Overview of Excise Taxes for Small Businesses

Excise Taxes or sin taxes are charged on services or products that are not categorized as good products for environment and consumers. The common products that may include excise taxes are gasoline, tobacco, and alcohol. If a business owner is selling a service or product subject to excise taxes is responsible for paying or collecting that taxes to appropriate state and federal authorities. You can use online accounting programs or hire an accountant to prepare yourself for tax season. 

Overview of Excise Tax

It is extra cost charged for particular services and products like fuel, tobacco, and alcohol. These are the products that a national government believed harmful to environment and individuals. Excise taxes are regulated by TTB (Tobacco and Alcohol Tax & Trade Bureau) and Internal Revenue Service.

This tax is applied to services and products in two ways, such as the fixed amount of dollar or a percentage of the cost of services and products. For instance, the tax on cigarettes or gasoline is a specific amount, and the excise tax for a truck and a luxury car is a percentage on the cost of the vehicle.

The excise tax is applicable only on a few products to discourage consumers from buying these items like alcohol and cigarettes. These items may lead to numerous health issues like liver disease and cancer. Excise tax and sales tax will decrease the number of people who purchase these terrible products. 

Services and Products Subject to Extra Taxes

There are only a few services and products that subject to excise taxes, such as:

• Firearms, Tobacco, and Alcohol
• Imported, produced and manufactured products like fishing Equipment, boats with motors, fuel
• There are services like indoor tanning, travel via cruise line or airplane
• Firearms, Tobacco, and Alcohol

After fuel, the firearms, tobacco, and alcohol often generate more in excise taxes. The taxes on these items are regulated by TTB (Tobacco and Alcohol Tax & Trade Bureau). Alcohol includes distilled spirits, wine, and beer. The beer is taxed at $18/ barrel or $0.5 for 12 ounces. On initial 60,000 barrels, you may qualify for a decreased rate.

Tobacco products are chewing tobacco, pipe tobacco, cigars and cigarettes along with cigarette tubes and papers. There may be a flat rate for 1000 units or more.

Ammunition and firearms consist of revolvers, pistols, and other ammunition products. These groups are taxed as per a particular percentage.    

Excise Tax on Imported, Produced or Manufactured Products

If you import, produce or manufacture coal, arrows and bow, petroleum products, crude oil, gasoline, electric motors, fishing equipment, gas-guzzler vehicles, vaccines, trailers, heavy trucks, or tires, you have to pay a flat rate as per each unit or the sales quantity. Here is a brief description of each product.

• Gasoline includes different types of fuels like gas for trucks and cars, diesel fuel, aviation gas, and CNG (compressed natural gas). The taxes on gasoline may be $0.184 each gallon and taxes on aviation is $0.194/gallon.
• Taxes apply to crude oil at a refinery of U.S. and petroleum products imported in the United States for warehousing, use or consumption. The tax is calculated with the help of Form 6627.
• The excise tax is applicable on not only arrows and bows, but other accessories and parts required to use arrows and bows. Almost 11% of sales price is deducted as an excise tax.
• Moreover, the type of coal is critical to determine a flat rate for each tone or percentage of sales price. If it is a flat rate per ton, the rate can be 55 cents or $1.10. If a portion of the sale price is utilized, the rate will be 4.4%.
• Excise taxes are applicable on the electric motors for boats. Importers, producers, and manufacturers may charge 3% of sales price.
• If you are preparing or importing fishing poles, fishing rods or sports equipment for fishing, you have to pay 10% of the total sales price for each item.
• Automobiles that don’t obtain more than 22.5 miles for each gallon fall in this category. The tax should be computed with the use of Form 6197. As per the mileage for one gallon, the tax among may range between $3,000 and $7,700 per vehicle.

Rates for excise taxes may vary as per the rules of your state, so it will be good to hire an tax preparer or legal person to register your business for the collection of excise tax.