Excise tax

An excise tax is levied on a specifically-identified product or service. The tax is usually intended for a limited purpose. For example, an excise tax may be placed on diesel fuel, with the resulting tax funds being used to pay for a clean air initiative. Or, an excise tax on alcohol may be used to fund alcoholism treatment centers. This type of tax is most commonly targeted at goods that have health issues associated with them, such as cigarettes. By imposing an excise tax, the intent is to raise the price of the product and thereby reduce the level of consumption.

Excise taxes are not usually imposed at the local level. Instead, they are imposed by state and federal governments. These taxes are collected by the sellers of the targeted goods and services, and then remitted to the applicable government.