Excise tax is an indirect, legislated tax applied to specific goods or services that are harmful to the environment explicitly or implicitly. These taxes are imposed within a country's government infrastructure. Federal excise tax is typically collected on motor fuel sales, airline tickets, and various other goods and services.
Unlike income taxes, excise taxes are independent of income levels.
Who Should Pay Excise Tax?
Excise taxes can be collected in two ways: either directly from manufacturers or indirectly from consumers. Some of the key entities that are required to pay excise taxes include:
Importers - An importer is a person or company that brings goods into a country from a foreign entity for trade.
Manufacturers - A manufacturer is a person or company that produces finished goods from raw materials using various tools, equipment, and processes, and then sells those goods.
Retailers - A retailer is a company that buys products from a manufacturer or wholesaler and sells them to end users or customers.
Consumers - A consumer is the decision maker who decides whether or not to buy an item at the store, and is also referred to as the end user.
Business owners - A business owner is a person who controls the operational and financial aspects of a business. Federal excise taxes are imposed on certain business owners. Read our blog if you have questions like Does my LLC need to file Form 720
When is Excise Tax imposed?
Excise taxes are imposed in specific situations, including but not limited to:
· Entry into the United States – Use/Sale after importation
· Sale or use by the manufacturer
· Sale or use by the retailer
· Use by the consumer
How to Pay Federal Excise Tax?
Excise taxes should be filed using Form 720. There are two filing methods: manual and online. Manual filing is time-consuming, so the IRS recommends online filing. Avoid filing a second return, as it can complicate the acknowledgment process.
You can choose our IRS-approved online portal Simple720 for better convenience.
Always pay excise taxes before the due date to avoid
penalties.
WRAP:
By reading the blog, you should have gained a clear understanding of who must pay federal excise taxes and how to file them.