An excise tax is a tax on the manufacture, sale or use of goods, or on the carrying on of an occupation or activity. The federal government imposes excise taxes on a variety of activities, including the manufacture or sale of certain products; the operation of certain kinds of businesses; and the use of various kinds of equipment, facilities and products.
Although there are excise taxes on a variety of activities, the excise taxes that affect most consumers and small business owners are on:
- Fuel (gasoline, diesel, kerosene and compressed natural gas)
- Air transportation
- Gas-guzzler automobiles
- Sport fishing equipment
Fuel tax is a common excise tax. Entities involved in blending, refining, transporting, using or selling fuel may be required to register with the government and pay excise taxes. The excise tax imposed on the sale, refining and blending of fuel is complex, with specific requirements for each entity involved in the process. Special rules also apply to different types of fuel. Generally, the tax is imposed at the time the fuel is removed from a storage terminal, upon entry into the United States or upon the sale of the fuel.
There is a 3 percent communications tax on amounts paid for local telephone service or teletypewriter exchange service. There are certain exemptions from this communications tax for particular services, such as bundled services and prepaid telephone cards, and for certain users, including nonprofit hospitals and educational institutions.
Air Transportation Taxes
Air transportation taxes apply to amounts paid for the air transportation of people and property and the use of international travel facilities. The tax on air transportation of people has two components: a percentage tax of 7.5 percent on amounts paid for air transportation and a domestic segment tax, which is a flat fee for each segment (a single takeoff and a single landing) of transportation. For 2009, the domestic segment tax is $3.60. There is also an international arrival/departure head tax. In addition, amounts paid for air transportation of property are subject to a 6.25 percent tax. There are exemptions to the air transportation tax for certain situations, including military personnel on international flights, sky diving and particular uses of helicopters.
Other Excise Taxes
The federal government imposes excise taxes on the manufacturers, producers and importers of gas-guzzler automobiles; sport fishing equipment; bows and arrows; tires; heavy trucks, trailers and tractors; coal; and vaccines. The tax is imposed at the time the item is sold by the manufacturer, producer or importer, and title passes.
- The gas-guzzler tax is a tax on the sale of automobiles that have a fuel economy standard of less than 22.5 miles per gallon. Individuals that import automobiles for personal use may be liable for this tax.
- There is a 10 percent tax on the sale of sport fishing equipment.
- The tax on tires is based on weight.
- The tax on vaccines is a fixed amount (75 cents) per dose of certain vaccines, including common vaccines for measles and mumps, sold by manufacturers in the United States.
- A producer of coal mined in the United States is liable for tax on the first sale of such coal.
The federal government also imposes excise tax on many less common products and activities. State and local governments may impose excise taxes as well. Failure to file the required returns and pay excise taxes may result in the imposition of penalties, interest and other sanctions.
Contact Wilson Ratledge and let one of the attorneys assist you with your excise tax needs.