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What is Excise Tax?

By June 10, 2014August 28th, 20142014, Tax Tips

As a small business owner you have likely come in contact with the phrase “excise tax” at least once. This term is a simple term for a very broad tax. Excise tax is what’s called an “indirect tax” on items. This tax can be levied by federal, state, and local governments and there is no country-wide standard. An indirect tax is a tax that is collected from a by a small business and then forwarded to the government, as opposed to a direct tax which is collected directly from the consumer by the government. Most businesses include the excise tax fee in their product’s price.

Excise tax first began following the American Revolutionary War and was placed primarily on goods such as whiskey, tobacco, and refined sugar. While at first these taxes were generally raised briefly only after wars and then dropped again, during The Great Depression they rose into popularity and have remained as such since. Excise taxes are usually used to finance projects such as highways, airports, and vaccine production.

The most common places to find excise tax being charged are fuel, liquor, tires, and airline tickets. In general excise tax is charged on quantities such as a gallon of fuel or a packet of cigarettes. Many companies are expected to pay excise tax themselves initially, and then they are reimbursed by the product being purchased with the excise tax included in the cost.

If your small business is related to the production and/or sale of alcoholic beverages or gasoline, you are the most likely to face excise taxes on your products. There are laws very specific to these sorts of products and they vary from state to state and even the laws may vary from the federal laws. Call ATS today at 303-232-8300 and schedule your free consultation today with one of our experts to ensure your small business is charging and paying excise taxes in accordance with those laws!

Accounting & Tax Solutions

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