No, excise tax and sales tax are different taxes on different things

Sales tax is a percentage added to almost everything you buy — groceries, clothes, gas, restaurant meals. It applies broadly. Excise tax is a tax on specific products only: cigarettes, alcohol, fuel, tires, firearms. Excise tax is usually built into the price you see on the shelf, while sales tax is added at checkout. The two can stack — you might pay excise tax on a bottle of liquor, then sales tax on top of that.

The key difference is scope. Sales tax hits nearly all purchases. Excise tax targets only certain goods the government wants to discourage or regulate. A gallon of milk has no excise tax. A gallon of gasoline does. A shirt has no excise tax. A pack of cigarettes does.

Key Takeaways

  • Sales tax applies to most goods and services; excise tax applies only to specific products like fuel, alcohol, and tobacco.
  • Excise tax is often hidden in the shelf price, while sales tax is added at the register.
  • Excise tax rates vary by state and by product — a cigarette tax in one state differs from another, and fuel tax differs from cigarette tax.
  • You can pay both taxes on the same item: excise tax on the product itself, then sales tax on the total.

How sales tax and excise tax work differently

Sales tax is a general consumption tax. Every state except five (Alaska, Delaware, Montana, New Hampshire, Oregon) charges it. The rate is usually between 4 and 10 percent, and it applies to the final sale price of most goods. When you buy a $20 shirt in a state with 8 percent sales tax, you pay $21.60 at checkout.

Excise tax is a selective tax on particular items. It exists at both the federal and state level. Federal excise taxes on gasoline, diesel, and aviation fuel fund the Highway Trust Fund. States add their own excise taxes on top. A gallon of gas might have 18.4 cents in federal excise tax, then 20 to 50 cents in state excise tax, depending on where you live. That tax is usually already in the price per gallon you see on the pump.

The reason for the difference is intent. Sales tax is meant to raise general revenue for state and local government. Excise tax is meant to discourage use of certain products (smoking, drinking, driving) or to fund specific programs (road maintenance from fuel tax, smoking cessation from cigarette tax).

Which products have excise tax

Federal excise taxes apply to these categories:

  • Gasoline and diesel fuel
  • Aviation fuel and kerosene
  • Alcohol (beer, wine, spirits)
  • Tobacco products (cigarettes, cigars, smokeless tobacco)
  • Firearms and ammunition
  • Tires
  • Fishing equipment and bows
  • Heavy trucks and trailers
  • Coal

States often add their own excise taxes on top of federal ones. Many states tax gasoline, diesel, cigarettes, and alcohol at rates higher than the federal level. Some states add excise taxes on items the federal government does not — for example, some states tax sugary drinks or vaping products.

Most everyday items — food, clothing, household goods, electronics — have no excise tax. They have only sales tax (where applicable).

Why excise tax is often hidden in the price

When you pump gas, the excise tax is already in the per-gallon price. You do not see it broken out separately. The same is true for cigarettes and alcohol in most stores — the tax is built into the shelf price. This is different from sales tax, which appears as a separate line on your receipt.

This happens because excise taxes on fuel, tobacco, and alcohol are collected by the seller and sent to the government, but the law does not require them to show the tax separately to the customer. For gasoline, the federal and state excise taxes are combined into one price per gallon before it reaches the pump display.

Sales tax, by contrast, is usually shown separately at checkout because it is calculated on the final total and varies by location within a state. A store might be in a county or city with a different sales tax rate than the next town over.

How excise tax rates vary by state and product

Excise tax rates are not uniform. The federal government sets federal excise tax rates, which are the same everywhere. But states set their own rates, and they differ widely.

For example, the federal excise tax on gasoline is 18.4 cents per gallon. But state excise taxes on gasoline range from about 8 cents per gallon (Alaska) to over 60 cents per gallon (California, Washington). A driver in California pays roughly 40 cents more per gallon in state excise tax than a driver in Alaska, before any sales tax is added.

Cigarette excise taxes show even wider variation. The federal tax is $1.01 per pack. State taxes range from 17 cents per pack (Missouri) to $4.50 per pack (Washington). A pack that costs $6 in one state might cost $10 in another, largely because of excise tax differences.

Alcohol excise taxes also vary by state and by type of alcohol. A bottle of beer, wine, and spirits each have different federal rates, and states layer on their own rates on top.

When you pay both excise tax and sales tax

It is possible to pay both taxes on the same purchase. This happens when a product has an excise tax built into its price, and then sales tax is added to the total.

Example: You buy a pack of cigarettes for $8. That $8 already includes the federal and state excise tax on cigarettes. At checkout, your state adds 8 percent sales tax. You pay $8.64 total. You have paid excise tax (hidden in the $8) and sales tax ($0.64).

Another example: You buy a bottle of liquor for $15. That price includes federal and state excise tax on alcohol. Sales tax of 7 percent is added. You pay $16.05. Again, both taxes apply.

Gasoline is the most common example. The price per gallon includes federal and state excise tax. In states that charge sales tax on gasoline (not all do), sales tax is added on top of the excise-tax-inclusive price.

Frequently Asked Questions

Do I pay sales tax on items that already have excise tax?

Usually yes. Excise tax and sales tax are separate. The excise tax is built into the price of the product, and then sales tax is added to that total at checkout. Some states exempt certain excise-taxed items from sales tax — for example, a few states do not charge sales tax on gasoline — but most do tax both.

Why does the government tax some things more than others?

Excise taxes are used to discourage consumption of products the government considers harmful (tobacco, alcohol) or to fund specific programs (fuel taxes fund road maintenance). Sales tax is a general revenue tool. Excise tax is a policy tool.

Can I deduct excise tax on my taxes?

Federal excise tax on gasoline and diesel fuel can be deducted if you use the vehicle for business purposes and claim the deduction on your tax return. Most other excise taxes cannot be deducted by individual consumers. Businesses may be able to deduct certain excise taxes depending on how they use the product.

Is excise tax the same in every state?

No. The federal excise tax rate is the same everywhere, but every state sets its own excise tax rates on top. Gasoline, cigarettes, and alcohol excise taxes vary significantly from state to state. Some states tax products the federal government does not.

Why is excise tax not shown separately on my receipt?

Excise tax on fuel, tobacco, and alcohol is collected by the seller but is not required by law to be shown separately to the customer. It is built into the shelf price. Sales tax is shown separately because it is calculated at the register and varies by location.