Excise Tax

Summary of Excise Tax

Taxes, also commonly known as internal revenue taxes, imposed by the United States on certain classes of manufactures and services and on the performance of some transactions. Unlike customs duties, which are applied to imports only, excise taxes are applied equally to imports and domestic manufactures of a given class; the process of importation is viewed, for taxing purposes, as the equivalent of “manufacturing”since both processes have the common effect of introducing an article into the commerce of the United States. Responsibility for collecting excise taxes lies with the Internal Revenue Service. Persons involved in the manufacture or importation of certain articles (alcoholic beverages, weapons subject to the special occupational and transfer taxes under the National Firearms Act) must register with the Internal Revenue Service and pay special occupational taxes prior to engaging in transactions in those articles.

U.S. manufacturers producing merchandise subject to excise taxes make quarterly filings and remittances to the Internal Revenue Service. Importers may be obliged to pay the tax when goods are released from customs custody, unless a tax deferment bond has been filed with the Customs Service. Generally the payment of excise taxes (as well as customs duties) may be deferred by entering the imported merchandise into a bonded warehouse or foreign trade zone.

In addition to excise taxes collected by the Federal government, the states and some localities impose excise-type taxes on various articles; the articles on which such state and local taxes are levied may or may not correspond to the articles subject to the Federal tax. Such state and local taxes, where they exist, are not collected by Federal officers and are additional to any duties and/or taxes imposed at the Federal level.

The excise tax on manufactures and imports is levied on the sale price of the article, including costs of packaging, coverings, or other preparations required for shipment. The value of the product for tax purposes does not include excise taxes; transportation from country of origin to the United States; insurance against loss or damage in transit; discounts and rebates actually paid; billings for local advertising billed at the time of sale, and identifiable on the invoice as such, subject to limitations prescribed in the Internal Revenue Code; and charges for warranty, if purchased voluntarily (this exemption is not applicable where the warranty charge is imposed by the seller as a requirement of purchasing the goods).

In those cases where the seller provides bonus or free goods to a buyer who purchases certain quantities of other merchandise, the tax is imposed only on the value attributable to the taxable articles, after discounting the taxable articles to reflect the value of the bonus goods. For example, the seller may give his customer a bonus of free goods equivalent to 10 percent of the sale. The bonus goods are of a class not subject to excise tax. Since the bonus goods have the effect of reducing the purchaser’s cost of the goods he bought by 10 percent, the excise tax will be imposed on the purchased product at 90 percent of the invoice value. This value apportionment process is applied also in those instances where the bonus merchandise is subject to excise tax, but at a rate different from that imposed on the purchased product.

A general exemption from excise taxes is permitted for goods sold to the U.S. government, state and local governments, the United Nations, and diplomatic missions and personnel. In addition, exported merchandise is exempted from excise taxes, provided that exportation is effected by the manufacturer or a single intermediary; in such cases, the merchandise must be exported within six months of the date when the tax would otherwise have been due, and proof of such exportation must be available for examination by the Internal Revenue Service. For the period October 1, 1983, through June 30,1984, excise taxes totalled $28,195,700,000.

The U.S. Tax Court lacks jurisdiction in matters affecting excise taxes. Any person having a dispute with the Internal Revenue Service over excise taxes must seek recourse in the U.S. District Court or the U.S. Court of Claims. (Find in this table for a listing of products subject to U.S. Federal excise tax.

(Main Author: William J. Miller)

Excise Tax in International Trade

Meaning of Excise Tax, according to the Dictionary of International Trade (Global Negotiator): A selective tax, sometimes called consumption tax, on certain goods produced within or imported into a country. An example is a tax on the import of crude oil, or a tax on certain luxury goods.