An excise tax is a tax on a specific good or services. There are excise taxes at both the state and federal level. Federal excise tax returns are due quarterly, and state deadlines vary.
When Excise Taxes Apply
Each excise tax is a specific law passed by the federal or state government. Governments use excise taxes to either cover costs associated with the good or service or to discourage people from engaging in specific activities.
Excise taxes commonly apply on the following items:
- Airline tickets
- Heavy trucks and highway tractors
- Indoor tanning
- Medical marijuana
- Recreational marijuana
Excise taxes may apply at different points of the supply chain:
- Sale by a manufacturer
- Sale by a retailer
- Use by a manufacturer
- Use by a customer
Excise Tax Rates
Excise tax rates vary based on the specific tax. Some are a percentage rate or ad valorem (e.g., 10% of the selling price). Others are a fixed rate or specific (e.g., $10 flat fee or $1 per unit sold).
Who Pays Excise Tax
Who is responsible for the excise tax varies. It may be the buyer or the seller.
- When the buyer is responsible for the excise tax, the seller still often collects it and files the excise tax return.
- When the seller is responsible for the excise tax, they can generally pass the cost on to the buyer.
Excise Tax vs. Sales Tax
An excise tax is essentially a different form of sales tax.
Excise Tax Registration Requirement
If you have a business that will be subject to excise taxes, you may be required to register with the IRS or your state government before engaging in activities subject to excise taxes. This is different from income tax returns, where you may only need to file at the end of the year.
To register for federal excise taxes, use IRS Form 637 Application for Registration. The IRS will review your application to determine whether you are properly conducting activities and are able to meet your tax obligations. You will receive one of the following response:
- Letter 3689 Approval of Excise Tax Registration with your assigned excise tax registration number
- Letter 3685 Denial of Excise Tax Registration stating the reason for denial and how to appeal
Penalties may apply if you failed to register even if you paid all required taxes. If you failed to register or had your application denied, contact an accountant or tax attorney who specializes in this area.
When to File Excise Tax Returns
Federal excise taxes go by quarter. Excise taxes for each three-month period are due at the end of the following month.
|1||January, February, March||April 30|
|2||April, May, June||July 31|
|3||July, August, September||October 31|
|4||October, November, December||January 31|
IRS Excise Tax Forms
- Form 720 Quarterly Federal Excise Tax Return is the general federal excise tax return.
- Form 2290 Heavy Highway Vehicle Use Tax is for that specific tax.
- Form 8849 Claim for Refund of Excise Taxes is to claim a refund of excise taxes on certain fuel-related sales.
- Form 11-C, Occupational Tax and Registration Return for Wagering
- Form 637, Application for Registration (For Certain Excise Tax Activities)
- Form 720-CS, Carrier Summary Report
- Form 720-TO
- Form 720-X, Amended Quarterly Federal Excise Tax Return
- Form 730, Monthly Tax Return for Wagers
- Form 8830, Enhanced Oil Recovery Credit
- Form 1363, Export Exemption Certificates
- Form 4136, Credit for Federal Tax Paid on Fuels
- Form 6197, Gas Guzzler Tax
- Form 6478, Biofuel Producer Credit
- Form 6627, Environmental Taxes
- Form 8821, Tax Information Authorization
- Form 8864, Biodiesel and Renewable Diesel Fuels Credit
- Publication 510, Excise Taxes
- Publication 3536, Motor Fuel Excise Tax EDI Guide
Frequently Asked Questions About Excise Taxes
For federal excise taxes, review IRS Publication 510. For state excise taxes, search for excise taxes by your state’s name.
Excise taxes paid by a business are generally a deductible business expense. Excise taxes you pay personally are generally not deductible unless it’s an ad valorem tax that would count as a sales tax for the SALT deduction.