What is an Excise Tax?

An excise tax is a required tax levied on a specific good or service that typically must be paid for by a business. The tax is usually passed onto consumers through increased prices. Taxes on gas, alcohol, airline tickets or tobacco are examples. A specific excise tax requires a set tax amount for a product per unit purchased, while an ad valorem excise tax requires a set percentage for a product based on the total cost.

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