Excise tax is applied to particular products and services such as gasoline, alcoholic beverages, tobacco products, and luxury goods. But who pays the excise tax?
Excise tax payment is frequently included in the price of the product. The manufacturer or producer pays for it. In contrast, sales tax is typically paid by the buyer at the time of sale.
Since the tax is usually passed down to the ultimate price of the goods, the customer usually bears the onus of paying it.
The Manufacturer or Producer
Most of the time, the product’s producer is the one who pays the excise tax to the government. This tax is part of the total price of the goods or services they offer, and they must lawfully remit it.
For instance, the price customers pay at the pump reflects the excise tax oil firms pay on gasoline when they produce or import it.
Also, read: What is a VAT number in the US?
The Customer
Producers and manufacturers initially pay the excise tax. Ultimately, the customer bears the cost. Excise taxes are often ‘hidden’ in the price. That is why customers are not aware that they are being taxed.
For instance, the excise tax is already included in the price of alcohol. Therefore, the final taxpayer is the buyer. However, it is crucial to remember that this tax is included in the purchase price. Customers do not pay it directly to the government.
Government and Specific Work Sectors
Excise taxes on some businesses are imposed because of health or environmental concerns. For instance, high taxes on alcohol and tobacco are intended to deter usage. This is why these goods are typically more expensive.
The government uses the money it receives from excise taxes to finance various projects, including public health and infrastructure development.
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Essential Things to Keep in Mind
To learn more about who pays the excise tax, it is crucial to be mindful of the following points:
Producers or Manufacturers
They are legally obligated to reimburse the government for excise taxes.
Consumers
Consumers pay the price as excise taxes. This amount is included in the cost of goods.
Industry-Specific Taxes
Excise taxes differ based on the product and the regulatory objectives of the government.
The Bottom Line
Now you know who pays the excise tax!
Manufacturers directly pay excise tax to the government. However, the expense is usually passed on to consumers in the form of increased prices. Contact L&Y Tax Advisor experts for further assistance.
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