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What Is an Excise Tax? Types of Excise Taxes

What Is an Excise Tax?

Excise Tax is an indirect tax charged for the sale or use of particular items. This is also an inland tax that is imposed on specific goods and services. Taxes on gasoline and other fuels, cigarettes, alcohol, phone services, airline tickets, and so on are common examples of excise charges. This is also known as Sin Tax.

It indicates that as an indirect tax, the manufacturer or seller who pays the tax to the government must regain or replace it by raising the consumer price. These taxes are typically collected in addition to another type of indirect tax, like value-added tax or sales tax.

Types of Excise Taxes

There are two types of these taxes and they are -

  1. Ad Valorem taxes are charged based on a fixed percentage of the value of a good or service (Eg. property taxes)
  2. Specific taxes are charged per unit sold (Eg. taxes added to gasoline sales)


Use of the Term in Sentences

  • An excise tax is generally a unit tax that charges a certain amount for a certain volume or unit of the item purchased.
  • Excise taxes are paid by companies that produce or sell goods or services that tend to be either controversial in use or require additional regulatory measures to ensure safe usage.
  • Excise Tax is a form of indirect tax because a merchant or manufacturer normally charges the tax to the consumer and then remits the amount to the government. 


Category: Economics
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