Who Is Subject to Federal Excise Tax
Items subject to excise duty include (but are not limited to): IRC Section 4221 contains five general excise duty exemptions in Chapters 31 and 32 of Subtitle D. These include exemptions for the first sale of the product (1) for later use; (2) intended for export; 3. refuelling of ships and aircraft; (4) to a state or local government for exclusive use; and (5) to a nonprofit educational organization for exclusive use. The extent to which each of these exemptions applies to the corresponding excise duties is set out below. Excise duties on alcoholic beverages, tobacco products and firearms are administered by the U.S. Department of the Treasury`s Alcohol and Tobacco Tax and Trade Bureau (TTB).  Total excise duty on gasoline, diesel, etc. for each condition was calculated.  In the Energy Improvement and Extension Act of 2008 (PL 110-343), section 206 excludes certain vacuum reduction devices and advanced insulation from the federal excise tax. This Act amends Section 4053 of the Internal Revenue Code. An unusual example of a state “consumption tax” can be found in the state of Hawaii.
Instead of a sales tax, the state of Hawaii levies a tax called the General Excise Tax (GET) on all business activities in the state. The GET is calculated at a rate of 4% for most companies and 0.5% for wholesalers. The tax is imposed on all business entities, so it is essentially levied at each stage of production (material supplier to manufacturer to wholesaler to retailer). The GET is also charged for all business services activities such as real estate brokerage commissions, legal fees and others. A more precise tax term would be value added tax or VAT.  Ad valorem is a Latin expression that literally means “by value”. An ad valorem tax is levied as a percentage. This results in an excise duty based on the value of the product or service. For example, the IRS imposes a 10% consumption tax on indoor tanning services. This means that if a tanning salon charges $100 for a tanning session, they will have to pay the IRS $10 in consumption tax. If the company charges $200 for tanning, it will have to pay a $20 consumption tax. Other types of ad valorem taxes include firearms (10%), airline tickets (7.5%) and heavy goods vehicles (12%).
Property taxes can also be considered a type of ad valorem excise tax. In addition to customs duties, low excise taxes were levied to provide the federal government with additional funds to pay for a portion of its operating costs and allow for the refund to the full U.S. value. The federal debt and the debt that the states had accumulated during the American Revolutionary War. You may not know what excise taxes are now, but they have a direct impact on your personal finances and how much you spend each year. Learning about these taxes can be beneficial if you make an effort to build up your savings and reduce your expenses. Excise duties can be used as Pigouvian taxes or sin taxes to assess externalities. An externality is, in economic terms, the side effect or consequence of an activity that is not reflected in the cost of that activity. For example, excise taxes can be used to reduce the consumption of cigarettes or sugary drinks, reduce pollution or reduce traffic congestion. Federal excise taxes have historical context in the United States. In response to an urgent need for revenue after the American Revolutionary War, after the United States The Constitution was ratified by the Ninth State, in 1788, the newly elected First Congress of the United States was passed and President George Washington signed the Tariff Act of July 4, 1789, which allowed the imposition of customs duties (tariffs) on imported goods. Customs duties and excise taxes were authorized by the U.S.
Constitution and recommended by the first U.S. Secretary of the Treasury, Alexander Hamilton, in 1789 to tax foreign imports. Hamilton believed it was important to put the U.S. federal government on a solid financial footing with good credit and a regular, easy-to-collect stream of income. Customs duties (tariffs) on imported goods, as set by tariff rates, were the source of about 80 to 95 percent of all federal revenue until 1860. After waging a war over taxation (among other things), the U.S. Congress wanted a relatively mundane reliable source of revenue, bringing in enough money to pay down the debt, and paying the federal government relatively inexpensive (at the time) and being relatively easy to collect. The rates met all these criteria.
A sales tax and an excise tax are very similar, but the main difference is that excise tax is only levied on the sale of very specific items.