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What is excise tax simple definition?

Excise taxes are taxes that are imposed on various goods, services and activities. Such taxes may be imposed on the manufacturer, retailer or consumer, depending on the specific tax.

What is an excise tax What is the purpose of it?

Excise taxes are imposed on manufacture, sale, or consumption of commodities, and upon licenses to pursue certain occupations. Federal dependence on excise taxes is down significantly since 1950, when almost 20 percent of federal tax collections were from excise taxes.

Which is an example of an excise tax?

Excise taxes are most often levied upon cigarettes, alcohol, gasoline and gambling. These are often considered superfluous or unnecessary goods and services. To raise taxes on them is to raise their price and to reduce the amount they are used. In this context, excise taxes are sometimes known as “sin taxes.”

What are three types of excise taxes?


  • Specific Tax – refers to the excise tax imposed which is based on weight or volume capacity or any other physical unit of measurement.
  • Ad Valorem Tax – refers to the excise tax which is based on selling price or other specified value of the goods/articles.

What is an excise tax give two examples of excise taxes?

Excise taxes are imposed on: fuel-inefficient vehicles including station wagons, vans and sport utility vehicles. air conditioners designed for use in automobiles, station wagons, vans or trucks and. gasoline, diesel fuel, aviation gasoline and aviation fuel.

Why do we need excise taxes?

Excise taxes can be used to price an externality or discourage consumption of a product that imposes costs on others. They can also be employed as a user fee to generate revenue from people who use particular government services, revenue which should be used to maintain that government service.

Does excise mean cut out?

An excise tax is a special tax levied on specific products sold within a country. To excise something can also mean to get rid of it. Interestingly, the word excise (ek-SIZE) used as a verb means to remove something by cutting it out.

What’s another name for excise tax?

What is another word for excise?

duty customs
levy tariff
tax toll
impost mulct
surcharge tithe

How are excise taxes collected?

Excise taxes are narrowly based taxes on consumption, levied on specific goods, services, and activities. Generally, excise taxes are collected from producers or wholesalers, and are embedded in the price paid by final consumers.

What is a Canadian excise tax?

When goods are made in Canada, excise tax is payable when the goods are delivered to the buyer. When they are imported, excise tax is payable by the importer, at the time the goods were imported. For more information, go to Excise taxes and other levies technical information or contact us at 1-866-330-3304.

What is the major difference between a sales tax and an excise tax?

Sales tax applies to almost anything you purchase while excise tax only applies to specific goods and services. Sales tax is typically applied as a percentage of the sales price while excise tax is usually applied at a per unit rate.

How are excise taxes used in the United States?

Excise tax refers to a tax on the sale of an individual unit of a good or service. The vast majority of tax revenue in the United States is generated from excise taxes. The incidence of an excise tax depends on the price elasticity of demand and the price elasticity of supply.

How are excise taxes collected by third parties?

Some excise taxes are collected by a third party. The third party then sends the tax to the IRS and files the Form 720. For example, the tax on an airline ticket generally is paid by the purchaser and collected by the airline. Businesses must file the form for each quarter of the calendar year.

What is the rate of excise tax on gasoline?

The effective federal excise tax rate varies depending on the income bracket of the individual with the Top 1% of earners paying about 0.1% in excise taxes and the bottom 40% paying around 1-1.5% in excise taxes. This is largely because of the taxes on gasoline that almost all individuals pay.

How does an excise tax affect the price of good?

Assuming that Good A is a homogenous good, in the absence of taxation, the equilibrium price is P 0, and the equilibrium quantity is Q 0. If the government decides to impose an excise tax of $X, the owners of Good A will only supply the quantity demanded at a price of P 1 + $X.