Difference between Sales Tax and Excise Duty
Key difference: Sales Tax and Excise Duty are two different taxes that are levied by the government. A sales tax is a tax that is levied on the sale of certain goods and services. This tax is payable by the consumer, at the time of purchase. An excise duty is also known as excise, excise tax, or even a duty of excise special tax. It is an inland tax on the sale, or production for sale, of specific goods within the country.
Sales Tax and Excise Duty are two different taxes that are levied by the government. Taxes usually serve as a source of income for governments.
Investopedia defines ‘sales tax’ as “A tax imposed by the government at the point of sale on retail goods and services. It is collected by the retailer and passed on to the state. It is based on a percentage of the selling prices of the goods and services and set by the state.”
A sales tax is a tax that is levied on the sale of certain goods and services. This tax is payable by the consumer, at the time of purchase. The tax may be applied additionally as a percentage on the cost of the item, or it may be already included in the retail selling price. Usually, there is a particular list of items on which the tax is levied. Likewise, there is a list of items that are exempted from the tax. The sales tax is considered a direct tax that is difficult to evade as a shopkeeper cannot hide his sales.”
Investopedia defines ‘excise tax’ as “an indirect tax charged on the sale of a particular good. Excise taxes are considered an indirect form of taxation because the government does not directly apply the tax. An intermediary, either the producer or merchant, is charged and then must pay the tax to the government. These taxes can be categorized in two ways:
- Ad Valorem: A fixed percentage is charged on a particular good.
- Specific: A fixed dollar amount dependent upon the quantity purchased is charged.”
An excise duty is also known as excise, excise tax, or even a duty of excise special tax. It is an inland tax on the sale, or production for sale, of specific goods within the country. It states that the product that is produced with the intention of selling within the country can be levied an excise duty. However, goods produced with the intention of exporting may be exempt from this tax.
An excise is considered an indirect tax which means that the producer or seller who pays the tax to the government is expected to try to recover or shift the tax by raising the price paid by the buyer.
Excise duties are usually applied on gasoline and other fuels, tobacco and alcohol, etc. There is a particular list of items on which the tax is levied. Likewise, there is a list of items that are exempted from the tax. Excise duties are typically imposed in addition to another indirect tax such as a sales tax or value added tax (VAT).
As compared to a sales tax, an excise duty is generally not levies on a large list of products. It is usually restricted to a list of specific goods and products. The excise duty is usually a heavier tax than sales tax, i.e. it costs more, a higher percentage. Furthermore, the excise duty is typically a per unit tax, whereas the sales tax is usually a percentage of the total cost and is proportional to the price of the good. Excise duty is also usually paid by the manufacturer, as opposed to the sales tax, which is borne by the consumer. Also, excise duty is payable on removal of goods from factory or warehouse whereas sales tax is payable after the sale takes place. Moreover, excise duty is levied on accessible value whereas sales tax is charged on sale price.
Image Courtesy: arstechnica.net, smallb.in