Excise Tax in The United States - Excise Tax Types

Excise Tax Types

Excise taxes are generally taxes on events like the purchase of a quantity of a particular item like: gasoline, diesel fuel, liquor, wine, cigarettes, airline tickets, tires, trucks, etc. and are usually included in the price of the item—not listed separately like sales taxes usually are. To minimize tax accounting complications, the excise tax is usually imposed on quantities like gallons of fuel, gallons of wine or drinking alcohol, packets of cigarettes, etc. and are usually paid initially by the manufacturer or retailer.

All excise taxes are, of course, passed on to the consumer who eventually consumes the product. The price the item is eventually sold for is not generally considered in calculating the excise taxes. Income taxes, value added taxes (VATs), sales taxes, and transfer taxes are all examples of other event taxes but are typically not called excise taxes (in the U.S.) because of the different ways they are assessed. In the U.S. essentially the only taxes called excise taxes are the taxes on quantities of enumerated items (whiskey, wine, tobacco, gasoline, tires, etc.). Other events may technically be considered excise taxes but are seldom collected under that name.

An example of a state of being tax is an ad valorem property tax — which is not an excise. Customs or tariffs are based on the property (usually imported goods) as a state of being or ad valorem taxes and are also typically not called excise taxes. Excise taxes are collected by producers and retailers and paid to the Internal Revenue Service or other state and/or local government tax collection agency. Historical federal excise tax collections to 1945 are listed in the Historical Statistics of the United States and more recent federal excise tax data is listed in the White House historical tables--Table 2.1

For purposes of the U.S. Constitution, an excise tax can be defined as any indirect tax, or event tax. An excise means any tax other than: (1) a property tax or ad valorem tax by reason of its ownership; (2) a tax per head tax or capitation tax by being present (very rare in the U.S.); (3) an income tax paid directly to the government on income; or a (4) sales tax which is paid on all sales except specifically exempted items.

An excise is imposed on listed specific taxable events or products and are usually not collected or paid directly by the consumer -- a direct tax. Excise taxes are collected by the producer or retailer and paid by them to the Internal Revenue Service, state or local tax agency. Of course the consumer ultimately pays the excise tax which is added to the price of the product when it is sold. Often sales taxes are collected as a percentage of the cost of the product and its excise tax -- a tax on a tax.