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excise tax

Excise Tax is a tax on a specific item, belonging to a special class of items. The classes of items are frequently specialty or luxury items, such as tobacco, fuel, and alcohol. Such taxes may be imposed on the manufacturer, retailer, or consumer, depending on the specific tax. Some excise taxes, such as property taxes and excise tax penalties on certain retirement account activity, can be levied directly from the customer.

Some everyday examples of an excise tax:

• A Federal excise tax is levied on motor fuel consumed during highway use; gasoline and diesel fuel exclusively consumed during off-road farming activities are not taxed. 
  • By statute , the fuel tax proceeds must be used for Federal highway projects.
• An excise tax is levied on tobacco products, at the State level.
• An excise tax is levied on alcohol products, at the State level.

[Last reviewed in September of 2022 by the Wex Definitions Team
]

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