Legal Definitions - excise

An excise is a specific type of tax levied by a government on the manufacture, sale, or use of particular goods, or on certain services, activities, or occupations. Unlike broader taxes like income tax or general sales tax, an excise tax targets specific items or actions. While often initially paid by the producer or seller, the cost of an excise tax is typically passed on to the consumer through higher prices, making it an indirect tax.

• Example 1: Fuel Tax

  When you purchase gasoline or diesel at a service station, a portion of the price you pay includes a federal and/or state fuel tax. This tax is collected by the fuel distributor or retailer and then remitted to the government.

  How it illustrates the term: This is an excise tax because it is specifically imposed on the sale and consumption of a particular good—motor fuel. The tax is built into the price per gallon, so while the distributor pays it to the government, the consumer ultimately bears the cost.

• Example 2: Hotel Occupancy Tax

  Many cities and counties impose a special tax on guests for each night they stay in a hotel, motel, or short-term rental within their jurisdiction. This is often referred to as a "tourism tax" or "bed tax."

  How it illustrates the term: This demonstrates an excise tax on a specific service or activity. The hotel collects this tax from the guest and then pays it to the local government. It is not a general sales tax on all purchases but a targeted tax on the activity of occupying a lodging facility.

• Example 3: Recreational Cannabis Tax

  In states where recreational cannabis is legal, governments often impose a significant tax on the sale of cannabis products, in addition to standard sales taxes. This tax might be a percentage of the sale price or a fixed amount per gram.

  How it illustrates the term: This is an excise tax because it is specifically applied to the sale of a particular good—recreational cannabis. The dispensaries collect this tax from customers and remit it to the state, making it an indirect tax on the consumption of this specific product.