An excise tax is a tax on a specific product, service or activity, rather than on income or general sales. It is usually collected from the seller or manufacturer and built into the price you pay.
Common federal excise taxes
| Item | Federal excise tax |
|---|---|
| Gasoline | 18.4 cents per gallon |
| Diesel | 24.4 cents per gallon |
| Cigarettes | $1.01 per pack |
| Airline tickets | 7.5% of domestic fare plus a flight segment fee |
| Indoor tanning | 10% |
| Firearms and ammunition | 10% to 11% of the manufacturer’s price |
Rates change; check the IRS for current figures.
Excise tax vs sales tax
- Excise tax targets specific goods, often to discourage use or to fund related programs such as highways.
- Sales tax applies broadly to most purchases and is shown at checkout.
- Excise tax is often included in the shelf price.
Businesses that owe federal excise tax generally report it on Form 720 each quarter.