Excise and Other Special Sales Taxes

Excise taxes are sales taxes targeted at a specific item, such as cigarettes or alcohol. They are imposed in a different way than sales tax, although responsibility for collecting them is still with the seller.

For example, the cigarette tax is usually imposed as an amount per cigarette or per specific number of cigarettes. Payment of the tax by the seller is designated by the use of stamps, which are attached to the cigarette carton. In the same way, motor vehicle taxes are usually by the gallon, and alcohol taxes are also assessed on a per gallon basis, generally varying by alcohol content.

Excise taxes are among the oldest taxes and are generally imposed only by the state, although some municipalities, such as New York City, are allowed to impose these special taxes. These taxes have to treat all products they tax equally—they cannot favor products made locally. For example, it would be unconstitutional for North Carolina to tax differently cigarettes made from tobacco grown locally different from cigarettes from tobacco grown out of state.

There are other examples of special sales taxes that are not considered excise taxes, since they do not target products but rather services. One example is the hotel/motel tax, which is a tax on the rental of hotel and motel rooms. Also, many states impose various entertainment taxes on restaurants, theaters and other tourist attractions. These taxes are often passed by local government entities and many times do not need the approval of the state in order be imposed.


Inside Excise and Other Special Sales Taxes