Gasoline vs Diesel Tax Under Form 720: Rates, Rules & Filing Requirements

• Tax on diesel vs gasoline differs mainly in rates, with diesel taxed at a higher rate federally.
• Form 720 filing captures excise tax on diesel vs gasoline for registered fuel activities.
• Diesel often incurs additional surcharges due to highway usage and environmental impact.
• Gasoline tax applies broadly, while diesel tax includes specific commercial exemption rules.
• Accurate reporting of tax on diesel vs gasoline ensures compliance and avoids IRS penalties.

Category	Gasoline Tax Under Form 720	Diesel Tax Under Form 720
Fuel Type	Gasoline used in motor vehicles	Diesel fuel is used in trucks, buses, and heavy equipment
IRS Form Used	Reported through IRS Form 720	Reported through IRS Form 720
Federal Excise Tax Rate	Generally, 18.3 cents per gallon	Generally, 24.3 cents per gallon
Primary Users	Passenger vehicles and light-duty fleets	Commercial trucking and industrial vehicles
Tax Liability Trigger	Sale or use of taxable gasoline	Sale or use of taxable diesel fuel
Common Industries	Retail fuel stations, transport services	Logistics, construction, and agriculture
Quarterly Filing Requirement	Filed quarterly if excise tax applies	Filed quarterly if excise tax applies
IRS Deposit Rules	Semi-monthly deposits may apply	Semi-monthly deposits may apply
Exemptions Available	Certain government or non-taxable uses	Off-highway and exempt business uses
Penalty for Non-Compliance	Interest and IRS penalties may apply	Interest and IRS penalties may apply

The Structure of the Federal Excise Tax: What Makes the Differences Between Diesel and Gasoline?

Fuel taxes are a fundamental reporting item listed under the IRS Form 720 (Quarterly Federal Excise Tax Return). Both gasoline and diesel are subject to both federal and state excise taxes, although the rates are not the same.

• Gasoline tax rate: The average gasoline tax rate is 18.3 cents per gallon.
• Diesel tax rate: This is usually 24.3 cents per gallon.

This disparity in the tax on diesel vs gasoline is due to the fact that diesel-powered vehicles, which are mostly commercial trucks, are more likely to cause wear and tear on highways. This has led to a heavier taxation on diesel to maintain the infrastructure.

Also, some kinds of fuel can have such environmental taxes as the Leaking Underground Storage Tank (LUST) tax, which is levied on both types of fuels but is already reflected in the overall rates.

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When Form 720 Applies to Fuel Taxes

Form 720 is required to be filed quarterly by businesses that are involved in fuel production, importation, or distribution (wholesale). This includes:

• Fuel terminal operators
• Gasoline or diesel importers.
• Registered distributors and bulk sellers.

IRS will demand reporting of a taxable event, including the removal of fuel from a terminal rack or the sale to an unregistered buyer.

The tax on diesel vs gasoline is critical here since, upon misclassification, it can cause improper reporting of tax, penalties, or late filing.

Rules of Compliance You Can No Longer Ignore

Form 720 compliance goes beyond just knowing the rates. You have to comply with organized IRS regulations:

Registration Requirements

• Some of the businesses involving fuel need to be registered on IRS Form 637. Exemptions cannot be claimed without registration.

Exemptions and Credits

• Diesel that is used off-highway (e.g., farming) can be subject to credits.
• Aviation gasoline or gasoline used in a particular machine can also be exempt.

Recordkeeping Standards

You must maintain:

• Gallonage records
• Transaction invoices
• Buyer registration details

Lack of documentation may lead to invalidation of claims, even when your tax calculation is accurate.

Common Filing Mistakes That Will Prompt IRS Notices

Even experienced filers make mistakes when dealing with fuel taxes. The most common problems are:

• Misreporting of diesel as gasoline or vice versa.
• Imposing wrong tax rates.
• Absence of registration information of exempt transactions.
• This is due to failure to reconcile the gallon totals with the reported tax.

Such inaccuracies may lead to IRS notices, audits, or financial fines. The accuracy is necessary in the case of fuel excise taxes under the Form 720.

What to do to Streamline Form 720 Filing

Paper filing may be complicated, particularly when dealing with numerous types of fuels and transactions. The process can be simplified by using an IRS-approved e-filing platform such as Efile720 which:

• Auto calculation of proper tax rates
• Reducing calculation errors
• Ensuring timely submission
• Providing instant confirmation

This is especially applicable to the businesses that frequently have both gasoline and diesel reporting.

ALSO CHECK - Plastic, Chemicals & Petroleum Taxes: Environmental Tax Filing Guide

Strategic Takeaway: Why This Is Important to Your Business.

The difference between the diesel and gasoline tax is not a mere rate difference but rather it has a direct impact on your compliance requirements, cost structure, and reporting accuracy. By actively dealing with these differences, businesses are able to:

• Optimize tax credits and exemptions
• Avoid penalties and audits
• Improve operational efficiency

Using proper data tracking and trusted e-filing solutions would make sure that your Form 720 process is seamless and compliant.

FAQs

1. What is the primary difference in the tax on diesel and gasoline as under Form 720?

• The main difference is the tax rate where diesel is taxed at a higher rate than gasoline because of its more adverse effect on the road infrastructure.

2. Does the business have exemptions on diesel or gasoline tax?

• Yes, there are exemptions based on certain uses, such as farming, aviation, or off-highway usage, depending upon IRS eligibility requirements.

3. How frequently do I need to report tax on diesel vs gasoline using Form 720?

• You will be required to submit Form 720 quarterly, providing all taxable fuel transactions during the respective periods.