In the first issue the IICLE “Tax Law Explained” FlashPoints (May, 2009) I showed how the Federal Tax laws are designed to encourage or discourage certain behaviors, not just raise money. Sure, the Federal government needs money, but they would not need thousands of pages of Federal Statute and Regulations to accomplish that goal.
There are a few tax laws where the government comes right out and says that they are imposing a tax to control or even punish people’s behavior. These are called “Excise Taxes”. These Excise Taxes also provide a reminder that those who name the tax acts and reporting requirements have not lost their sense of humor.
In general, Excise taxes are imposed on certain purchases, consumption and activities without regard to one’s income. Cash strapped Governmental bodies search for ways to raise money. Often, they try to show why the party being taxes deserves what they get. Here are some examples of Excise Taxes:
The Federal and state governments imposes certain Excise Taxes that are generally referred to as “SIN” Taxes. Politicians can use certain activities that are legal but considered “immoral” as the target of an Excise Tax. Some people get on board because they want to punish those who participate regardless of how much revenue can be raised.
Here is a partial list of the SIN Taxes:
- Tobacco Products. The Federal Government, as well as many states and counties impose Excise Taxes on tobacco products. Some claim that the Excise Tax is required to offset the increased healthcare costs associated with tobacco use while others just want the revenue.
- The Federal Government, as well as many states and counties impose Excise Taxes on Alcohol products. During Prohibition, Alcohol could not be produced or sold except for limited medicinal or religious purposes.
The Federal Government lost tens of millions of dollars of Excise Taxes (not to mention causing millions of people to become lawbreakers and giving a huge benefit to organized crime).
- Effective beginning on July 1, 2010, there is a Federal Excise Tax of 10% imposed upon people who get their bodies artificially tanned at “tanning salons”.
- Pole Tax. Texas enacted a new law imposing a $5 per person tax on customers who go to strip clubs. While this was struck down by the Texas Supreme Court as unconstitutional, other states have explored similar Excise
- Junk Food & Soda. Many governmental bodies are exploring ways to impose an Excise Tax on certain soft drinks and junk food. The theory behind targeting these products is to encourage healthier food choices. Will Coke, Pepsi and Frito-Lay band together to incite a “Boston Tea Party” type reaction?
- LUST: The Leaking Underground Storage Tank (“LUST”) is a Federal Excise tax imposed on certain fuels. The stated purpose of the LUST tax is to provide money for cleaning up the environmental contaminants that leak from underground motor fuel storage tanks. It should be noted that pursuant to Omnibus Budget Reconciliation Act of 1990, LUST expired effective on December 31, 1995. However, Bill Clinton was determined to reinstate LUST while in the White House and did so by signing the Taxpayer Relief Act of 1997.
- CRUDE: An Excise Tax is imposed on crude oil that is imported or produced in the U.S.
- ExSTARS: This has nothing to do with those who have had their 15 minutes of fame and now only appear up under the heading of “Whatever happened to…..” The Excise Summary Terminal Activity Reporting System (“ExSTARS”) is a fuel reporting system that tracks liquid fuels as they move in or out of IRS approved terminals. ExSTARS was jointly developed by the IRS, the Department of Transportation, States, and Motor Fuel Industry.
- Spare The Rod: There is a 10% Federal Excise Tax imposed upon certain sport fishing equipment including fishing rods, tackle, and electric trolling motors.
- Overtures to William Tell: There is a Federal Excise Tax imposed upon manufacturers of certain bows, quivers and arrows.
- Vaccines: This one runs counter to the theories of punishing those who use sinful products. All the same, there is a Federal Excise Tax imposed on certain vaccines including vaccine’s against: polio, measles, mumps, chicken pox, hepatitis and diphtheria. Along with the Excise Taxes, come forms, filing deadlines, penalties and interest.
Copyright ©, Keith B. Baker – 2010
This article is designed to be a public resource of general information. It does not constitute “legal advice” nor does it create a “client-attorney” relationship. While the information is intended to be accurate, this cannot be guaranteed. Tax laws are complex and constantly changing as a result of new laws, regulations, court interpretations and IRS pronouncements. Often, there are also various possible interpretations. Further, the applicable rules can be affected by the facts and circumstances of a particular situation. Because of this, some of the information may no longer be correct or may not apply to all situations. We are not responsible for any consequences or losses resulting from your reliance on such information. You are urged to consult an experienced lawyer concerning your particular factual situation and any specific legal questions you may have.
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