- An excise tax is usually included in the price of a product or service. A consumer pays the tax when she purchases the product, and the tax is not usually listed as a separate expense on the receipt. According to CRS Report for Congress, federal excise taxes on gasoline were originally enacted in 1932 to correct a federal budgetary imbalance. Now, most excise taxes are dedicated to specific trust funds, like the Highway Trust Fund.
- An excise tax can be assessed by federal, state or local government agencies upon goods and services. For example, the Department of Motor Vehicles in many cities charges an excise tax when an individual registers a vehicle. Some car dealers issue an excise tax when an individual purchases a new vehicle within the state. Federal excise taxes are imposed on goods and services like gasoline, telephone services and indoor tanning salons.
- Some city governments impose taxes on income and personal property. Excise taxes are never imposed on income -- only on goods and services. According to the Tax Foundation, some cities tax income on individuals who reside within city limits and on those who commute to work locations within city boundaries. City taxes provide what the Tax Foundation refers to as a "substantial revenue" for communities. Some cities also tax personal property, including real estate.
- City taxes are often issued on the purchase of specific goods and services within city limits. The tax on these goods is determined by local assemblies and agencies. For example, the "Anchorage Daily News" reported in November 2010 that Anchorage, Alaska, raised its city tax on a pack of cigarettes by 75 cents. City taxes on goods and services are often defined as excise taxes, so the terms can be used interchangeably in this case.
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