacture of other taxablearticles (see below).

• For export or for resale to someone whointends to export (see below).

• To the United Nations for official use.

Registration In general the seller andbuyer must be registered for a sale to be taxfree. Certain registration exceptions apply inthe case of sales to state and local govern-ments and to foreign purchasers for export.

Further manufacturing. If you buy arti-cles tax free and resell or use them other thanin the manufacture of another article, you areliable for the tax on their resale or use justas if you had manufactured and sold them.

Export returned to United States. If anarticle is sold tax free for export and subse-quently is returned to the United States in anunused and undamaged condition, theimporter must pay the tax on any later saleor use of the article in the United States.

Ship Passenger TaxA tax of $3 per passenger is imposed on theoperation of commercial ships, as explainedlater under Taxable situations. The tax is im-posed only once for each passenger, eitherat the time of first embarkation ordisembarkation in the United States.

Voyage. A voyage is the vessel's journeythat includes the outward and homeward tripsor passages. The voyage starts when thevessel begins to load passengers and con-tinues during the entire period until the vesselhas completed at least one outward and onehomeward passage. The tax may be imposedfor a passenger who does not make both anoutward and a homeward passage as longas the voyage begins or ends in the UnitedStates.

Passenger. A passenger is an individualcarried on the vessel other than the Masteror a crew member or other individual engagedin the business of the vessel or its owners.

Example 1. John Smith works as a guestlecturer. The cruise line hired him for thebenefit of the passengers. Therefore, he isengaged in the business of the vessel and isnot a passenger.

Example 2. Marian Green is a travelagent. She is taking the cruise as a promo-tional trip to determine if she wants to offer itto her clients. She is a passenger.

Taxable situations. There are two taxablesituations. The first situation includes voyageson commercial passenger vessels extendingover one or more nights. A voyage extendsover one or more nights if it extends for morethan 24 hours. A passenger vessel is anyvessel with stateroom or berth accommo-dations for more than 16 passengers.

The second situation includes voyages ona commercial vessel transporting passengersengaged in gambling on the vessel beyondthe territorial waters of the United States.Territorial waters of the United States arethose waters within the international boundaryline between the United States and any con-tiguous foreign country or within 3 nauticalmiles (3.45 statute miles) from low tide on the

coastline. If passengers participate as playersin any policy game or lottery, or any othergame of chance for money or other thing ofvalue that the owner or operator of the vessel(or their employee, agent, or franchisee)conducts, sponsors, or operates, the voyageis subject to the ship passenger tax. A friendlygame of chance with other passengers thatis not operated by the owner or operator isnot gambling for determining if the voyage issubject to the ship passenger tax.

Luxury TaxThe luxury tax is imposed on the first retailsale or use (other than use as a demonstra-tor) of a passenger vehicle with a price ex-ceeding the base amount. The seller of thevehicle pays the luxury tax.

For 1999, the tax is 6% of the amount thesales price exceeds the base amount of$36,000. However, the base amount is in-creased for the following vehicles.

• For an electric vehicle, the base amountis increased by 50%.

• For a clean-fuel vehicle, the base amountis increased by the amount that the priceof the vehicle increases due to the in-stallation of retrofit parts and componentsthat permit the vehicle to be propelled bya clean-burning fuel.

Passenger vehicles. Generally, the tax ap-plies if the passenger vehicle has an un-loaded weight of 6,000 pounds or less. How-ever, the tax applies to trucks and vans onlyif they have a maximum loaded weight of6,000 pounds or less. The tax applies to lim-ousines regardless of their weight. The taxdoes not apply to the sale of taxicabs andother vehicles used by the purchaser exclu-sively in the business of transporting personsor property for hire or compensation.

Exemptions. The tax does not apply to pas-senger vehicles if bought for exclusive use inany of the following situations.

• In public safety, law enforcement, orpublic works by the federal, state, or localgovernment.

• In providing emergency medical servicesby any person.

Treat an Indian tribal government as a stateonly if the use is an essential tribal govern-ment function.

The tax does not apply to vehicles sold forexport.

Leases. Generally, a lease is considered asale of the vehicle. The sales price is thelowest price for which the vehicle is sold byretailers in the ordinary course of business.For rules on paying the tax on a lease, seeIRC section 4217(e)(2).

Parts and accessories. Certain parts oraccessories installed within six months of thedate on which a passenger vehicle is placedin service may be subject to the tax. Thesame rate of tax applies to parts and acces-sories that applies to vehicles.

The owner, lessee, or operator of the ve-hicle is liable for the tax. If the part is installed

by someone else, the installer is secondarilyliable for the tax.

The tax does not apply to any of the fol-lowing items.

• Replacement parts or accessories.

• Parts or accessories installed to help aperson with a disability operate, enter, orexit the vehicle.

• Parts or accessories that permit the ve-hicle to be propelled with a clean-burningfuel.

• Parts and accessories if the total cost(including installation) of all parts andaccessories does not exceed $1,000.

Resale or substantial non-exempt use.The tax may apply to vehicles that were ori-ginally exempt from the luxury tax if the pur-chaser resells the vehicle or makes a sub-stantial non-exempt use of the vehicle within2 years after the date of purchase.

Imported vehicles. The tax applies to taxa-ble vehicles that are imported for sale or use(except for vehicles first used before January1, 1991). The tax is imposed on the first do-mestic sale or use of the vehicle.

Credit or refund. If the price of the vehicleis readjusted, you may qualify for a credit orrefund of any tax overpaid. A readjustmentof the price may occur if either of the followingevents occurs.

• The vehicle is returned or repossessed.

• A bona fide discount, rebate, or allow-ance is applied against the price of thevehicle.

The tax on the amount repaid or credited tothe purchaser is the overpayment. If thepurchaser paid the tax on the original sale,you must repay the tax to the purchaser orobtain the purchaser's consent before claim-ing a credit or refund.

Luxury Tax Computation

Other Excise TaxesExcise taxes are imposed on both the follow-ing items.

• Policies issued by foreign insurers.

• Obligations not in registered form.

Policies Issuedby Foreign InsurersTax is imposed on the issuance of policiesof insurance by foreign insurers. The followingtax rates apply to each dollar (or fractionthereof) of the premium paid.

• Casualty insurance and indemnity, fidel-ity, and surety bonds: 4 cents (for ex-ample, on a premium payment of $10.10,the tax is 44 cents).

• Life, sickness, and accident insurance,and annuity contracts: 1 cent (for exam-ple, on a premium payment of $10.10, thetax is 11 cents).

• Reinsurance policies covering any of thecontracts taxable in the two precedingparagraphs: 1 cent.

However, the tax does not apply to casualtyinsurance premiums paid to foreign insurersfor coverage of export goods in transit to for-eign destinations.

Premium. Premium means the agreed priceor consideration for assuming and carryingthe risk or obligation. It includes any addi-tional charge or assessment that is payableunder the contract, whether in one sum orinstallments. If premiums are refunded, claimthe tax paid on those premiums as an over-payment against tax due on other premiumspaid or file a claim for refund.

Line 2. Additions include the following items if statedseparately on the invoice and not included in theretail price.

• Preparation charges.

• Delivery charges.

• Packaging.

• Parts or accessories sold on or in connectionwith the vehicle.

• Taxes (except the luxury tax and state salestax).

• Commissions.

• Mandatory warranties.

• Any other charges not listed above.Line 4. Subtractions include the following if they areseparately stated on the invoice and are included inline 3.

• State and local sales taxes.

• Title and registration charges.

• Optional warranty charges.

• Rebates and price adjustments paid.

• The value of used components supplied by thepurchaser.

* The base amount for an electric vehicle is $54,000.The base amount for a clean-fuel vehicle is in-creased by the amount the price of the vehicle in-creases due to the installation of retrofit parts andcomponents that permit the vehicle to be propelledby a clean-burning fuel.

1. Enter the retail price of the vehicle ...

2. Enter additions to the retail price ......

3. Add lines 1 and 2 ..............................

4. Enter subtractions from the retailprice ...................................................

5. Adjusted sales price. Subtract line 4from line 3 .........................................

6. Base amount for 1999 ....................... $36,000 *

7. Taxable adjusted sales price. Sub-tract line 6 from line 5. If line 6 isgreater than line 5, make noentry—the luxury tax does not applyto the vehicle .....................................

8. Tax rate for 1999 ............................... .06 (6%)

9. Luxury tax. Multiply the amount online 7 by the tax rate on line 8 ..........

Line 1. The retail price is the total consideration paidin cash, cash equivalents, goods, services, and thewholesale fair market value of any trade-in minusany payoff made by the seller and any cash givenback to the customer. For leases, enter the lowestprice for which the vehicle is sold by retailers in theordinary course of business.

When liability attaches. The liability for thistax attaches when the premium payment istransferred to the foreign insurer or reinsurer(including transfers to any bank, trust fund,or similar recipient designated by the foreigninsurer or reinsurer) or to any nonresidentagent, solicitor, or broker. A person can paythe tax before the liability attaches if the per-son keeps records consistent with that prac-tice.

Duty to pay tax. The person who makesthe payment of the premium to the foreigninsurer or the person's agent pays the tax.This is the resident person who actuallytransfers the money or its equivalent to theinsurer or agent.

RECORDS

The person required to pay this taxmust keep accurate records thatidentify each policy or instrument

subject to tax. These records must clearlyestablish the type of policy or instrument, thegross premium paid, the identity of the in-sured and insurer, and the total premiumcharged. If the premium is to be paid in in-stallments, the records must also establishthe amount and anniversary date of each in-stallment.

The records must be kept at the place ofbusiness or other convenient location for atleast 3 years after the later of the date anypart of the tax became due, or the date anypart of the tax was paid. During this period,the records must be readily accessible to theIRS.

The person having control or possessionof a policy or instrument subject to this taxmust keep the policy for at least 3 years afterthe date any part of the tax on it was paid.

Treaty-based positions under IRC 6114.You may have to file an annual report dis-closing the amount of premiums that are ex-empt from United States excise tax as a resultof the application of a treaty with the UnitedStates that overrides (or otherwise modifies)any provision of the Internal Revenue Code.

Attach any disclosure statement to the firstquarter Form 720. You may be able to useForm 8833, Treaty-Based Return PositionDisclosure Under Section 6114 or 7701(b),as a disclosure statement. See the Form 720instructions for how and where to file.

See Revenue Procedure 92–14 for pro-cedures that you can use to claim a refundof this tax under certain U.S. treaties.

Obligations Notin Registered FormTax is imposed on any person who issues aregistration-required obligation not in regis-tered form. The tax is:

• 1% of the principal of the obligation,multiplied by

• The number of calendar years (orportions of calendar years) during theperiod starting on the date the obligationwas issued and ending on the date itmatures.

A registration-required obligation is anyobligation other than one that meets any ofthe following conditions.

1) Is issued by a natural person.

2) Is not of a type offered to the public.

3) Has a maturity (at issue) of not morethan one year.

4) Can only be issued to a foreign person.

For item (4), if the obligation is not in reg-istered form, the interest on the obligationmust be payable only outside the UnitedStates and its possessions. Also, the obli-gation must state on its face that any U.S.person who holds it shall be subject to limitsunder the U.S. income tax laws.

Filing Form 720File Form 720 for each calendar quarter untilyou file a final Form 720. If you are not re-porting a tax that you normally report, enterzero on the line for that tax.

Be sure to sign the return. An unsignedreturn is not considered filed.

Your district director may require you tofile your returns on a monthly or semimonthlybasis instead of quarterly if you do not makedeposits as required (see Deposit Require-ments, later) or are liable for the excise taxon gasoline, diesel fuel, or kerosene andmeet certain conditions.

Form 720. The Form 720 has varioussections.

• Part I consists of the excise taxes thatgenerally are required to be deposited(See Deposit Requirements, later).

• Part II consists of the excise taxes thatare NOT required to be deposited.

• Part III consists of the lines for figuringyour tax liability, showing any adjust-ments and claims, and indicating theamount of your deposits.

• Schedule A, Excise Tax Liability, is usedto report your net tax liability for eachsemimonthly period in the quarter. Com-plete it if you have an entry in Part I.

• Schedule C, Adjustments and Claims, isused if you have an entry for adjustmentsand claims in Part III.

Forms attached to Form 720. Depend-ing on the type of excise tax that you are re-porting on Form 720, you may have to attachthe following forms.

• Form 6197 for the gas guzzler tax.

• Form 6627 for environmental taxes.

Employer identification number. If you fileForm 720, you generally need an employeridentification number (EIN). If you do not havean EIN, you need to file Form SS–4, Appli-cation for Employer Identification Number.You can get a Form SS–4 from the IRS orfrom the Social Security Administration. Ifyou do not receive an EIN by the time a returnis due, file your return anyway and write “Ap-plied for” in the space for the EIN.

TIPYou can get an EIN immediately bycalling the Tele-TIN number for theservice center for your state. See the

Form SS–4 instructions.

Special one-time filings. If you import avehicle, you may be eligible to make a one-time filing of Form 720 for the gas guzzler taxor the luxury tax on passenger vehicles if youmeet the following three conditions.

• You do not use the automobile or vehiclein the course of your trade or business.

• You do not import gas guzzling cars orluxury vehicles in the course of your tradeor business.

• You are not required to file Form 720 toreport any other excise taxes.

File Form 720 for the quarter in which youincur the tax liability. Attach any requiredform. Pay the full tax with the return. No de-posits are required. Check the one-time filingbox on page 1, Form 720.

Return due dates. If any due date falls ona Saturday, Sunday, or legal holiday, you canfile the return on the next business day.

Returns for all excise taxes other thanozone-depleting chemicals, communi-cations, and air transportation taxes mustbe filed by the following due dates.

Returns for taxes on ozone-depletingchemicals, communications, and airtransportation are due as follows.

You must report the floor stocks tax im-posed on ODCs held on January 1, as dis-cussed earlier, on the return for the secondcalendar quarter filed by August 31 of theyear that the tax is imposed.

If you must file a Form 720 for a quarterin which you report two or more excise taxesthat are due on different dates, use the laterfiling date. File only one Form 720 for eachquarter. However, the time for making pay-ments and deposits of excise taxes is notextended.

Paying the TaxesExcise taxes are due and payable withoutassessment or notice. Unless you are re-quired to make deposits of taxes (as dis-cussed next) attach your full payment for thequarterly tax to your return when filed. Makeyour payment by check or money order pay-able to the United States Treasury. Write onyour check or money order your employeridentification number, Form 720, and the pe-riod covered by the payment.

Floor stocks tax on ODCs. You must de-posit the floor stocks tax imposed on ODCsheld on January 1, as discussed earlier, byJune 30 of the year that the tax is imposed.

Deposit RequirementsIf you have to file a quarterly excise tax returnon Form 720, you may have to make depositsof your excise taxes before the return is due.You are not required to make deposits if yournet tax liability for Part I taxes for the calendarquarter is not more than $2,000. You pay thetax when you file Form 720. See Exceptions,later.

Quarter Covered Due Dates

January, February, March .................... April 30April, May, June .................................... July 31July, August, September ...................... October 31October, November, December ............ January 31

Quarter Covered Due Dates

January, February, March ................. May 31April, May, June ................................ August 31July, August, September ................... November 30October, November, December ........ February 28

Deposit coupons. If you do not make yourdeposits electronically (discussed next), theymust be accompanied by a Form 8109, Fed-eral Tax Deposit Coupon. If you do not havea coupon book, contact your local IRS officeor call 1–800–829–1040.

Electronic deposit requirement. The Elec-tronic Federal Tax Payment System (EFTPS)must be used to make electronic deposits. Ifyou meet either of the following requirements,you must make electronic deposits for all de-pository tax liabilities that occur after Decem-ber 31, 1998.

• Your Medicare, social security, railroadretirement, and withheld income taxeswere more than $50,000 in 1997.

• You did not deposit employment taxes,but you had deposits of other depositorytaxes (such as excise taxes) that weremore than $50,000 in 1997.

If your were already using EFTPS, con-tinue to do so in 1999. You can choose tomake deposits using EFTPS even though youare not required to use it. For information onEFTPS, see Revenue Procedure 97–33.

If you are required to make deposits byelectronic deposit and fail to do so, you maybe subject to a penalty. However, if you werefirst required to make electronic deposits afterJune 30, 1997, you will not be subject to thepenalty for failure to make electronic depositsbefore July 1, 1999.

When To Make DepositsThese rules apply to taxes reported on Form720 for which deposits are required.

Generally, you make deposits for a semi-monthly period. A semimonthly period is thefirst 15 days of a month or the 16th daythrough the end of a month.

All excise taxes that must be depositedare subject to the special September rules.Under these rules, different dates apply if youare required to make electronic deposits (seeElectronic deposit requirement, earlier). Thetaxes for that part of the period not coveredby the special rules should be deposited bythe normal due date.

Each deposit rule is considered to be aclass of tax.

The 9-day rule. Deposits of taxes for asemimonthly period generally are due by the9th day of the following semimonthly period.Therefore, the tax for the first semimonthlyperiod is due by the 24th of that month. Thetax for the second semimonthly period is dueby the 9th of the following month. Generally,this rule applies to taxes listed in Part I ofForm 720, except as discussed under thefollowing rules.

September rule. For 1999, deposit bySeptember 28 the taxes for the period begin-ning September 16 and ending September25. If making electronic deposits, deposit bySeptember 29 the taxes for the period begin-ning September 16 and ending September26.

The 30-day rule. Deposits of the taxes onozone-depleting chemicals (ODCs) andimported products containing ODCs for asemimonthly period are due by the end of thesecond following semimonthly period. There-

fore, the tax for the first semimonthly periodis due by the 15th of the following month. Thetax for the second semimonthly period is dueby the end of the following month.

September rule. For 1999, deposit bySeptember 28 the tax for the last 16 days ofAugust and the period beginning September1 and ending September 10. If making elec-tronic deposits, deposit by September 29 thetax for the last 16 days of August and theperiod beginning September 1 and endingSeptember 11.

The 14-day rule. Deposits of gasoline, die-sel fuel, and kerosene taxes for a semi-monthly period by qualified persons made byelectronic funds transfer are due by the 14thday following the semimonthly period.Therefore, the tax for the first semimonthlyperiod is due by the 29th of that month. Thetax for the second semimonthly period is dueby the 14th of the following month. If the 14thday is a Saturday, Sunday, or legal holiday inthe District of Columbia, the due date is theimmediately preceding day that is not aSaturday, Sunday, or legal holiday.

A qualified person is an independent re-finer or a person whose average daily pro-duction of crude oil for the preceding calendarquarter was 1,000 barrels or less.

September rule. For 1999, deposit elec-tronically by September 29 the taxes for theperiod beginning September 16 and endingSeptember 26.

Communications and air transportationtaxes. You may figure deposits of thesetaxes based on amounts actually collectedand use the 9-day rule (discussed earlier) formaking the deposits. You also may be ableto figure deposits of these taxes based on theamounts considered as collected (the “alter-native method”).

If you use the alternative method, the taxincluded in amounts billed or tickets soldduring a semimonthly period is considered ascollected during the first 7 days of the secondfollowing semimonthly period. You must de-posit these taxes by the third banking dayafter that seventh day.

To use the alternative method, you mustkeep a separate account of the tax includedin the amounts billed or tickets sold during themonth. Report on Form 720 the tax includedin amounts billed or tickets sold and not theamount of tax that is actually collected.

Example. Under the alternative method,the tax included in amounts billed or ticketssold between December 1 and December 15,1998, is considered collected during the first7 days of January 1998. The deposit of thesetaxes is due by January 12, 1999, 3 bankingdays after January 7. These amounts are re-ported on the Form 720 for the first quarterof 1999.

September rule. For 1999, if you use thealternative method, deposit by September 28the communications and air transportationtaxes included in the amounts billed or ticketssold during the period beginning September1, and ending September 10. If making elec-tronic deposits, deposit by September 29 theair transportation and communications taxesincluded in the amounts billed or tickets soldduring the period beginning September 1 andending September 11.

Amount of DepositsDeposits for a semimonthly period generallyequal the amount of net tax liability incurredduring that period unless a safe harbor rule(discussed later) applies. Generally, you donot have to make a deposit for a period inwhich you incurred no tax liability. For com-munications and air transportation taxes,however, the amount deposited generallyequals the tax collected or considered ascollected (alternative method) during thesemimonthly period.

Net tax liability. Your net tax liability is yourtax liability for the period plus or minus anyadjustments allowable on Form 720. You mayfigure your net tax liability for a semimonthlyperiod by dividing your net liability incurredduring the calendar month by two. If you usethis method, you must use it for all semi-monthly periods in the calendar quarter.

September rule. To figure your depositunder the September rule, see the regulationsunder section 6302 of the Internal RevenueCode that relate to the class of tax.

Safe Harbor RulesYou can use a safe harbor rule to figure if youhave deposited a sufficient amount of tax.The rules apply to each class of tax sepa-rately.

For the safe harbor rules that apply todeposits under the September rule, see theregulations under section 6302 that relate tothe class of tax.

Look-back quarter. This safe harbor ruleapplies to persons who filed a Form 720 forthe second calendar quarter (the look-backquarter) preceding the current quarter. If youfiled for the look-back quarter, you will meetthe semimonthly deposit requirement for thatclass of tax for the current quarter if all thefollowing conditions are met.

• The deposit of that tax for each semi-monthly period in the current quarter isnot less than 1/6 (16.67%) of the net taxliability reported for that tax for the look-back quarter.

• Each deposit is timely made.

• Any underpayment for the current quarteris paid by the due date of the return.

In addition, if the due date of the return isextended because you report taxes with dif-ferent due dates, you must make a specialdeposit by the earlier due date. The specialdeposit must be at least equal to the amountof the underpayment of the taxes due on thatearlier date.

Example. In the third quarter, you reportboth fuel taxes (due date of October 31) andthe tax on ozone-depleting chemicals (duedate of November 30). You have an under-payment of the fuel taxes of $100. You mustmake a special deposit of the $100 by theOctober 31 deadline.

Tax rate increases. You must modify thesafe harbor rule based on the look-back-quarter liability for a class of tax on whichthere has been an increase in the rate of tax.You must figure your tax liability in the look-back quarter as if the increased rate had beenin effect. To qualify for the safe harbor rule,your deposits cannot be less than 1/6 of therefigured tax liability.

New or reinstated taxes. You mustmodify this safe harbor rule for any calendarquarter in which a class of tax includes anynew or reinstated tax. A new or reinstated taxis any tax that was not in effect at all timesduring the look-back quarter. In this situation,this safe harbor rule applies if the semi-monthly deposit for that class of tax for thecurrent quarter is not less than the greater ofthe following amounts.

1) One-sixth of the net tax liability reportedfor that class of tax for the look-backquarter.

2) The sum of the following amounts.

a) 95% of the net tax liability incurredfor new or reinstated taxes duringthe semimonthly period.

b) One-sixth of the net tax liability re-ported for all other taxes in thatclass for the look-back quarter.

New chemicals. You must modify thissafe harbor rule for any calendar quarter inwhich a new chemical is included under the30-day rule. A new chemical is any chemicalthat was not subject to tax at all times duringthe look-back quarter. The modification of thesemimonthly deposit as discussed under Newor reinstated taxes applies if a new chemicalis included in this class of tax.

Current liability. This safe harbor rule ap-plies to all filers. You meet the semimonthlydeposit requirement for a class of tax for thecurrent quarter if all the following conditionsare met.

• The deposit of that tax for each semi-monthly period in the quarter is not lessthan 95% of the net tax liability incurredduring the semimonthly period.

• Each deposit is timely made.

• Any underpayment for the quarter is paidby the due date of the return.

In addition, if the due date of the return isextended because you report taxes with dif-ferent due dates, you must make a specialdeposit by the earlier due date. The specialdeposit must be at least 5% of your net taxliability or the amount of the underpaymentof the taxes due on that earlier date, which-ever is less.

ExceptionsYou do not have to make deposits of the fol-lowing taxes. You pay these taxes when youfile your Form 720 for the quarter.

• Sport fishing equipment.

• Electric outboard motors and sonar de-vices.

• Bows.

• Arrow components.

• Fuels used on inland waterways.

• Alcohol sold as fuel but not used as fuel.

One-time filings. You are not required tomake deposits of any taxes reportable on aone-time filing. See the earlier discussion,

Special one-time filings, under Filing Form720. You pay the tax when you file Form 720.

Penaltiesand InterestPenalties and interest may result from any ofthe following acts.

• Failing to collect and pay over tax as thecollecting agent (see Trust fund recoverypenalty).

• Failing to keep adequate records.

• Failing to file returns.

• Failing to pay taxes.

• Filing returns late.

• Filing false or fraudulent returns.

• Paying taxes late.

• Failing to make deposits.

• Depositing taxes late.

Trust fund recovery penalty. If you providecommunications services or air transporta-tion, you have to collect excise taxes (as dis-cussed earlier) from those persons who payyou for those services. You must pay thesetaxes to the U.S. Government.

If you willfully fail to collect and pay overthese taxes, or if you evade or defeat themin any way, the trust fund recovery penaltymay apply. Willfully means voluntarily, con-sciously, and intentionally. The trust fund re-covery penalty equals 100% of the taxes notcollected or not paid over to the U.S. Gov-ernment.

The trust fund recovery penalty may beimposed on any person responsible for col-lecting, accounting for, and paying over thesetaxes. If this person knows that these requiredactions are not taking place for whateverreason, the person is acting willfully. Payingother expenses of the business instead ofpaying the taxes is willful behavior.

A responsible person can be an officer oremployee of a corporation, a partner or em-ployee of a partnership, or any other personwho had responsibility for certain aspects ofthe business and financial affairs of the em-ployer (or business). This may include ac-countants, trustees in bankruptcy, membersof a board, banks, insurance companies, orsureties. The responsible person could evenbe another corporation—in other words, any-one who has the duty and the ability to direct,account for or pay over the money. Havingsignature power on the business checkingaccount could be a significant factor in deter-mining responsibility.

Examination andAppeal ProceduresIf your excise tax return is examined and youdisagree with the findings, you can get infor-mation about audit and appeal procedures

from Publication 556, Examination of Returns,Appeal Rights, and Claims for Refund. Anunagreed case involving an excise tax cov-ered in this publication differs from other taxcases in that you can only contest it afterpayment of the tax by filing suit for a refundin the United States District Court or theUnited States Court of Federal Claims.

Help WithUnresolved Tax IssuesMost problems can be solved with one con-tact by calling, writing, or visiting an IRS of-fice. But if you have tried unsuccessfully toresolve a problem with the IRS, you shouldcontact the Taxpayer Advocate's ProblemResolution Program (PRP). Someone at PRPwill assign you a personal advocate who is inthe best position to try to resolve your prob-lem. The Taxpayer Advocate can also offeryou special help if you have a significanthardship as a result of a tax problem.

You should contact the Taxpayer Advo-cate if:

• You have tried unsuccessfully to resolveyour problem with the IRS and have notbeen contacted by the date promised, or

• You are on your second attempt to re-solve your problem.

You may contact a Taxpayer Advocate bycalling a new assistance number, 1–877–777–4778. Persons who have access toTTY/TDD equipment can call 1–800–829–4059 and ask for the Taxpayer Advocate. Ifyou prefer, you can write to the TaxpayerAdvocate at the office that last contacted you.

While Taxpayer Advocates cannot changethe tax law or make a technical tax decision,they can clear up problems that resulted fromprevious contacts and ensure that your caseis given a complete and impartial review.Taxpayer Advocates are working to put ser-vice first. For more information about PRP,get Publication 1546, The Problem ResolutionProgram of the Internal Revenue Service.

Rulings ProgramThe IRS has a program for assisting taxpay-ers who have technical problems with taxlaws and regulations. The IRS will answerinquiries from individuals and organizationsabout the tax effect of their acts or trans-actions. The National Office of IRS issuesrulings on those matters.

A ruling is a written statement to a tax-payer that interprets and applies tax laws tothe taxpayer's specific set of facts. There arealso determination letters issued by districtdirectors and information letters issued bydistrict directors or the National Office.

There is a fee for most types of determi-nation letters and rulings. For complete de-tails of the rulings program, get a copy ofRevenue Procedure 99–1.

Appendix AThis appendix provides information for per-sons engaged in wagering activities. Youmust pay the occupational tax if you are theprincipal or an employee-agent. See Form11–C, later, for more information.

You may have to pay the tax on wageringif you are in the business of accepting wagersor running a betting pool or lottery. See Form730, later, for more information.

Exempt organizations. Organizations ex-empt from income tax under section 501 or521 of the Internal Revenue Code are notexempt from the tax on wagering or the oc-cupational tax. However, see Lottery, later, foran exception.

Confidentiality. No Treasury Departmentemployee may disclose any information thatyou supply in relation to the wagering tax,unless necessary to administer or enforce theInternal Revenue laws.

DefinitionsThe following definitions apply to Form 11–Cand Form 730.

Principal. A principal is a person who is inthe business of accepting wagers for his orher own account. This is the person whomakes profit or risks loss depending on theoutcome of the event or contest for which thewager was accepted.

Employee-agent. This is the paid employeeof the principal who accepts wagers for theprincipal.

Wagers. Wagers or bets include any wager:

• Made on sports events or contests witha person in the business of acceptingwagers,

• Placed in a wagering pool on a sportsevent or contest, if the pool is conductedfor profit, and

• Placed in a lottery conducted for profit.

Sports events. A sports event includes ev-ery type of amateur, scholastic, or profes-sional sports competition, such as:

Contests. A contest is any competition in-volving speed, skill, endurance, popularity,politics, strength, or appearance, such as:

• Elections,

• Nominating conventions,

• Dance marathons,

• Log-rolling,

• Wood-chopping,

• Weightlifting,

• Beauty contests, and

• Spelling bees.

Wagering pool. A wagering pool conductedfor profit includes any method or scheme forgiving prizes to one or more winning bettorsbased on the outcome of a sports event, acontest, or a combination or series of theseevents or contests if the wagering pool ismanaged and conducted for the purpose ofmaking a profit. A wagering pool or lotterymay be conducted for profit even if a directprofit does not occur. If you operate thewagering pool or lottery with the expectationof a profit in the form of increased sales, at-tendance, or other indirect benefits, you con-duct it for profit.

Lottery. This includes the numbers game,policy, punch boards, and similar types ofwagering. In general, a lottery conducted forprofit includes any method or scheme for thedistribution of prizes among persons whohave paid or promised to pay for a chance towin the prizes. The winning prizes are usuallydetermined by the drawing of numbers, sym-bols, or tickets from a wheel or other con-tainer or by the outcome of a given event.

It does not include either of the followingkinds of events.

1) Games in which the wagers are placed,winners are determined, and the prizesare distributed in front of everyone whoplaced a wager.

2) Drawings conducted by a tax-exemptorganization, if the net proceeds of thedrawing do not benefit a private share-holder or individual.

Card games, roulette games, dice games,bingo, keno, and gambling wheels usually fallwithin exception (1) above.

Form 11–CYou use Form 11–C to register with the IRSany wagering activity and to pay the occupa-tional tax on wagering. After you file this formand pay the tax, the IRS issues you a letteras proof of registration and payment.

Who must file. You must file Form 11–C ifyou are a principal or an employee-agent.You must have an employer identificationnumber (EIN). You cannot use your socialsecurity number. If you do not have an EIN,complete Form SS–4, Application for Em-ployer Identification Number, and attach it tothe Form 11–C when you file. If you haveapplied for a number but have not yet re-ceived it, write “applied for” in the block for theEIN on Form 11–C.

When to file. You must file your first Form11–C before you begin accepting wagers.After that, file a renewal return by July 1 foreach year that you accept wagers. You mayalso have to file supplemental returns whencertain changes occur. These changes areshown in the instructions to the form.

Information required. Follow the in-structions on the back of the form. If you area principal, you must show the number ofemployee-agents that work for you and theirnames, addresses, and EINs. If you hire anemployee-agent, you must file a supple-mental return showing this information within10 days after you hired the employee-agent.

Employee-agents must show the name,address, and EIN of each of their principals.You must file a supplemental return within 10days after being hired by a principal. If you

do not provide the information about theprincipal, you will be liable for the excise taxon wagering as if you were the principal.

Example. Ken operates a numbers gameand arranges with 10 people to receivewagers from the public on Ken's behalf. Kenalso employs a secretary and a bookkeeper.Ken and each of the 10 persons are liable forthe tax. They each file Form 11–C. Thesecretary and the bookkeeper are not liablefor the tax unless they accept wagers for Ken.

On Ken's Form 11–C, he lists all requiredinformation (name, address, and EIN) foreach of his ten agents as well as himself.He does not list his secretary or bookkeeper.

Each of the 10 agents lists on Form 11–Chis or her name, address, and EIN, as wellas Ken's.

Figuring the tax. There are two rates of tax.If you start accepting wagers after July 31,these tax rates are prorated. The proratedamounts are shown in the table in the Form11–C instructions. The rates of tax are asfollows.

• $50 if all wagers accepted are authorizedunder state law. This applies to principalswho only accept these wagers andemployee-agents who only work for theseprincipals.

• $500 in all other situations. This appliesto all other principals and employee-agents.

Form 730While Form 11–C is for the occupational tax,Form 730 is for figuring the tax on the wagersthemselves. The wagering tax applies to thewagers (as defined earlier), regardless of theoutcome of the individual bets.

The tax applies only to a wager that meetseither of the following conditions.

• It is accepted in the United States.

• It is placed by a person who is in theUnited States with a U.S. citizen or resi-dent, or in a wagering pool conducted bya U.S. citizen or resident.

Wagers made within the United States aretaxable regardless of the citizenship or placeof residence of the parties to the wager.

Lay-off wagers. If you accept a wager takeninitially by someone else (other than an agentor employee acting for you) include the wagerin your gross receipts. When you lay off awager on which you have already paid the taxto another person in the business of accept-ing wagers, you may either file a claim forrefund on Form 8849 or claim a credit on line5 of Form 730. For more details, get Form730.

Excluded wagers. Tax is not imposed onany of the following.

• Parimutuel wagering, including horseracing, dog racing, and jai alai when li-censed under state law.

• Coin-operated devices such as pinballmachines.

• Sweepstakes, wagering pools, or lotteriesif they are conducted by an agency of astate and the wagers are placed with thestate agency or its authorized agents oremployees.

Auto racing Baseball BasketballBilliards Bowling BoxingCards Checkers CricketCroquet Dog racing FootballGolf Gymnastics HockeyHorse racing Lacrosse RugbySoccer Squash TennisTrack Tug of war Wrestling

Figuring the tax. The amount of the wageris the amount risked by the bettor, includingany fee or charge incident to placing thewager. It is not the amount that the bettorstands to win.

The tax is 2% of the wager if it is not au-thorized under state law. If the wager is au-thorized, the rate is 0.25% of the wager.

When to file. File Form 730 by the last dayof the month following the month for whichyou report taxable wagers. If you temporarilystop accepting taxable wagers, continue tofile Form 730 and write “None” on the return.When you stop accepting wagers perma-nently, write “Final Return” on the form.

RECORDS

Keep your records on a daily basis toreflect each day's operations. Yourrecords should show all the following

information.

• The gross amount of all wagers ac-cepted.

• The gross amount of each class or typeof wager accepted on each event, con-test, or other wagering medium.

• The amount of any layoffs and the nameand address of the person with whom youplaced the layoffs.

If you have employees or agents who ac-cept wagers for you, keep records of their

names, home addresses, business ad-dresses, periods of employment, and theirEINs. Also, you may be subject to income andemployment tax withholding for your employ-ees. Get Publication 15, Circular E, Employ-er's Tax Guide.

Appendix BThis appendix provides the Imported Pro-ducts Table. This is a listing of imported pro-ducts containing or manufactured withozone-depleting chemicals (ODCs). See Im-ported Taxable Products for more informationon these tables.

Part I. Products that are mixtures containing ODCs

Imported Products Table

Mixtures containing ODCs, including but not limited to:—anti-static sprays—automotive products such as “carburetor cleaner,” “stop leak,” “oil charge”—cleaning solvents—contact cleaners—degreasers—dusting sprays—electronic circuit board coolants—electronic solvents—Ethylene oxide/CFC-12—fire extinguisher preparations and charges—flux removers for electronics—insect and wasp sprays—mixtures of ODCs—propellants—refrigerants

Part II. Products in which ODCs are used for purposes of refrigeration or air conditioning, creating anaerosol or foam, or manufacturing electronic components

Product NameHarmonized TariffSchedule Heading ODC ODC Weight

Rigid foam insulation defined in §52.4682-1(d)(3)

Foams made with ODCs, other than foamsdefined in §52.4682-1(d)(3)

Scrap flexible foam made with ODCs

Medical products containing ODCs——surgical staplers—cryogenic medical instruments—drug delivery systems—inhalants

Dehumidifiers, household

Chillers:charged with CFC-12charged with CFC-114charged with R-500

Refrigerator-freezers, household:not > 184 liters

> 184 liters but not > 269 liters


> 382 liters

Refrigerators, householdnot > 184 liters



> 382 liters

Freezers, household

Freezers, household

Refrigerating display counters not> 227 kg

8415.82.00.50

8415.82.00.65

8418.10.00.10

8418.10.00.20

8418.10.00.30

8418.10.00.40

8418.21.00.10

8418.21.00.20

8418.21.00.30

8418.21.00.90

8418.30

8418.40

8418.50

CFC-12

CFC-12CFC-114

CFC-12CFC-11

0.344

1600.1250.1920.

1.081

0.13

1.321

0.26

1.541

0.35

1.871

0.35

1.081

1.321

0.261

1.541

0.35

1.871

0.35

2.01

0.4

2.01

0.4

50.01

260.0CFC-12CFC-11

CFC-12CFC-11

CFC-12CFC-11

CFC-12CFC-11

CFC-12CFC-11

CFC-12CFC-11

0.13

CFC-12CFC-11

CFC-12CFC-11

CFC-12CFC-11

CFC-12CFC-11

CFC-12

Part II. (continued)


CFC-12Icemaking machines:

charged with CFC-12charged with R-502

Drinking water coolers:charged with CFC-12charged with R-500

Centrifugal chillers, hermetic:charged with CFC-12charged with CFC-114charged with R-500

Reciprocating chillers:charged with CFC-12

Mobile refrigeration systems:containerstruckstrailers

Refrigeration condensing units:not > 746W> 746W but not > 2.2KW> 2.2 KW but not > 7.5KW> 7.5KW but not > 22.3 KW>22.3KW

Fire extinguishers, charged w/ODCs

Electronic typewriters and word processors

Electronic calculators

Electronic calculators w/printing device

Electronic calculators

Account machines

Cash registers

Digital automatic data processing machinesw/cathode ray tube, not included insubheading 8471.20.00.90

Laptops, notebooks, and pocket computers

Digital processing unit w/entry valuenot > $100K

> $100K

Combined input/output units (terminal)

Keyboards

Display units

Printer units

Input or output units

Hard magnetic disk drive units not included insubheading 8471.93.10 for a disk of adiameter:

not > 9 cm (31⁄2 inches)

> 9 cm (31⁄2 inches) but not > 21 cm(81⁄4 inches)

Nonmagnetic storage unit w/entry value > $1,000

Magnet disk drive unit for a disk of a diameterover 21 cm (81⁄4 inches)

Power supplies

8418.69

8418.69

8418.69

8418.69

8418.99

8418.99.00.058418.99.00.108418.99.00.158418.99.00.208418.99.00.25

8424

8469

8470.10

8470.21

8470.29

8470.40

8470.50

8471.20

8471.20.00.90

8471.918471.91

8471.92

8471.92

8471.92

8471.92

8471.92

8471.93

8471.93

8471.93

8471.93.10

8471.99.30

CFC-12CFC-12

CFC-12

CFC-12

CFC-12

CFC-12CFC-12CFC-12

CFC-12CFC-12CFC-12CFC-12CFC-12

CFC-115

CFC-114

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

1.43.39

0.210.22

1600.1250.1920.

200.

15.11.20.

0.31.03.08.5

17.0

0.2049

0.0035

0.0057

0.0035

0.1913

0.1913

0.3663

0.03567

0.498027.6667

0.3600

0.0742

0.0386

0.1558

0.1370

0.2829

1.1671

2.7758

4.0067

0.0655



CFC-12

CFC-113

CFC-113CFC-113

CFC-113CFC-113CFC-113

CFC-113

CFC-113CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

Electronic office machines

Populated cards for digital processing unit insubheading 8471.91 with value:

not > $100K> $100 K

Automatic goods—vending machines withrefrigerating device

Microwave ovens with electronic controls, withcapacity of:

0.99 cu. ft. or less1.0 through 1.3 cu. ft.1.31 cu. ft. or greater

Microwave oven combination with electroniccontrols

Telephone sets w/entry value:not > $11.00> $11.00

Teleprinters & teletypewriters

Switching equipment not included in subheading8517.30.20

Private branch exchange switching equipment

Modems

Intercoms

Facsimile machines

Loudspeakers, microphones, headphones, &electric sound amplifier sets, not included insubheading 8518.30.10

Telephone handsets

Turntables, record players, cassette players, andother sound reproducing apparatus

Magnetic tape recorders & other sound recordingapparatus, not included in subheading8520.20

Telephone answering machines

Color video recording/reproducing apparatus

Videodisc players

Cordless handset telephones

Cellular communication equipment

TV cameras

Camcorders

Radio combinations

Radios

Motor vehicle radios with or w/o tape player

Radio combinations

Radios

Tuners w/o speaker

Television receivers

VCRs

Home satellite earth stations

Electronic assemblies for HTS headings 8525,8527, & 8528

8472

8473.308473.30

8476.11

8476.50

8516.50.40.60

8517.108517.10

8517.20

8517.30

8517.30.20

8517.40

8517.81

8517.82

8518

8518.30.10

8519

8520

8520.20

8521.10.00.20

8521.90

8525.20.50

8525.20.60

8525.30

8525.30

8527.11

8527.19

8527.21

8527.31

8527.32

8527.39.00.20

8528

8528.10.40

8528.10.80.55

8529.90

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

0.001

0.14084.82

0.45

0.03000.04410.0485

0.0595

0.02250.1

0.1

0.1267

0.0753

0.0225

0.0225

0.0225

0.0022

0.042

0.0022

0.0022

0.1

0.0586

0.0106

0.1

0.4446

1.423

0.0586

0.0022

0.0014

0.0021

0.0022

0.0014

0.0022

0.0386

0.0586

0.0106

0.0816



CFC-12

CFC-113

CFC-113

CFC-113

Indicator panels incorporating liquid crystaldevices or light emitting diodes

Printed circuits

Computerized numerical controls

Diodes, crystals, transistors and other similardiscrete semiconductor devices

Electronic integrated circuits andmicroassemblies

Signal generators

Avionics

Signal generators subassemblies

Insulated or refrigerated railway freight cars

Passenger automobiles:foams (interior)foams (exterior)with charged a/cwithout charged a/celectronics

Light trucks:foams (interior)foams (exterior)with charged a/cwithout charged a/celectronics

Heavy trucks and tractors, with GVW 33,001 lbsor more:foams (interior)foams (exterior)with charged a/cwithout charged a/celectronics

Motorcycles with seat foamed with ODCs

Bicycles with seat foamed with ODCs

Seats foamed with ODCs

Aircraft

Optical fibers

Electronic cameras

Photocopiers

Avionics

Electronic drafting machines

Complete patient monitoring systems

Complete patient monitoring systems;subassemblies thereof

Physical or chemical analysis instruments

Oscilloscopes

Foam chairs

Foam sofas

Foam mattresses

8531.20

8534

8537.10.00.30

8541

8542

8543.20

8543.90.40

8543.90.80

8606

8703

8704

8704

8711

8712

8714.95

8802

9001

9006

9009

9014.20

9017

9018.19.80

9018.19.80.60

9027

9030

9401

9401

9404.21

CFC-113

CFC-113

CFC-113

CFC-113

CFC-113

CFC-11

CFC-11CFC-11

CFC-12CFC-113

CFC-12

CFC-11CFC-11

CFC-12CFC-113

CFC-12

CFC-11CFC-11

CFC-12CFC-113

CFC-11

CFC-11

CFC-11

CFC-12

CFC-113

CFC-12

CFC-113

CFC-113

CFC-113

CFC-113

CFC-12CFC-113CFC-113

CFC-12CFC-113

CFC-11CFC-12CFC-113

CFC-11

CFC-11

CFC-11

0.0146

0.001

0.1306

0.0001

0.0002

0.6518

0.915

0.1265

100.1

0.80.72.00.20.5

0.60.12.00.20.4

0.60.13.02.00.4

0.04

0.04

0.04

0.25 lb./1000 lbsOperating Empty

Weight (OEW)30.0 lbs./1000 lbs. OEW

0.005 lb./ thousand feet

0.01

0.0426

0.915

0.12

0.943.41631.9320

0.00030.0271

0.490.59430.2613

0.30

0.75

1.60



CFC-113

CFC-113

CFC-113

Electronic games and electronic componentsthereof

Electronic items not otherwise listed inthe Table

not included in HTSchapters 84, 85, 90

9504

0.0004 pound/$1.00 ofentry value

included in HTSchapters 84, 85, 90

0.0004 pound/$1.00 ofentry value

Part III.

Product NameHarmonized TariffSchedule Heading

Products that are not Imported Taxable Products

Room air conditionersDishwashersClothes washersClothes dryersFloppy disk drive unitsTransformers and inductorsToastersUnrecorded mediaRecorded mediaCapacitorsResistorsSwitching apparatusCathode tubes

8415.10.00.608422.118450.118451.218471.9385048516.72852385248532853385368540

1 Denotes an ODC used in the manufacture of rigid foam insulation.

Appendix CThis appendix contains models of the certif-icates, reports, and statements discussed

earlier under Fuel Taxes.

Model Certificate A

NOTIFICATION CERTIFICATE OF TAXABLE FUEL REGISTRANT

Name, address, and employer identification number of person receiving certificate

The undersigned taxable registrant (“Registrant”) hereby certifies under penalties of perjury that Registrant is registered by the InternalRevenue Service with registration number and that Registrant’s registration has not been revoked or suspended by theInternal Revenue Service.

Registrant understands that the fraudulent use of this certificate may subject Registrant and all parties making such fraudulent use ofthis certificate to a fine or imprisonment, or both, together with the costs of prosecution.

Signature and date signed

Printed or typed name of person signing

Title of person signing

Name of Registrant

Employer identification number

Address of Registrant

Model Certificate B

CERTIFICATE OF PERSON BUYING GASOLINE BLENDSTOCKS FOR USE OTHER THAN IN THE PRODUCTION OFFINISHED GASOLINE

Name, address, and employer identification number of seller




Name of Buyer


Address of Buyer

(To support tax-free sales under section 4081 of the Internal Revenue Code.)

The undersigned buyer (“Buyer”) hereby certifies the following under penalties of perjury:

The gasoline blendstocks to which this certificate relates will not be used to produce finished gasoline.

This certificate applies to the following (complete as applicable):

If this is a single purchase certificate, check here and enter:

1. Invoice or delivery ticket number

2. (number of gallons) of (type of gasoline blendstocks)

If this is a certificate covering all purchases under a specified account or order number, check here and enter:

1. Effective date

2. Expiration date

(period not to exceed 1 year after the effective date)

3. Type (or types) of gasoline blendstocks

4. Buyer account or order number

Buyer will not claim a credit or refund under section 6427(h) of the Internal Revenue Code for any gasoline blendstocks covered by thiscertificate.

Buyer will provide a new certificate to the seller if any information in this certificate changes.

If Buyer resells the gasoline blendstocks to which this certificate relates, Buyer will be liable for tax unless Buyer obtains a certificatefrom the purchaser stating that the gasoline blendstocks will not be used to produce finished gasoline and otherwise complies with theconditions of §48.4081-4(b)(3) of the Manufacturers and Retailers Excise Tax Regulations.

Buyer understands that if Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer’s right toprovide a certificate.

Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. In addition, theInternal Revenue Service has not notified Buyer that the right to provide a certificate has been withdrawn from a purchaser to which Buyersells gasoline blendstocks tax free.

Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of thiscertificate to a fine or imprisonment, or both, together with the costs of prosecution.

Model Certificate C

FIRST TAXPAYER’S REPORT

1.

2.

3.

4.

5.

6.

7.

First Taxpayer’s name, address, and employer identification number

Name, address, and employer identification number of the buyer of the taxable fuel subject to tax

Date and location of removal, entry, or sale

Volume and type of taxable fuel removed, entered, or sold

Check type of taxable event:Removal from refineryEntry into United StatesBulk transfer from terminal by unregistered position holderBulk transfer not received at an approved terminalSale within the bulk transfer/terminal systemRemoval at the terminal rackRemoval or sale by the blender

Amount of Federal excise tax paid on account of the removal, entry, or sale

Location of IRS service center where this report is filed

The undersigned taxpayer (the “Taxpayer”) has not received, and will not claim, a credit with respect to, or a refund of, the tax on thetaxable fuel to which this form relates.

Under penalties of perjury, the Taxpayer declares that Taxpayer has examined this statement, including any accompanying schedulesand statements, and, to the best of Taxpayer’s knowledge and belief, they are true, correct and complete.


Printed or typed name of person signing this report

Title

Model Certificate D

STATEMENT OF SUBSEQUENT SELLER

1.

2.

3.

4.

Name, address, and employer identification number of seller in subsequent sale

Name, address, and employer identification number of the buyer in subsequent sale

Date and location of subsequent sale

Volume and type of taxable fuel sold

The undersigned seller (the “Seller”) has received the copy of the first taxpayer’s report provided with this statement in connection withSeller’s purchase of the taxable fuel described in this statement.

Under penalties of perjury, Seller declares that Seller has examined this statement, including any accompanying schedules andstatements, and, to the best of Seller’s knowledge and belief, they are true, correct and complete.


Printed or typed name of person signing this report

Title

Model Certificate E

CERTIFICATE OF REGISTERED GASOHOL BLENDER


(To support sales of gasoline at the gasohol production tax rate under section 4081(c) of the Internal Revenue Code)

Name of buyer (“Buyer”) certifies the following under penalties of perjury:

Buyer is registered as a gasohol blender with registration number . Buyer’s registration has not been suspended orrevoked by the Internal Revenue Service.

The gasoline bought under this certificate will be used by Buyer to produce gasohol (as defined in §48.4081-(6)(b) of the Manufacturersand Retailers Excise Tax Regulations) within 24 hours after buying the gasoline.

Type of gasohol Buyer will produce (check one only):

10% gasohol

7.7% gasohol

5.7% gasohol

If the gasohol the Buyer will produce will contain ethanol, check here:



1. Account number

2. Number of gallons


1. Effective date

2. Expiration date



Buyer will not claim a credit or refund under section 6427(f) of the Internal Revenue Code for any gasoline covered by this certificate.

Buyer agrees to provide seller with a new certificate if any information in this certificate changes.

Buyer understands that Buyer’s registration may be revoked if the gasoline covered by this certificate is resold or is used other than inBuyer’s production of the type of gasohol identified above.

Buyer will reduce any alcohol mixture credit under section 40(b) by an amount equal to the benefit of the gasohol production tax rateunder section 4081(c) for the gasohol to which this certificate relates.

Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use of thiscertificate to a fine or imprisonment, or both, together with the costs of prosecution.




Address of Buyer


Model Certificate F

CERTIFICATE OF PERSON BUYING COMPRESSED NATURAL GAS (CNG) FOR A NONTAXABLE USE


(To support tax-free sales of CNG under section 4041 of the Internal Revenue Code.)




Address of Buyer


(Name of buyer)(“Buyer”) certifies the following under penalties of perjury:

The CNG to which this certificate relates will be used in a nontaxable use.




2. (number of MCFs)


1. Effective date

2. Expiration date



Buyer will not claim a credit or refund under section 6427 of the Internal Revenue Code for any CNG to which this certificate relates.



Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. In addition, theInternal Revenue Service has not notified Buyer that the right to provide a certificate has been withdrawn from a purchaser to which Buyersells CNG tax free.


Model Certificate G

CERTIFICATE OF PERSON BUYING AVIATION-GRADE KEROSENE FOR USE AS A FUEL IN AN AIRCRAFT


(To support tax-free removals and entries of aviation-grade kerosene under section 4081 of the Internal Revenue Code.)




Address of Buyer


(Name of buyer)(“Buyer”) certifies the following under penalties of perjury:

The aviation-grade kerosene to which this certificate relates will be used as fuel in an aircraft.

Buyer is (check one):

Registered under section 4101 of the Internal Revenue Code with respect to the tax imposed by section 4091 with a

registration number of


1. Effective date

2. Expiration date





Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.


Buying the kerosene for its use in a nontaxable use (as defined in section 4092(a)).

Buying the kerosene for its use (other than a nontaxable use) in commercial aviation (as defined in section 4092(b)).

Buying the kerosene for its use (other than a nontaxable use) in noncommercial aviation (as defined in section

4041(c)(2)).

Buying the kerosene for resale.



2. (number of gallons)


Model Certificate H

FIRST PRODUCER’S REPORT

First Producer’s name, address, and employer identification number




Under penalties of perjury, First Producer declares that First Producer has examined this statement, including any accompanyingschedules and statements, and, to the best of First Producer’s knowledge and belief, it is true, correct and complete.

Buyer’s name, address, and employer identification number

Date and location of taxable sale

Volume and type of aviation fuel sold

Amount of federal excise tax paid on account of the sale

Model Certificate I

STATEMENT OF SUBSEQUENT SELLER (AVIATION FUEL)

Name, address, and employer identification number of seller in subsequent sale




Under penalties of perjury, Seller declares that Seller has examined this statement, including any accompanying schedules andstatements, and, to the best of Seller’s knowledge and belief, it is true, correct and complete.

Name, address, and employer identification number of buyer in subsequent sale

Date and location of subsequent sale

Volume and type of aviation fuel sold

The undersigned seller (the Seller) has received the copy of the first producer’s report provided with this statement in connection withSeller’s purchase of the aviation fuel described in this statement.

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• A second IRS representative sometimesmonitors live telephone calls. That persononly evaluates the IRS assistor and doesnot keep a record of any taxpayer's nameor tax identification number.

• We sometimes record telephone calls toevaluate IRS assistors objectively. Wehold these recordings no longer than oneweek and use them only to measure thequality of assistance.

• We value our customers' opinions.Throughout this year, we will be survey-ing our customers for their opinions onour service.

Walk-in. You can pick up certainforms, instructions, and publicationsat many post offices, libraries, and

IRS offices. Some libraries and IRS officeshave an extensive collection of productsavailable to print from a CD-ROM or photo-copy from reproducible proofs.

Mail. You can send your order forforms, instructions, and publicationsto the Distribution Center nearest to

you and receive a response 7 to 15 workdaysafter your request is received. Find the ad-dress that applies to your part of the country.

• Western part of U.S.: Western Area Distribution CenterRancho Cordova, CA 95743–0001

• Central part of U.S.:Central Area Distribution CenterP.O. Box 8903Bloomington, IL 61702–8903

• Eastern part of U.S. and foreign ad-dresses:Eastern Area Distribution CenterP.O. Box 85074Richmond, VA 23261–5074

CD-ROM. You can order IRS Publi-cation 1796, Federal Tax Products onCD-ROM, and obtain:

• Current tax forms, instructions, and pub-lications.

• Prior-year tax forms, instructions, andpublications.

• Popular tax forms which may be filled inelectronically, printed out for submission,and saved for recordkeeping.

• Internal Revenue Bulletins.

The CD-ROM can be purchased from Na-tional Technical Information Service (NTIS)for $25.00 by calling 1–877–233–6767 or for$18.00 on the Internet at www.irs.ustreas.gov/cdorders. The first release is availablein mid-December and the final release isavailable in late January.

Index

A Affiliated corporations .................. 7

Air transportation taxes: 225-mile-zone rule ................. 5 Alaska ..................................... 6 Baggage ................................. 6 Bonus tickets .......................... 6 Exemptions ............................. 6 Export ..................................... 6 Hawaii ..................................... 6 Helicopters ............................. 6

International air travel facilities 6 Military personnel ................... 6

Package holiday tours ............ 6Persons by air ........................ 5

Persons liable ......................... 6Property by air ........................ 6

Tax rates ............................ 5, 6 Taxable transportation ........... 5

Travel agency ......................... 6 Uninterrupted international ..... 6

Aircraft museums ...................... 15 Aircraft:

Affiliated corporations ............. 7 Airlines .................................... 7 Helicopters ............................. 6 Small planes ........................... 7

Alaska .......................................... 6 Alcoholic beverages .................... 2

American Red Cross ............. 5, 18 Answering service ....................... 4 Appeal procedures .................... 26 Arrows ....................................... 18

Assistance (See More information) Aviation fuel ............................... 14

B Bonus tickets ............................... 6

Bows .......................................... 18Bureau of Alcohol, Tobacco, and

Firearms ................................. 2

C Chemicals, ozone-depleting ........ 3 Coal:

Blending ............................... 19 Exemptions ........................... 19 Producer ............................... 18 Production ............................ 19 Selling price .......................... 19

Tax based on weight ............ 17 Tax rates .............................. 19

Coin-operated telephones ........... 4Commercial waterway transporta-

tion ........................................ 16 Communications taxes:

Coin-operated telephones ...... 4

Deposits ............................... 25 Exempt services ..................... 4

Figuring the tax ...................... 4Local telephone service ......... 4Prepaid telephone cards ........ 4Private communication service 4

Tax rates ................................ 4 Teletypewriter exchangeservice ............................... 4

Toll telephone service ............ 4 WATS service ........................ 4

Credit or refund: Environmental taxes ............... 3 Form 720 ................................ 3 Form 8849 .............................. 3

Gas guzzler tax .................... 19Resale of tax-paid

semitrailers ...................... 21Statute of limitations ............... 3

Vaccines ............................... 20

D Deposits:

Exceptions ............................ 26Federal tax deposit coupons 25

Fourteen-day rule ................. 25Net tax liability ...................... 25

Nine-day rule ........................ 25 Ozone-depleting chemicals .. 25 Requirements ....................... 24

Safe harbor rules ................. 25 Semimonthly period ............. 25

Thirty-day rule (ODCs) ......... 25When to make ...................... 25 Diesel fuel .................................. 11

Dyed diesel fuel ......................... 12

EElectric outboard motors ........... 18Employer identification number . 24

Environmental taxes:Credit or refund ...................... 3

Ozone-depleting chemicals 2, 3United States (defined) .......... 2 Examination procedures ............ 26

Exempt communication ser-vices: American Red Cross .............. 5

Answering service .................. 4 Coin-operated telephones ...... 4 Common carriers .................... 5 Installation charges ................ 4 International organizations ..... 5 Military personnel ................... 5

Mobile radio telephone service 4 News services ........................ 4

Nonprofit educational organiza-tions ................................... 5 Nonprofit hospitals ................. 5

Private communication service 4 Radio broadcasts ................... 4 Security systems .................... 4

Exemptions:Air transportation taxes .......... 6

Airplane supplies .................. 17American Red Cross ............ 18

Bonus tickets .......................... 6 Coal ...................................... 19 Export returned .................... 18

Federal government ..... 3, 5, 23 For export ............................. 17 Further manufacturing .... 17, 18 Helicopters ............................. 6 Indian handicrafts ................. 17

Indian tribal governments . 5, 18 Luxury tax ............................. 23 Manufacturers tax ................ 18 Military personnel ................... 6

Nonprofit educational or-ganizations .............. 3, 5, 18

State and local gov-ernments ........... 3, 5, 18, 23 Tires ..................................... 19 United Nations ...................... 18 Vaccines ............................... 20 Vessel supplies .................... 17

F Federal government ................ 3, 5

Federal tax deposit coupons ..... 25 Firearms ...................................... 2

Floor stocks tax: Deposits ............................... 24 Ozone-depleting chemicals .... 4

Form 720: Attachments ......................... 24 Due dates ............................. 24

Paying the tax ...................... 24 Schedule A ........................... 24 Schedule C ........................... 24

Special one-time filings ........ 24

Forms: 11–C ..................................... 27 637 ................................... 2, 17 720 ................................. 20, 24 730 ....................................... 27 1363 ....................................... 6 2290 ....................................... 2 5300.26 .................................. 2 5630.5 .................................... 2 5630.7 .................................... 2

6197 ......................... 19, 20, 24 6627 ................................. 2, 24 8109 ..................................... 25 8849 ....................................... 3 SS-4 ..................................... 24

Fourteen-day deposit rule ......... 25Free tax services ....................... 42

Fuels: Aviation ................................. 14

Compressed natural gas ...... 16 Diesel ................................... 11

Fuel used on inlandwaterways ....................... 16 Gasohol ................................ 10 Gasoline ................................. 7 Kerosene .............................. 11

Special motor fuel ................ 15

G Gambling ............................. 22, 27

Gas guzzler tax: Automobiles .......................... 19

Credit or refund .................... 19 Limousines ........................... 19 Manufacturers tax .......... 17, 19

Vehicles not subject to tax ... 19 Gasohol ..................................... 10 Gasoline ...................................... 7

H Hawaii .......................................... 6 Heavy trucks:First retail sale ...................... 21

Further manufacture ............. 22 Glider kits ............................. 22 Installment sales .................. 22

Parts or accessories ............ 20Presumptive retail sales price 21Readily attachable compo-

nents ............................... 20 Related persons ................... 21 Resales ................................ 21 Separate purchases ............. 20 Tax base .............................. 21 Tax rate ................................ 20

Helicopters ................................... 6Help (See More information) Highway use tax .......................... 2

Highway vehicle(Diesel-powered) .................. 11

IImported Products Table (ODCs) 3Imported taxable products

(ODCs) ................................... 3 Indian products .......................... 18

Interest and penalties ................ 26International air travel facilities .... 6

K Kerosene ................................... 11

LLocal telephone service .............. 4

Luxury tax: Exemptions ........................... 23 Imported vehicles ................. 23

Parts and accessories .......... 23 Passenger vehicles .............. 23 Resale .................................. 23 Tax rate ................................ 23

M Manufacturers taxes:

Airplane supplies .................. 17American Red Cross ............ 18

Arrows .................................. 18 Bows ..................................... 18 Coal ...................................... 18 Exemptions ........................... 18 Export returned .................... 18 For exports ........................... 18 Further manufacturing .......... 18

Gas guzzler tax .................... 19 Indian products ..................... 18

Indian tribal governments ..... 18 Installment payments ........... 17 Lease .................................... 17 Lease payments ................... 17

Nonprofit educational organ-izations ............................ 18 Partial payments .................. 17 Person liable ........................ 17 Registration .......................... 17 Related person ..................... 18

Sport fishing equipment ....... 18State and local governments 18Tax attaches to article .......... 17

Tax liability ........................... 17 Tires ..................................... 19 Uncollectible accounts ......... 17 United Nations ...................... 18 Vaccines ............................... 20 Vessel supplies .................... 17

Mobile radio telephone service ... 4 More information ....................... 42

N News services ............................. 4

Nine-day deposit rule ................ 25Nonprofit educational organ-

izations ......................... 3, 5, 18

OObligations not in registered

form ...................................... 24 Ozone-depleting chemicals:

Deposits ............................... 25Floor stocks tax ...................... 4Imported Products Table ........ 3Imported taxable products ..... 3

Taxable ................................... 3

PPenalties and interest ................ 26Policies issued by foreign per-

sons: IRC 6114 treaty-based posi-

tions ................................. 24 Tax rate ................................ 23

Problem Resolution Program .... 26Publications (See More information)

R Radio broadcasts ........................ 4 Registration-required obligations 24 Registration:

Diesel fuel .............................. 7 Form 637 ................................ 2 Gasoline ................................. 7 Manufacturers taxes ............. 17

Related persons: Heavy trucks ........................ 21

Sport fishing equipment ....... 18

Restoration of vehicles .............. 22 Rulings Program ........................ 26

S Sales price:

Bonus goods ........................ 17Cost of transportation ........... 17

Discounts .............................. 17Local advertising charges .... 17

Manufacturers tax ................ 17 Rebates ................................ 17 Trucks ................................... 21 Warranty charges ................. 17

Security systems ......................... 4Ship passenger tax ................... 22

Sonar devices ............................ 18Sport fishing equipment:

List of equipment .................. 18 Manufacturers tax ................ 18 Resales ................................ 18

State and localgovernments ................. 3, 5, 18

Statute of limitations .................... 3

TTax help (See More information)

Tax rate:Air transportation of persons .. 5Air transportation of property . 6

Arrows .................................. 18 Bows ..................................... 18 Coal ...................................... 19 Communications tax ............... 4

Electric outboard motor ........ 18International air travel facilities 6

Luxury tax ............................. 23Obligations not in registered

form ................................. 24Policies issued by foreign per-

sons ................................. 23Ship passenger tax .............. 22

Sonar devices ...................... 18Sport fishing equipment ....... 18

Trucks ................................... 20 Taxpayer Advocate ................... 26 Telephone tax .............................. 4

Teletypewriter exchange service . 4Thirty-day deposit rule (ODCs) . 25

Tires: Exemptions ........................... 19 Manufacturers taxes ....... 17, 19 Weight determination ........... 19

Toll telephone services ............... 4 Travel agency .............................. 6 TTY/TDD information ................ 42

UUninterrupted international air

transportation ......................... 6 United Nations ........................... 18

V Vaccines:Credit or refund .................... 20

Exemptions ........................... 20 Manufacturers tax .......... 17, 20

Vehicles: Gas guzzler .......................... 19 Imported ............................... 20 Law enforcement .................. 19

Passenger (luxury tax) ......... 23

W Wagering ................................... 27 WATS service .............................. 4

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publication 510 (rev. november 1998)

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