IRS Form 720-TO Guide: Terminal Operator Statement Rules

1. Introduction – What is Form 720-TO?

IRS Form 720-TO, officially titled Terminal Operator Statement, is a specialized federal information return governed by the Internal Revenue Service (IRS). It is used by fuel terminal operators to report monthly receipts, disbursements, and physical inventory balances of taxable liquid fuels.

Form 720-TO is a foundational component of the federal Excise Summary Terminal Accounting and Reporting System (ExSTARS). ExSTARS is an automated IRS compliance tracking network designed to monitor the national bulk fuel distribution supply chain.

Like its companion form (Form 720-CS), Form 720-TO is purely an informational disclosure statement. No tax payment is submitted with Form 720-TO. Instead, it provides the IRS with verifiable data on fuel movements across terminal loading racks, pipeline receipts, and position holder inventory balances.

2. Purpose of the Form

The primary purpose of Form 720-TO is to track taxable liquid fuels—such as gasoline, diesel, kerosene, aviation fuel, and biodiesel—at approved bulk storage facilities to ensure complete federal excise tax compliance.

Form 720-TO solves a major fuel tax enforcement challenge under Internal Revenue Code Section 4081. The removal of taxable fuel across a terminal loading rack into a transport truck or railcar is the primary taxable event in the fuel supply chain. Form 720-TO records every rack removal, providing the audit trail needed to verify that fuel owners pay their required quarterly excise taxes on Form 720.

Furthermore, Form 720-TO cross-references terminal data against bulk carrier reports filed on Form 720-CS. By matching terminal receipts and disbursements against pipeline and barge manifests, the IRS can quickly identify unrecorded fuel movements, misclassified product codes, and illegal tax evasion schemes.

3. Who Needs to File This Form

Form 720-TO must be completed and filed monthly by any commercial entity that owns, operates, or controls an approved bulk fuel storage terminal facility.

You must file Form 720-TO if your business satisfies all of the following criteria:

• Terminal Operator Status: You own, operate, or manage a liquid bulk storage facility supplied by pipeline, vessel, or barge where fuel can be removed at a loading rack.
• IRS Registration: You hold an active IRS Form 637 Registration with **Activity Letter S** or **Activity Letter T** (Terminal Operator).
• Assigned Terminal Control Number (TCN): The IRS has assigned your facility a unique 9-character **Terminal Control Number (TCN)**.

4. Who Is Exempt / Not Required to File

Form 720-TO is restricted strictly to registered operators of approved bulk fuel storage terminals. General fuel businesses and transport companies do not file this form.

You are NOT required to file Form 720-TO in the following situations:

• Bulk Fuel Carriers: Pipeline operators and marine barge companies transporting fuel between facilities file **Form 720-CS** (Carrier Summary Statement) instead.
• Position Holders & Fuel Traders: Companies that own fuel inventory stored inside a terminal but do not operate the physical facility (they report tax liabilities on Form 720).
• Retail Fuel Dealers & Jobbers: Wholesale fuel distributors and retail gas stations that buy fuel at the terminal rack and deliver it to retail locations.
• Unapproved Inland Storage Depots: Non-bulk fuel storage facilities that are not supplied by pipeline or waterborne vessel.

5. When to File

Form 720-TO is a recurring monthly information return submitted for each approved terminal facility operating during a calendar month.

Review the primary submission timing rules:

• Monthly Due Date: Form 720-TO is due on or before the last day of the month following the calendar month covered by the report (for example, the January monthly report is due February 28/29).
• Per-TCN Filing Requirement: A separate Form 720-TO report (or electronic schedule) must be filed monthly for every assigned Terminal Control Number (TCN).
• Mandatory Zero Reports: Terminal operators must file Form 720-TO every month for every active TCN, even if zero fuel receipts or disbursements occurred during the month.

6. Where and How to File

Form 720-TO is primarily submitted electronically through IRS-approved electronic data interchange channels under the ExSTARS program.

Because terminal operations involve massive transactional volume, the IRS requires terminal operators to submit Form 720-TO electronically using approved Electronic Data Interchange (EDI) software or approved web portals. Electronic submission provides immediate receipt confirmation and automated data validation.

If paper filing is authorized under IRS exception rules, the completed paper Form 720-TO must be mailed directly to the designated IRS Excise Processing Unit address listed in the official instructions (typically the IRS Center in Cincinnati, OH or Ogden, UT).

7. Step-by-Step Instructions to Fill the Form

Form 720-TO requires detailing terminal identification data, bulk receipts, rack disbursements, and monthly physical inventory reconciliations. Review the breakdown below.

Schedule / Section	Section Title	Required Information to Disclose
Header	Facility & Operator Details	Operator legal name, EIN, physical terminal address, Form 637 Letter (S/T), and 9-character TCN number.
Schedule 1	Bulk Fuel Receipts	Detail fuel entering terminal: Origin TCN, Carrier FEIN, Product Code, date, manifest number, and gallons.
Schedule 2	Fuel Disbursements	Detail fuel leaving rack/terminal: Destination, Position Holder FEIN, Product Code, delivery mode, and gallons.
Schedule 3	Inventory Reconciliation	Opening physical inventory, total receipts, total disbursements, gain/loss adjustments, and ending inventory.
Signatures	Operator Execution	Authorized corporate officer signature and date certifying accuracy under penalties of perjury.

Header – Terminal Identification

Enter the terminal operator’s legal corporate name, Employer Identification Number (EIN), physical facility address, and contact details. Disclose your IRS Form 637 Activity Letter (S or T) and your assigned 9-character **Terminal Control Number (TCN)**.

Schedule 1 & 2 – Receipts and Disbursements

Itemize every fuel transaction passing through the facility during the month:

• Schedule 1 (Receipts): List all bulk deliveries received into the terminal via pipeline, vessel, or railcar. State the origin TCN, carrier FEIN, bill of lading number, IRS Fuel Product Code, gross gallons, and net temperature-adjusted gallons.
• Schedule 2 (Disbursements): List all fuel disbursements, including rack removals into tanker trucks. State the **Position Holder FEIN** (the fuel owner), carrier FEIN, product code, bill of lading number, gross gallons, and net gallons.

Schedule 3 – Temperature-Adjusted Net Gallonage and Inventory

Report physical inventory counts for every IRS Fuel Product Code (e.g., Code 065 for gasoline, 167 for low-sulfur diesel, 130 for jet fuel, 228 for biodiesel). Under IRS rules, all gallonage reported on Form 720-TO must be reported as **net gallons adjusted to 60° Fahrenheit**.

8. Required Documents/Information Needed Before Filling

Completing Form 720-TO requires real-time automated terminal automation system logs and physical meter readings.

Ensure you have the following verification materials ready:

• Terminal Control Number (TCN) Registration: Official IRS TCN assignment letter and Form 637 Registration statement.
• Terminal Automation System Logs: Automated rack loading logs, bill of lading records, and pipeline receipt tickets.
• Position Holder Database: Verified legal company names, FEINs, and Form 637 Activity Letters for all fuel position holders storing product in the facility.
• Temperature-Corrected Tank Gauges: Automated tank gauge (ATG) inventory reports showing physical starting/ending inventory levels and net gallons at 60°F.

9. Common Mistakes to Avoid

Reporting errors on Form 720-TO cause immediate cross-matching discrepancies in ExSTARS, triggering IRS audits. Avoid these frequent mistakes:

• Failing to File Monthly Zero Reports: Skipping monthly filings during slow months when no fuel was received or disbursed. Every active TCN requires a monthly report.
• Reporting Gross Gallons Instead of Net Gallons: Entering unadjusted physical gross gallons. The IRS requires net gallons adjusted to **60° Fahrenheit**.
• Invalid Position Holder FEINs: Entering incorrect FEINs or missing Form 637 activity codes for position holders taking fuel off the rack.
• Confusing Form 720-TO with Form 720-CS: Submitting Form 720-TO for pipeline or barge transport operations instead of storage facility operations.
• Mismatching Rack Ticket Data: Discrepancies between terminal bills of lading and position holder quarterly Form 720 excise tax returns.

10. Penalties for Non-Filing or Errors

Failing to file Form 720-TO or providing incorrect terminal data carries severe operational and civil financial penalties under federal law.

Key penalty risks include:

• Information Return Penalties (IRC Section 6721): Civil penalties ranging from $50 to $290+ per return for late or inaccurate information returns (increasing to 10% of reported values for intentional disregard).
• Revocation of TCN and Form 637 Registration: Persistent failure to file Form 720-TO will cause the IRS to revoke your Terminal Control Number (TCN) and cancel your Form 637 registration. Losing TCN status **legally shuts down the terminal’s ability to operate**.
• Regulatory Audits: Mismatched rack removal logs trigger immediate IRS field audits of the terminal and its position holders.

11. Related Forms or Schedules

Form 720-TO operates in direct coordination with several core federal excise and fuel tax forms:

• Form 720-CS: Carrier Summary Statement (filed by pipeline and vessel operators).
• Form 637: Application for Registration (For Certain Excise Tax Activities – Activity Letters S and T).
• Form 720: Quarterly Federal Excise Tax Return (filed by position holders to pay rack taxes).
• Form 8849: Claim for Refund of Excise Taxes.

12. Frequently Asked Questions

1. What is IRS Form 720-TO?

IRS Form 720-TO is a monthly informational return filed by terminal operators under the ExSTARS system to report bulk fuel receipts, rack disbursements, and inventory balances.

2. Is any tax paid with Form 720-TO?

No. Form 720-TO is strictly an informational disclosure statement. No tax payments are submitted with this return.

3. What is a Terminal Control Number (TCN)?

A Terminal Control Number (TCN) is a unique 9-character alphanumeric identifier assigned by the IRS to each approved bulk fuel storage terminal facility.

4. What is the difference between Form 720-TO and Form 720-CS?

Form 720-TO is filed by terminal *storage operators* handling terminal racks. Form 720-CS is filed by bulk *carriers* moving fuel through pipelines or marine vessels.

5. What is a “position holder” on Form 720-TO?

A position holder is a person or company that holds the inventory position in taxable fuel inside the terminal, as reflected on the terminal operator’s accounting books.

6. What is the monthly filing deadline for Form 720-TO?

Form 720-TO is due monthly on or before the last day of the calendar month following the month covered by the report.

13. Conclusion

IRS Form 720-TO is an indispensable regulatory tool for bulk fuel storage terminal operators. By recording bulk fuel receipts, position holder disbursements, and net temperature-adjusted inventories, terminal operators maintain supply chain transparency and prevent illegal fuel tax evasion.

To ensure full IRS compliance, maintain active Form 637 Letter S/T registration, verify position holder FEINs, track net gallons at 60°F, submit Form 720-TO monthly via ExSTARS for every assigned TCN, and retain rack load tickets in company records.