Aug 28 ,2025

Understanding Other Excise Tax (IRS No. 31): A Clear Guide

What is Form 720 and Why Is It Important?

Form 720 is the IRS's official document used by businesses to report and pay various types of Federal Excise Taxes. This form is used to calculate taxes for things like environmental taxes, fuel taxes, and other specific excise taxes imposed on certain goods and services. Business owners, especially those dealing with taxable products and services, need to file this form quarterly. It helps ensure that businesses are compliant with the IRS and avoid penalties for non-payment of taxes.

IRS Number 31: Obligations Not in Registered Form

In this blog, we will focus on IRS Number 31, which deals with obligations not in registered form. This tax is important for businesses and individuals who issue or deal with obligations like bonds and other forms of debt.

What Does “Obligations Not in Registered Form” Mean?

An "obligation not in registered form" refers to certain types of bonds or debt instruments that are not recorded or tracked by the issuer in a formal, registered manner. Essentially, these are debt instruments that do not have a registered owner in the issuer’s books. This differs from registered bonds, where the bondholder is identified and recorded.
When such obligations are issued, a tax is imposed on the issuer unless the obligation meets specific exceptions.

Tax Rate for IRS Number 31

The tax for issuing obligations not in registered form is calculated as follows:
1% Tax on Principal: The issuer is required to pay 1% of the principal amount of the obligation.
Period of Taxation: The amount is multiplied by the number of calendar years, or parts of a year, starting from the date the obligation was issued until the date it matures.
In other words, the tax is calculated based on the total principal of the obligation, and how long it remains outstanding.

Exceptions to the Tax

Not every obligation that isn't in registered form will incur the tax. There are several exceptions outlined by the IRS:
Issued by a Natural Person: If a natural person (not a business or corporation) issues the obligation, it is exempt from this tax.
Not Offered to the Public: If the obligation is not offered to the public (i.e., it is not widely marketed), it is also exempt.
Maturity of 1 Year or Less: Obligations with a maturity of one year or less at the time of issue are not subject to this tax.
Tax-Exempt Bonds: Obligations that are tax-exempt (such as certain government bonds) are excluded.
Foreign Sales-Only Obligations: If the obligation is sold only to foreign persons and is part of an arrangement designed to ensure this, it is exempt. In this case, however, the interest must only be paid outside of the United States and its territories, and the obligation must clearly state that U.S. persons holding the obligation are subject to U.S. tax laws.

Reporting the Tax on Form 720, Tips to Keep in Mind

For obligations issued during a quarter, the tax amount should be entered on Line for IRS No. 31. The form requires you to report the principal amount of the obligation, multiplied by the number of calendar years (or part of a year) from the issue date to the maturity date. This helps the IRS track obligations that are not in registered form and ensures the tax is paid accordingly.

Tips to Keep in Mind
Always check the IRS website for the most up-to-date information regarding excise taxes and IRS forms.
Be aware of the specific exceptions to this tax to avoid unnecessary payments.
If you deal with obligations not in registered form, consider speaking with a tax professional to ensure you're compliant with IRS rules and regulations.

Conclusion
Understanding IRS Number 31 and the tax implications of issuing obligations not in registered form is essential for businesses dealing with debt instruments. By being aware of the exceptions and correctly reporting taxes on Form 720, businesses can ensure they remain compliant with the IRS. Always stay updated with IRS guidelines and seek professional advice when necessary to avoid errors in your filings.

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