FOR LAWYERS

Excise Tax

By
Lia Kopin-Green
/
March 27, 2023

What is Excise Tax?

An excise tax is a type of tax levied on certain goods, activities and services in the United States. In most cases, excise taxes apply to things that may be considered harmful or unnecessary such as tobacco, alcohol, firearms, motor fuel and airline tickets. Excise taxes are international taxes imposed within the U.S. government infrastructure and are not applicable to transactions that occur outside of the U.S. borders. In some cases, excise taxes may apply to certain real estate transactions.

Depending on the specific tax, these taxes are generally imposed on the manufacturer, retailer, seller or consumer.

Key Takeaways

  • An excise tax is a type of tax imposed on certain goods, activities and services that may be considered harmful or unnecessary.
  • Tobacco products, alcohol, firearms and airline tickets are common examples of things that may be excise taxed.
  • Typically, excise taxes are included in the final price of certain products and services so that they are generally hidden to consumers.

Understanding Excise Taxes

Although this is not always the case, excise taxes and primarily imposed on businesses. The business then passes the tax on to consumers by charging higher prices on certain products and services. It may be charged as a percentage of the sale price or as a fixed amount per unit sold. Accordingly, consumers may not always see the cost of most excise taxes directly. For example, when you buy a pack of cigarettes, the manufacturer of the cigarettes or the store in which you bought it may have included the excise tax into its final price.

The main purpose of an excise tax is to discourage the consumption of certain goods and services that may be deemed harmful, dangerous or unnecessary. In turn, the government aims to raise revenue for beneficial programs or projects. For instance, the excise tax on cigarettes is meant to discourage the use of tobacco and raise revenue for certain healthcare programs. Other forms of excise taxes may also be used to fund highway or airport improvement projects.

If businesses or individuals fail to comply with excise taxes, they may face harsh penalties and fines. Moreover, the government may take other legal measures to collect the tax owed.

In summary, the U.S. government uses excise taxes to promote public health and safety while generating revenue and discouraging the use of harmful products. 

Real Estate Excise Taxes

Local or state governments may levy real estate excise taxes, also known as REET, on the sale of certain properties. In some states, all sales or real property may be subject to REEt unless a specific exemption is claimed. The tax is usually paid by the seller at the time of the transaction and is based on the sale price of the property.

The principal goal of real estate excise taxes is to generate revenue to fund public services such as schools, parks, and transportation infrastructure. In other words, similar to other excise taxes, REET is intended to discourage unnecessary transfer of property while generating revenue for the government.

Bottom Line

If you are dealing with excise taxes and are looking for unmatched legal support, look no further than Attorney At Law. Our team or specialized tax lawyers can provide you with expert advice and personalized assistance to ensure that you are not subject to any unnecessary taxes. Contact a top tax lawyer in your area today to schedule a consultation.

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