How is an excise tax different from a sales tax?
An excise tax and a sales tax are both ways governments collect revenue, but they target different things:
An excise tax is typically levied on specific goods or services, like gasoline, tobacco, or alcohol. It is usually imposed per unit basis (e.g., per gallon or pack) and is often used to discourage consumption of certain products or to account for externalities (unintended side effects on society) these products may create.
On the other hand, a sales tax is a general tax applied to selling most goods and services at the point of sale. It’s often expressed as a percentage of the purchase price. Unlike the excise tax, it isn’t limited to specific products or services.
In short, while a sales tax applies broadly to many purchases, an excise tax targets specific goods or services.
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