Legal Definitions - Specific tax

A Specific tax is a type of tax where a fixed amount is charged on each unit of an item or property, rather than being based on its monetary value. This means the tax remains the same for every unit, regardless of how much that unit is worth. The calculation of a specific tax is straightforward, typically involving a simple count, weight, or measurement of the items being taxed.

Here are some examples to illustrate how specific taxes work:

• Fuel Tax: Imagine a state imposes a specific tax of $0.50 on every gallon of gasoline sold.
  • If a driver buys 10 gallons of regular gasoline for $3.00 per gallon, the specific tax would be $5.00 (10 gallons x $0.50/gallon).
  • If another driver buys 10 gallons of premium gasoline for $4.00 per gallon, the specific tax would still be $5.00 (10 gallons x $0.50/gallon).

  This illustrates a specific tax because the $0.50 tax is applied per gallon, a fixed unit of measurement, and does not change based on the varying price (value) of the regular versus premium gasoline.

• Cigarette Tax: Consider a city that levies a specific tax of $2.00 on every pack of cigarettes sold.
  • Whether a consumer purchases a budget brand pack costing $5.00 or a premium brand pack costing $10.00, the specific tax applied to each pack remains a fixed $2.00.

  This example demonstrates a specific tax because the tax is a constant amount per physical unit (a pack of cigarettes), completely independent of the retail price or value of that particular brand of cigarettes.

• Import Duty on Specific Items: Let's say a country imposes an import duty of $500 on every imported passenger car, regardless of its make, model, or purchase price.
  • A luxury sedan imported for $80,000 would incur a $500 specific tax.
  • A compact economy car imported for $15,000 would also incur the same $500 specific tax.

  This is a specific tax because the fixed amount of $500 is applied per car (a single item), without considering the significant difference in the market value of the luxury sedan versus the economy car.