Excise tax is a tax levied annually for the privilege of operating a motor vehicle or camper trailer on the public ways as defined by State Statute. It is also called duty of excise, special tax or sin tax. Excise taxes are inland taxes or taxes that are due for goods produced for sale inside the country. It is also an indirect tax. This means that the tax paid to the government by the producer is expected to try to recover that amount by raising the price of their products. It is more or less like a value added tax but they differ in three aspects. First, excise tax only applies to a narrow array of products while VAT is applied to almost every product that you purchase. Excise taxes are also heavier than the VAT. And lastly, the excise tax is very specific as to how many cents per units.
As mentioned above, there are only limited products where excise taxes are imposed. It is sometimes referred as sin taxes because it usually targets alcohol, drugs, gasoline, prostitution and etc. It is odd that the government try to regulate these things that are considered sinful rather than banning it. Drugs are legal is some states and imposing high excise taxes on it is mainly to impose heavier punishments to the users. Gambling on the other hand was a subject of taxation before. They use revenue stamps on the ace of spades or the dice to signify that the act of gambling has been paid. Today, gambling licenses are the only ones subjected to excise tax rather than the gambling itself. Prostitution excise taxes have also raised commotion and debates. It is said that brothels ought to pay excise taxes for prostitution. The excise tax is imposed on the customers who use the prostitutes’ services for $5 per calendar year. Salt, paper, windows and gasoline are also sources of excise taxes. This is due to the high demands and value for these products. Alcohol is another product that has excise tax.
There are three major purpose of excise tax. First is to protect people. Excise taxes are used to protect people that indulge in substances like tobacco and alcohol from harming their health. It is also used to protect others from engaging into morally damaging activities such as gambling, prostitution, pimpings, etc. It is also used to provide dues needed for health care and other expenditures that are needed to treat the diseases caused by the excise products such as lung cancer, drunk driving accidents, etc. The money from excise tax is also used to support military force. Excise taxes are also used to punish the users of the product such as drugs. When a product increase in price, it lowers its affordability thus reduces its consumers.
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