SolveYourProblem
Article Series: Taxes
Help Me Understand My Taxes
What
is an Excise Tax?
Excise tax is something many people don’t
know about, or don’t understand, and yet most of us pay excise
tax every day without realizing it. This area of tax law can
be a little confusing and complex, but for most people, there
are two main areas of excise tax with which they should be
concerned. These two types of excise tax are easy to understand,
and only one of them requires any action on your part.
The first type of excise tax that you should know about is
the one that affects everyone the most. This excise
tax is a tax built into the price of certain products to discourage
their use or to pay for expenses related to the product. Things
like alcohol, cigarettes, and gasoline fall under this category.
Excise taxes on alcohol and cigarettes are used to decrease
consumption by increasing the price, and in the case of cigarettes,
to pay for anti-smoking campaigns. Excise taxes on gasoline
are used to encourage people to conserve gas, carpool more,
and use public transportation more, as well as providing money
for maintenance and upkeep of roadways.
When you buy these products, the excise tax is already included
in the price, so you usually don’t even feel like you are being
taxed. The difference here is that excise taxes are levied
by both the federal government and the state government, which
can cause huge differences in the prices of certain products
between the states. Smokers in New York who pay upwards of
$9.00 or more for a pack of cigarettes would be shocked to
walk into a store in South Carolina, where cigarettes average
less than $3.00 per pack. State politics has a huge impact
on the excise tax you pay on many products.
The
second type of excise tax that affects people most often
is the excise tax applied to trucks for highway usage and bulk
fuel usage. Many truckers own their own trucks and are individually
taxed for these things. The IRS has a system in place called
the Excise Summary Terminal Activity Reporting System (ExSTARS)
which truckers, or trucking companies, are required to comply
with to report their taxable fuel usage. Truckers are responsible
for several other excise taxes, depending on the state in which
they are based and the cargo they carry. This kind of excise
tax is the one that has the most relevance to individuals.
Unlike the other excise tax, this tax requires action on the
part of the tax payer. Additionally, it can be an expensive
and confusing tax, especially for self employed truckers who
do not have a corporation behind them handling the paperwork.
If this excise tax affects you, you should seek the advice
of a financial advisor to make sure you are meeting all of
your tax burdens.
There are many other excise taxes that have varying effect
on individuals. Airline tickets, some cars, some technological
equipment, and even some medications are subject to excise
tax. If you take a vacation abroad and come back with goods,
those items are subject to excise tax. If you import merchandise
professionally, those goods are subject to excise tax.
Excise tax law is constantly changing based on the political
climate, and as previously mentioned, varies from state to
state. To get a clear handle on how excise tax laws affect
you, especially if you work in trucking or the import/export
industry, you should consult a tax expert or financial advisor
to make sure you paying the correct amount of taxes. Failure
to do so could mean hefty fines or the loss of your business.
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SolveYourProblem.com : 2007
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