Two-Party Exchange & Schedule T on Form 720 Explained
What a two-party exchange is
Within the bulk transfer/terminal system, fuel often changes hands between registered parties before it leaves the terminal. A two-party exchange is a transaction — under a written contract between the delivering and receiving parties — where the receiving person becomes liablefor the excise tax on removal from the terminal rack, instead of the delivering position holder. It avoids stacking tax on intermediate transfers.
Conditions for the exchange
- A written contract between the delivering and receiving parties
- The transaction occurs before or at the rack removal
- Both parties are registered as required for taxable-fuel transactions
- The exchange happens within the terminal system
Reporting on Schedule T
Schedule T reports the gallons of taxable fuel received or delivered in two-party exchanges — for diesel, gasoline, kerosene, and aviation gasoline. It ties the physical movement to the party that's liable, supporting the Part I tax you report under each fuel's IRS number. See the 2026 fuel rates for the per-gallon amounts, and Schedule C credits for nontaxable uses.
FAQ
What is a two-party exchange?▼
A two-party exchange is a transaction where taxable fuel is transferred within the terminal system and the receiving person — not the delivering person — becomes liable for the federal excise tax on removal from the terminal rack. It lets position holders and receiving parties move fuel without an extra layer of tax.
What is Schedule T on Form 720?▼
Schedule T is the Form 720 schedule used to report gallons of taxable fuel received or delivered in a two-party exchange. It documents the bulk-transfer movement of diesel, gasoline, kerosene, and aviation gasoline so liability is assigned to the correct party.
Who is liable for the tax in a two-party exchange?▼
In a qualifying two-party exchange, the receiving person is treated as liable for the tax on removal from the terminal rack, rather than the delivering person. Both parties must meet the conditions for the exchange (a written contract, registration, and movement within the terminal) for this treatment to apply.
Which fuels does Schedule T cover?▼
Schedule T covers taxable fuels moved in the bulk transfer/terminal system — primarily diesel fuel, gasoline, kerosene, and aviation gasoline. EasyFile720 includes a guided Schedule T section for these fuels.
Schedule T, guided
EasyFile720 includes a guided Schedule T section for diesel, gasoline, kerosene, and aviation gasoline — alongside your Part I liability and Schedule C credits, with IRS-authorized e-file.
Reflects the Instructions for Form 720 (Rev. June 2026) and the bulk-transfer/terminal-system rules. General information, not tax advice. Confirm two-party exchange eligibility and registration with a qualified advisor.
