Excise Tax Returns Made Easy

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.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

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:

  • Fuel
  • Airline tickets
  • Heavy trucks and highway tractors
  • Indoor tanning
  • Tires
  • Tobacco
  • Vaping
  • Alcohol
  • Gambling
  • Medical marijuana
  • Recreational marijuana

Excise taxes may apply at different points of the supply chain:

  • Import
  • 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.

QuarterCovered MonthsDue
1January, February, MarchApril 30
2April, May, JuneJuly 31
3July, August, SeptemberOctober 31
4October, November, DecemberJanuary 31
If the due date is a weekend or legal holiday, the due date is the next business day.

IRS Excise Tax Forms

Frequently Asked Questions About Excise Taxes

How do I know if I have to pay excise tax?

For federal excise taxes, review IRS Publication 510. For state excise taxes, search for excise taxes by your state’s name.

Can you take a deduction for excise taxes?

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.

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