Excise Tax

January 7, 2013

General Discussion

An excise tax is an indirect tax on certain listed items.  Excise taxes are collected by the producer or retailer and are not paid directly by the consumer.  They are “hidden” in the price of the listed item.  Excise taxes may be levied by federal, state or local governments.  The authority to levy the federal excise tax stems from the U.S. Constitution, which provides that Congress has the power to “[…] lay and collect taxes, duties, imposts and excises, pay the debts and provide for the common defense and general welfare of the United States.”  In the U.S. constitutional law sense, an excise tax is essentially an event tax (as opposed to a state of being tax).  For instance, the ad valorem property is a state of being tax.

In the United States, the only taxes technically called excise taxes are the taxes on quantities of enumerated items.  Other events may be considered excise taxes but are seldom collected under that name.

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 (4) a sales tax which is paid on all sales except specifically exempted items.

Federal excise taxes are imposed under Subtitle D (Miscellaneous Excise Taxes) and Subtitle E (Alcohol, Tobacco and Certain Other Excise Taxes) of Title 26 of the United States Code.