Excise tax is a particular type of a tax that only targets a few goods or services which are usually regarded as non-essential or those that may be detrimental to health or the environment. Commonly excise tax goods include alcohol, tobacco products, petroleum products, or certain foreign goods. It’s worth noting that this tax is mostly factual in nature because it’s commonly embedded in the price tag for the product thereby enabling targeted businesses to remain quiet about its existence while still feeling the pinch and the tax burden with regards to industries that produce, import, or sell these goods.
An Overview of the Excise Tax
Unlike sales tax which is levied on numerous or various kinds of goods or services, the excise tax more often than not is levied on a selected few items only. More often than not, the tax is placed at the level of production or importation of the goods, implying that businesses engaged in these spheres have the responsibility of estimating and paying excise tax, particularly, the taxable event arises when the goods or the excise is taxable or sold. Excise tax may in some instances be imposed as a percentage of seller’s turnover while in other instances, it is on the volume of goods sold.
Nature of Excise Taxes
1. Types of Excise Taxes: Federal Excise Taxes
Federal excise taxes in the United States are defined to cover taxes about certain goods such as fuels, tobacco, and firearms. These types of taxes are also used for developing facilities of national development such as roads and public transport and also assist as revenue for certain government projects.
2. Types of Excise Taxes: State and Local Excise Taxes
Excise taxes expand beyond the level of the federal government since several states and local authorities have placed excise taxes on other consumer products such as alcohol, gasoline and non-alcoholic carbonated beverages. The amount charged in these taxes ranges from one area to another and is usually used as an increase towards the available funds for use in some public sectors, including Charlotte health, education, roads among other services.
Effect of Excise Tax on Certain Businesses
1. New Costs for Manufacturers and Distributors
It is clear to comprehend that every business that manufactures, sells, or distributes excise-taxed products is held liable for calculating and forwarding the tax to the relevant taxing authority. This increases the administrative burden and in most cases, leads to inflation of the finished goods price including the end user. Companies will have to take a step back to weigh the tax compliance of these excise goods lest they will be fined.
2. Price and Investment Decisions
Excise tax is mainly added to the retail price for consumers. On the other hand, the retailers have to be careful not to overprice the products because of the discharge of the excise duty. In some cases, excise taxes can be costly to a certain market’s profit margin and especially when the price of the excise goods is increased, and the customers don’t want to buy these goods due to the increased prices.
3. Regulatory Compliance and Filing Requirements
Firms dealing in excise-taxed goods also have to deal with tough regulations and determinants that include where they file for various forms such Form 720 among other forms in the United States. This further means that proper records should be kept and all tax-related documents submitted in time to observe the laws prescribed.
Excise taxes are quite burdensome to business entities, especially those that are into making, selling, or distributing certain products such as petroleum, alcoholic drinks, tobacco products including other business which are general. Even though the excise tax is eventually borne by the consumer, there are a lot of rules and laws which are obliged upon the businesses due to taxation, which may contribute to a change in the measures taken towards the prices charged and the running of the business. The identification and control of excise tax are important aspects that must be embraced by the organizations in order to keep off from adequate economic pressures and to be successful.