Refunds of federal excise tax on fuels are generally claimed on Form 8849, Claim for Refund of Excise Taxes. If you have to file Form 720, Quarterly Federal Excise Tax Return, because you owe certain federal excise taxes, you can use Schedule C of that form to claim a refund for your nontaxable use of a fuel for the quarter.
If you are an ultimate purchaser of the fuel, you can only claim a refund on Form 720 for any quarter in which you can claim at least $750. This is the amount of the excise tax on fuel you used for a nontaxable use in the quarter, or in any previous quarters during the year for which you have not yet requested a refund. You can carry forward the amount from one quarter to another if you have less than $750 of excise taxes to claim.
Form 720 is a quarterly form. If you file an annual claim, you would need to use Form 4136, Credit for Federal Tax Paid on Fuels, which would be filed with your annual income tax return. The following taxes can only be claimed as a credit (not a refund) on Form 4136:
Excise tax on gasoline or aviation gasoline used on a farm.
Excise tax on fuels used for nontaxable purposes when the total for the year is less than $750.
The excise tax on fuels used for nontaxable use, for which you did not claim a refund for any quarter during the year.
Excise tax on fuel used in machinery for off-highway business use that traveled less than 7,500 miles.
How you claim the credit depends on whether you are filing as an individual, a partnership, a corporation, S-corporation, or a farmers’ cooperative association.
If you are an individual, you include the amount of the credit on the “Other payments” line in the “Payments” section of Form 1040 and check the Form 4136 box.
A partnership would pass the credit through to its partners by attaching a statement to Schedule K-1 (Form 1065), showing each partner’s share of the number of gallons of fuel involved in the nontaxable use, the type of use, and the applicable credit per gallon. The partners would then claim their applicable portions of the credit on their individual income tax returns.
Corporations, S-corporations, and farmers’ cooperative associations claim the credit on the line “credit for Federal tax paid on fuels” on their applicable tax returns.