Question

How is an excise tax different from a sales tax?
Responses

An excise tax applies only to imported goods.
An excise tax applies only to imported goods.

An excise tax applies to specific products.
An excise tax applies to specific products.

An excise tax is an indirect tax.
An excise tax is an indirect tax.

An excise tax is not deductible.

Answer 1

Short answer: Two of the four statements are correct.

- "An excise tax applies only to imported goods." — False. Excise taxes apply to particular products or activities whether produced domestically or imported.
- "An excise tax applies to specific products." — True. Excises target specific goods or activities (e.g., gasoline, tobacco, alcohol, airline tickets).
- "An excise tax is an indirect tax." — True. Excises are usually collected from producers/importers or sellers and passed on in the price to consumers, so they function as indirect taxes.
- "An excise tax is not deductible." — False (overly broad). Whether an excise tax is deductible depends on the taxpayer and context: businesses generally can deduct excise taxes as a business expense, while personal deductibility is limited and situation-dependent.

Quick difference vs. sales tax: A sales tax is a broad percentage charged at the point of retail sale on many goods/services; an excise is targeted (often per‑unit or specific amount), imposed earlier in the supply chain, and often used both to raise revenue and discourage consumption.