Question

How is an excise tax different from a sales tax?

An excise tax is not deductible.
An excise tax applies to specific products.
An excise tax applies only to imported goods.
An excise tax is an indirect tax.

Answer 1

Correct answer: "An excise tax applies to specific products."

Explanation:
- Excise taxes are typically levied on particular goods or activities (e.g., gasoline, alcohol, tobacco, airline tickets) and often charged per unit (specific tax) or as a targeted ad valorem tax.
- "An excise tax is not deductible." — Not generally true as a blanket statement. Businesses can often deduct excise taxes as a business expense; deductibility depends on tax rules and context.
- "An excise tax applies only to imported goods." — False. Excise taxes apply to both domestically produced and imported items. (Customs duties specifically apply to imports.)
- "An excise tax is an indirect tax." — True, but not a useful distinguishing feature because sales taxes are also indirect taxes.