Federal tax laws impose a number of excise taxes on
different types of businesses, products, services and
occupations. These taxes are usually imposed without any
assessment or notice to the taxpayer. Thus, it is up to
you to find out if you are subject to any of these taxes
and, if so, to obtain the proper tax return forms and pay
the tax on time. It is not uncommon for a small business
to operate for several years without the owner ever being
aware of the need to pay federal excise taxes. Then the
day of reckoning comes when a formal notice is received
from the government demanding immediate payment of several
years' worth of back taxes on some particular item subject
to excise tax, plus interest and penalties for not filing
the returns and not paying the tax. This can be a
disastrous surprise, especially since the business owner in
such a situation has not factored into the price of his or
her goods or services the cost of paying the excise.
The following is a brief summary of the major federal ex-
cise taxes that a small or medium-sized business may need
to know about. Some excise taxes, such as those on tele-
phone service, are not discussed below, since they are
passed along or absorbed by the telephone company or other
large institution with which your company may deal and you
have no obligation to file any returns or make any direct
payment to the government of such taxes.
Federal excise taxes you need to know about fall into the
following major categories:
. MOTOR VEHICLE HIGHWAY USE TAX. This is the excise
tax that the largest number of small businesses are
likely to be subject to. It is imposed on vehicles
of more than 55,000 pounds gross weight. If you
want information about the highway use tax, you
should obtain a free copy of IRS Publication 349.
. RETAILERS--TAXES ON CERTAIN FUELS. The federal
gasoline tax is now 18.3 cents a gallon on gasoline
and 24.3 cents on diesel fuel. In addition, both
of these taxes are increased by 0.1 cent a gallon
to create a "Leaking Underground Storage Tank Trust
Fund." A reduced tax rate applies to qualified
methane and ethanol fuel.
. OTHER RETAIL EXCISE TAXES. Retail excise taxes
are now imposed on sales of:
(a) Heavy trucks and trailers
(b) Tires and tubes
(c) Recreation equipment such as bows,
arrows and fishing rods, reels, lures
and creels
(d) Firearms and ammunition
(e) "Luxury" autos, at a tax rate of 10% of
the retail price that exceeds the threshold
price of $30,000 (after 1990). The $30,000
threshold is to be indexed for inflation af-
ter 1990, but the indexing did not go into
effect until 1994, when it increased to
$32,000 (same in 1995).
Other luxury taxes on boats, planes, furs and
jewelry, which also went into effect after
1990, were repealed by the 1993 tax act,
retroactive to January 1, 1993. If you paid
a luxury tax on any such item in 1993, you
should be able to get your money back from
the retailer (NOT from the IRS).
. TAXES ON AIR TRANSPORTATION. If you are in the busi-
ness of transporting people by air, you may have to
collect an excise tax.
. COMMUNICATIONS. Taxes on telephone and teletype
services.
. WAGERING TAXES.
. TAX ON COAL MINED IN THE UNITED STATES.
. ENVIRONMENTAL TAXES. On petroleum products, various
chemicals and hazardous wastes, including a tax on
ozone-depleting chemicals that was enacted in 1989,
and expanded in 1990.
. TAXES ON ALCOHOL, FIREARMS, AMMUNITION AND TOBACCO
PRODUCTS.
. MANUFACTURER'S EXCISE TAX ON VACCINES. Since January
1, 1988, certain vaccines manufactured or imported
into the U.S. are subject to a new excise tax, in
order to create a Vaccine Injury Compensation Trust
Fund, a no-fault program for compensating persons
who are injured by, or die from, certain vaccines.
[This tax was to have terminated, at least temporarily,
as of January 1, 1993, but has been extended, perman-
ently.]
. HARBOR MAINTENANCE TAX. After 1990, this tax is in-
creased to 0.125% of the value of commercial cargo
that is loaded or unloaded at any U.S. port.
Most federal excise taxes are reported on Form 720, Quar-
terly Federal Excise Tax Return, the most common excise
tax form. Form 2290 must be filed by owners of trucks and
buses subject to the highway use tax. Environmental taxes
on petroleum and numerous designated chemical substances
must be reported on Form 6627, which is attached to Form
720.
For further information on federal excise taxes, you may
want to get a copy of IRS Publication 510, Excise Taxes.
In addition to federal excise taxes, the various states all
have a number of excise and miscellaneous taxes that apply
to businesses.
@CODE: HI
In Hawaii these include the following major excises:
. ALCOHOLIC BEVERAGE TAXES. Sale of alcohol is heav-
ily regulated and subject to numerous taxes in Hawaii.
Persons selling such beverages must obtain permits
from the Dept. of Taxation and from the county liquor
commissions. Beverage taxes apply at various tax
rates to distilled spirits, sparkling wine, still
wine, beer, and cooler beverages.
. CIGARETTE AND TOBACCO TAXES. These generally apply
to dealers and wholesalers of tobacco products other
than cigarettes at a rate of 40% of the wholesale
price. The tax on cigarettes is 3 cents per cigarette,
after June 30, 1993. A license or permit must be
obtained to sell such products, from the Hawaii Dept.
of Taxation.
. STATE AND LOCAL FUEL TAXES. The state of Hawaii
imposes a 16 cents per gallon tax on gasoline, and
the various counties impose their own taxes at vary-
ing rates. Total state and county gasoline tax
rates range from 24.8 cents a gallon in Hawaii County
to 32.5 cents a gallon in Honolulu County (26 cents
in Kauai; 27 cents in Maui). In addition, there is a
1 cent per gallon state tax on aviation gas and other
state and county taxes on LPG and various off-highway
fuel uses.
. TRANSIENT ACCOMMODATIONS TAX. This is a 6% tax on
revenues of hotels, motels and other transient ac-
commodations (5% before July 1, 1994). It applies
IN ADDITION TO the 4% G.E.T., to such revenues. Tax-
payers subject to this tax must register with the
Department of Taxation on Form GEW-TA-RV-3. Monthly
or less frequent returns are required, depending on
the amount of the annual tax liability.
. REAL ESTATE CONVEYANCE TAX. Another important excise
tax in Hawaii is the tax due on sales of real proper-
ty, imposed at a rate of 10 cents (formerly 5 cents)
per $100 of sales value. It also applies to the
capitalized values of leases with an unexpired term
extending more than 5 years, capitalized at the pres-
ent value of the rentals, using a discount rate of 6%.
. COUNTY AND STATE MOTOR VEHICLE TAXES. Vehicle weight
fees payable to the counties and state.
. RENTAL AND TOUR VEHICLE TAX. Hawaii recently enacted
a "surcharge" tax on rental automobiles and tour
vehicles of various sizes.
@CODE:EN
@CODE: CA
┌───────────────────────────────┐
│ CALIFORNIA EXCISE TAXES │
└───────────────────────────────┘
Some of the more important excise taxes in California in-
clude the following:
. The California gasoline tax rate is 18 cemts a
gallon, as it has been since January 1, 1994.
. Effective July 1, 1995, California will impose a
diesel fuel tax on the removal, entry, sale, deli-
very, and use of diesel fuel in the state. (Current-
ly, diesel is subject to the California use fuel tax.)
The tax rate on diesel will be 18 cents per gallon.
The tax rate will increase to the extent of any drop
in the federal fuel tax below the rate of 15 cents a
gallon, so that the combined California and federal
tax rate on diesel will decrease to less than 33 cents
per gallon.
. California imposes a cigarette tax at the rate of
37 cents per pack of 20 cigarettes (effective as of
January 1, 1994). There is also a tobacco products
tax, based on the wholesale cost of tobacco products
(other than cigarettes), which is set at 31.2 per-
cent of the wholesale price for the period from July
1, 1994 to June 30, 1995.
. The California oil and gas severance tax rate for
1994 was set at 2.3938 cents per barrel of oil for
or each 10,000 cubic feet of natural gas. This is
a decrease from the 1993 rate of 2.5221 cents.
. In addition, California imposes a Hazardous Substan-
ces Tax. It includes disposal fees on hazardous waste
disposal sites and an annual assessment on generators
of hazardous waste. This tax is set and administered
by the State Board of Equalization.
@CODE:EN
These usually include taxes on alcoholic beverages, cigar-
ette and tobacco taxes, severance taxes on minerals, special
business license taxes and, frequently, real estate transfer
taxes.
@CODE: AL AK AZ AR CO CT DE DC FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NB NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WS WY
In addition, every state has gasoline, diesel and other
fuel taxes. The gasoline tax rate in @STATE is:
@CODE:OF
@CODE: FL
12.3 cents per gallon (which includes a special variable
sales tax on fuels, at the rate of 6%, which cannot be less
than 6.9 cents per gallon.) For 1995, the total gasoline tax
and additional special sales tax is 12.3 cents per gallon.)
@CODE:OF
@CODE: GA
7.5 cents per gallon, plus 4 percent of the price.
@CODE:OF
@CODE: AK
8 cents per gallon.
@CODE:OF
@CODE: NY
8 cents per gallon. In addition, for the fourth quarter of
1994, the sales tax component of the taxes on fuel is 7.7
cents per gallon, or a composite tax rate of 15.7 cents per
gallon.
@CODE:OF
@CODE: WY
9 cents per gallon.
@CODE:OF
@CODE: NJ
10.5 cents per gallon.
@CODE:OF
@CODE: PA
12 cents per gallon.
@CODE:OF
@CODE: MO
15 cents per gallon (17 cents, effective 1-1-96).
@CODE:OF
@CODE: IN KY MI
15 cents per gallon.
@CODE:OF
@CODE: AL SC VT
16 cents per gallon.
@CODE:OF
@CODE: NM
22 cents per gallon, but is reduced temporarily to 20
cents per gallon from July 1, 1994 to July 1, 1997.
@CODE:OF
@CODE: OK
17 cents per gallon.
@CODE:OF
@CODE: VA
17.5 cents per gallon.
@CODE:OF
@CODE: AZ KS MS NH ND SD
18 cents per gallon.
@CODE:OF
@CODE: AR
18.5 cents per gallon.
@CODE:OF
@CODE: UT ME
19 cents per gallon.
@CODE:OF
@CODE: IL
19 cents per gallon at the pump. (Commercial motor vehicles
must, in addition, pay a "Part B" rate of 5.6 cents with
their motor fuel use tax return, for calendar year 1994.)
The Part B rate will vary from year to year.
@CODE:OF
@CODE: IA LA MN TX DC
20 cents per gallon.
@CODE:OF
@CODE: WV
20.5 cents per gallon (plus sales tax of 4.85 cents).
@CODE:OF
@CODE: ID MA TN
21 cents per gallon.
@CODE:OF
@CODE: NV
23 cents per gallon.
@CODE:OF
@CODE: MT
27 cents per gallon, effective since July 1, 1994.
@CODE:OF
@CODE: CO OH
22 cents per gallon.
@CODE:OF
@CODE: DE
22 cents per gallon, rising to 23 cents on January 1, 1995.
@CODE:OF
@CODE: WS
23.4 cents per gallon, beginning April 1, 1995.
@CODE:OF
@CODE: NC
17.5 cents per gallon base rate, plus a variable amount
equal to the higher of 7% of the average wholesale price
or 3.5 cents per gallon. The total rate for the first
6 months of 1995 is 21.7 cents per gallon.
@CODE:OF
@CODE: WA
23 cents per gallon.
@CODE:OF
@CODE: MD
23.5 cents per gallon.
@CODE:OF
@CODE: OR
24 cents per gallon.
@CODE:OF
@CODE: NB
24.2 cents per gallon for the first quarter of 1995.
@CODE:OF
@CODE: RI
28 cents per gallon for the fourth quarter of 1994.
@CODE:OF
@CODE: CT
31 cents per gallon, which is the highest of any state, and
which rises to 32 cents on January 1, 1995 and 33 cents on
July 1, 1995. It then increases to 34 cents on October 1,
1995, and subsequently will increase another cent on the
first day of each calendar quarter until it reaches 39
cents per gallon on January 1, 1997.
@CODE:OF
@CODE: MT OR AK DE NH
@STATE does not have a sales tax or the equivalent.
@CODE:OF
@CODE: AL AZ AR CO CT DC FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO NB NV NJ NY NC ND OH OK PA RI SC SD TN TX UT VT VA WA WV WS WY
