Houston Bookkeeping Tip: Should You Pay Excise Tax? -

We at B&J love sharing a host of bookkeeping tips for businesses and individuals. You may have heard the term “excise tax” during tax time. As with most tax laws, it probably confused you. We bet it was especially confusing if you should pay it. You may have chosen to err on the side of caution rather than roll the dice. We don’t blame you. We’ll tell you everything you need to know below.

1. What is the Excise Tax?

Excise taxes are paid when purchases are made on a specific good. One such good is gasoline. Excise taxes are usually included in the price of the product, so it remains unseen to the buyer. These kinds of excise taxes may also be levied on activities. This includes gambling, highway usage by heavy trucks, as well as others. In short, we all pay the excise tax if we own an automobile. There are ways around it.

2. Excise Tax Exemptions

The Tax Increase Prevention Act of 2014 was signed into law in December of 2014. It offered the following credits associated with the excise tax:

Use of biodiesel fuels.
Use of biodiesel mixture fuels.
Renewable diesel fuel.
Second generation biofuel producer credit.
Alternative fuel credit.
Alternative fuel mixture credit.

These tax credits have been allowed to expire. Many of them did as of tax year 2017. However, many alternative fuel credits are still allowable, as seen on Taxpayers for Common Sense.

3. Who Pays Excise Tax?

Excise tax is collected in numerous ways. Below are a few of the most common at their current rates:

Gasoline – $0.184 per gallon.
Aviation Gasoline – $0.194 per gallon.
Domestic Airport Transportation – $4.10 per passenger.
Domestic Airport Transportation – $9.10 per passenger to Alaska/Hawaii.
International Airport Transportation – $18.30 per passenger.
Pack of cigarettes – varies by state, but has a national average of $1.75.
Pack of cigarettes in Texas – $1.41.

4. 2018 Changes in Excise Tax

One of the newest developments in excise tax is the disallowance of butane for the credit. It and other similar fuels are considered “gasoline blendstock” that do not qualify for the section 6426 alternative fuel mixture credit.

The good news is that the medical device tax has been suspended. The 4191 section medical device tax associated with the Affordable Healthcare Act was repealed, which is good news if you have a qualifying medical device.

5. Other Things to Know About the Excise Tax

The best way to know how much excise tax you are paying is to search for it by state. The IRS website posts updates on the federal excise tax on a regular basis. The rates can vary dramatically by state. The items that are taxed generally remain the same. A few changes include an excise tax on tanning salons, construction companies, businesses who use heavy vehicles over 55,000 pounds, and others.