Excise taxes are another form of generating revenue for federal and state governments.
Excise taxes differ from sales and use taxes in that specific goods are generally subject to excise tax and also tend to be a specific amount versus a percentage of the sales price. Sellers report and remit excise taxes; however, the tax is usually either built into the sales price or a separate line item to pass through to the purchaser.
The most common goods subject to excise taxes are gasoline, alcohol and cigarettes. Reasoning for these items are to pass through the expense of maintaining roads and additional health issues contributed from alcohol and cigarette usage, also known as a Sin Taxes. Tire excise taxes are also common to assist in environmental issues associated with tire rubber. Many states subject excise tax to many different goods, for various reasons, and many purchasers may not even realize they are paying the additional tax on top of sales taxes. A difference being if the seller does not collect sales tax, the purchaser owes use tax; if excise tax is not collected from the purchaser, the seller is still liable for the amount.
Some of the more unusual excise taxes charged include:
Maine – the official state fruit, blueberries, are subject to $0.15/per pound.
Alabama – decks of cards subject retailers to $2.00/pack sold. The last state to consider decks of cards a vice.
Washington – has a fish excise tax on various fish at various rates.
California – has a Lumber Products Assessment.
Nevada – recently implemented an excise tax of 3% on Transportation Network Companies (think Uber and Lyft).
Many states now have a Medical Marijuana excise tax, or are considering implementing.
The excise tax that amuses me is the Bicycle Tax in the City of Colorado Springs, Colorado. The excise tax is an attempt to have bicyclists share costs in road maintenance and bike infrastructures. Other states have attempted or are attempting to create a bicycle tax to ease road cost burdens, since bicyclists generally share the roads with automobiles. Colorado Springs implemented the excise tax in 1998 and is considered to be successful in generating funds to improve the bicycle riding experience. Colorado Springs is also the only city in the nation to have such a tax. Let’s take a look.
In addition to the above, depending on where in El Paso County and in Colorado Springs, a Regional Transit District Tax of 1.00% may apply.
For bicycle vendors, there is an excise tax of $4.00/new bicycle sold. This excise tax would most likely be passed through to the purchaser, either as a flat fee or built into the selling price of each new bicycle. The tax has been a success in Colorado Springs in that over the years, generating funds to create new and better bike trails and services.
Excise taxes generally are created to assist in the funding of specific projects or programs by way of cost sharing. Most consumers are unaware of excise taxes as they are generally rolled into one line item of “Taxes” on invoices or built into the sales price.
Sellers have the responsibility of reporting and remitting the excise taxes, usually on separate forms from sales and use tax-reporting forms. The best bet to find out if your goods are subject to excise taxes is to visit the state taxing authority and review their Excise Tax section.
Laura Hoffman is an Indirect Tax Specialist living in Las Vegas, Nevada. Laura retired from a multi-state natural gas distribution company after specializing in sales & use taxes, franchise fees, business licensing, property taxes, excise and utility taxes for over 15 years.