Who Pays Excise Taxes?


Taxation can be one of the most Byzantine and complicated activities of government. In particular, excise taxes can be quite indistinct in their nature. Many entities or products are susceptible to excise tax, but the one commonality that they share is that an excise tax is applied to activities, products or services that originate within the borders of the country. By contrast, custom duties or tariffs are applied to foreign goods being brought into a country.

Nature of Excise Taxes

  • The nature of an excise tax is a specific amount of tax applied towards a specific quantity of product or of economic activity. For example, an excise tax on gasoline may consist of a specific number of cents per gallon. In contrast, many other taxes are calculated in relation to the price of the item or service. The entity to which the excise tax is paid may be a state or federal government.

Fuel Excise Taxes

  • Hydrocarbon fuels are subject to excise taxes in the United States. Gasoline, diesel, heating fuel and many others are subject to this tax on a federal level. This tax is in addition to any sales tax levied by the state in which the sale is made. The justification for this taxation is to provide for government maintenance of infrastructure facilitating the supply or required for the use of these fuels.

Ground Transportation

  • In addition to the excise tax on fuel, the cost of which is directly paid by the vendors of fuel and added on to the cost paid by consumers, businesses engaged in land transportation pay additional excise tax. States use the excise tax paid by the operators of over-the-road trucks to maintain highways, bridges and related infrastructure, which suffers more under the wheels of such vehicles than under those of passenger cars. The tax is usually applied based on the tonnage of the vehicles, which is determined at mandatory weigh stations.

Air Transportation

  • Aircraft are subject to excise taxes as well. Both cargo carriers and passenger flights must pay on a per-passenger or pound of cargo basis. The ostensible motive for collecting these taxes is the support of air traffic control systems and personnel as well as offsetting government subsidies to airports or other elements of air travel infrastructure.

Sin Taxes

  • Another class of items that are subject to excise tax consists of "things that are bad for you," also known as "sin taxes." Substances or activities that expose the user to known carcinogens or risk of addiction, like UV tanning beds, alcohol, tobacco or gambling, can have an excise tax applied to them. Both critics and supporters of excise taxes can disagree on the motive for this. Some purport that the tax itself is meant to discourage consumption of these things, thus protecting the public from harm. Others perceive the measure as being a means of acquiring capital for the state in order to address any harm that may be caused by the activities.

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