Who Needs to File Form 720: A Simple Guide for Businesses
If you hear “excise tax” and think it only applies to big fuel companies or tobacco manufacturers, you are not alone. In practice, many ordinary businesses end up with an IRS Form 720 filing obligation because they sell a taxed service, manufacture or import a taxable product, or sponsor certain health coverage that triggers the PCORI Fee.
This guide explains who needs to file Form 720 (and why the obligation often shows up during growth, audits, or acquisitions), plus how to confirm your status using the IRS instructions for Form 720.
What Form 720 actually covers (in plain English)
IRS Form 720 (Quarterly Federal Excise Tax Return) is used to report and pay a wide range of federal excise taxes. Unlike income tax, excise taxes are often:
- Transaction-based (tied to a sale, use, or event)
- Embedded in pricing (passed through to customers or included in vendor invoices)
- Easy to miss when a business adds a new product line, contract type, or benefits structure
The IRS updates details, tax rates, and codes in the official Instructions for Form 720, which is the fastest “IRS web” reference for confirming whether a specific activity is reportable.
Who needs to file Form 720 (the simplest decision rule)
You generally need to file irs form 720 if your business does either of the following:
You have a Form 720 excise tax liability for the quarter
This includes situations where you:
- Sell certain taxed goods or services
- Manufacture, produce, or import certain products
- Use certain fuels or products in a taxable way
- Owe specialized excise taxes tied to your industry
You owe the PCORI Fee (often annual, reported on Form 720)
Many employers and plan sponsors that are otherwise “non-excise” businesses still file Form 720 to report the PCORI Fee. The filing is typically associated with the July deadline tied to plan years (the IRS provides the mechanics in Form 720 instructions, and many businesses treat it like an annual compliance event).
A practical “trigger map” by business activity
Most confusion comes from not recognizing that excise taxes can attach to what you sell, what you import, how you insure risk, or how you structure benefits. Use the table below as a fast screening tool, then verify the exact tax code and rules in the IRS instructions.
| Business activity | Why it can trigger Form 720 | What to check next |
|---|---|---|
| Selling or removing fuel, operating in fuel supply chains | Certain fuel transactions are subject to federal excise taxes and reporting rules | Fuel tax sections and definitions in the Form 720 instructions |
| Providing certain transportation or communications services | Some services have excise tax regimes depending on facts and billing | Whether your service falls into a taxable category and how it is billed |
| Manufacturing, importing, or selling certain taxable products | Some products are taxed at the manufacturer, importer, or retail level | The product category and the responsible party for filing |
| Indoor tanning services | Indoor tanning has been a common “surprise” excise category for service businesses | Whether your offering meets the taxable definition |
| Issuing or buying policies subject to foreign insurance excise tax | Certain cross-border insurance arrangements can trigger excise tax | Policy type, parties, and where the risk is located |
| Sponsoring self-insured health coverage | Often triggers PCORI Fee reporting on Form 720 | Plan type, plan year end, and counting method rules |
If one of these looks like your business, do not guess. Go straight to the IRS instructions for Form 720 and confirm the tax code, rate, and who is liable.
The PCORI Fee: why “non-excise” companies get pulled into Form 720
The PCORI Fee is a great example of why the headline question “Who Needs to File Form 720” matters beyond obvious excise industries. Fast-growing companies often add benefits in stages (HRAs, level-funded arrangements, or self-insured components). That benefits decision can create a Form 720 filing requirement even if the company sells software, provides consulting, or runs a local service business.
Strategic lesson learned: benefits structure is not just an HR decision, it is also a tax compliance input. If your business has recently changed carriers, introduced new reimbursement arrangements, or acquired a company with a different plan design, re-check whether PCORI applies.
When Form 8849 enters the picture (refunds and claims)
Form 720 is about reporting and paying excise tax, but some businesses also need Form 8849 to claim certain refunds or credits tied to excise taxes (for example, specific fuel-related claims depending on use and eligibility).
The key strategic point is operational: if you are in a business where excise taxes show up in procurement, logistics, or fleet operations, you may want a process that connects:
- Source documents (invoices, bills of lading, usage logs)
- Your Form 720 reporting
- Any eligible claims using Form 8849
Even when a claim is legitimate, weak documentation is where businesses lose time and create audit risk.
Why Form 720 obligations are showing up more often in deals and audits
Form 720 exposure is increasingly treated like a due diligence item because excise tax is easy to under-file without noticing. Here are three real-world patterns investors and operators run into:
Pattern 1: The “we thought the vendor handled it” contract
A service contract may say “taxes included” without specifying which taxes. In diligence, buyers often discover the target should have been filing and remitting excise taxes directly.
Takeaway: during renewals, make tax responsibility explicit. Ambiguity creates back-tax exposure.
Pattern 2: Benefits changes create a new compliance calendar
An operator introduces a self-insured element to benefits (often for cost control), and nobody updates the compliance checklist. The PCORI Fee is missed because the company does not think of itself as an excise taxpayer.
Takeaway: whenever benefits structure changes, add a compliance review item for PCORI.
Pattern 3: Growth into new channels triggers new excise categories
Importing, private labeling, or changing where title transfers can change who is liable for certain excise taxes.
Takeaway: treat “new channel launches” like a tax scoping event, not just a sales milestone.
A simple way to score your Form 720 risk (actionable, not scary)
You do not need a complex model to decide whether to investigate further. Use this internal scorecard and escalate if you hit “Medium” or “High.”
| Risk factor | Low | Medium | High |
|---|---|---|---|
| Product/service footprint | No obvious excise categories | One category might apply | Multiple categories clearly apply |
| Operational complexity | Few SKUs, simple billing | Multiple states, mixed billing | Importing, manufacturing, fuel usage, or specialized services |
| Benefits structure (PCORI) | Fully insured, confirmed | Mixed or recently changed | Self-insured component likely |
| Deal activity (investor lens) | No acquisitions | One acquisition or carve-out | Multiple acquisitions, integrations, or rapid expansion |
If you land in Medium or High, confirm your facts against the IRS Form 720 instructions and consider professional advice.
Filing without making it a quarterly fire drill
Once you know you must file, the goal becomes repeatability:
- Create a single owner for excise tax inputs (finance, payroll/benefits, or operations)
- Build a “source-of-truth” folder for invoices, usage logs, and plan documents
- Validate category codes and calculations against the IRS instructions each year
If you want an online, IRS-authorized way to submit, platforms like E Eile Excise 720 (eFileExcise720) are designed to help businesses e-file Form 720 without software downloads, with secure data handling and customer support.
Frequently Asked Questions
Who needs to file Form 720 if they had no activity this quarter? Generally, Form 720 is filed when you have a reportable excise tax liability (including certain one-time liabilities like the PCORI Fee when applicable). If you are unsure whether a “zero return” applies to your situation, confirm using the IRS instructions for Form 720 or a tax professional.
Is the PCORI Fee filed on Form 720 or a separate form? The PCORI Fee is reported on Form 720 (typically tied to an annual filing timeline based on plan year rules). Always verify the current filing mechanics in the IRS Form 720 instructions.
When would I use Form 8849 instead of Form 720? Form 720 is used to report and pay excise taxes. Form 8849 is commonly used to claim certain refunds or credits related to excise taxes, depending on eligibility and documentation. Some businesses use both.
Where can I find IRS instructions for Form 720 on the IRS website? The most direct IRS web resource is the official Instructions for Form 720 page.
How do I figure out pricing or get help if I am not sure I need to file? If you want an online filing option, you can review pricing and use contact us options on the eFileExcise720 website to reach support for general platform questions.
File Form 720 online with an IRS-authorized provider
If you have identified a likely filing trigger (especially PCORI Fee, fuel-related activity, or a newly added taxable line of business), the next step is turning that into a clean, on-time submission.
You can file your form 720 online with eFileExcise720, an IRS-authorized e-filing portal built for Form 720, amendments (720-X), and claims support such as form 8849. To proceed, create your free account, review pricing in the site menu, or use the contact us page if you need help getting started.
