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Updated for 2011
Excise Taxes
What Are Excise Taxes?
Excise taxes are imposed by the government on certain types of fuels and other commodities, as well as certain activities.
Historical note: Before 1913, when the income tax was imposed, the federal government relied on excise taxes to meet its funding requirements.
Since excise taxes are generally included in the price of gas, diesel fuel, and other motor fuels used in your business, you simply deduct the total cost of the fuel as a business deduction rather than take a separate deduction for the tax.
For example, assuming you use the actual expenses method for deducting car expenses (and not the mileage allowance method), you would just deduct the total cost of fuel used for business purposes.
Examples of fuels that are taxed:
- Gasoline
- Diesel fuel
- Aviation fuel (any liquid, other than gasoline or diesel fuel)
- Aviation gasoline (all special grades suitable for use in aviation)
- Liquid petroleum gas (propane, butane, and pentane)
Examples of other commodities that are taxed:
- Liquor
- Tobacco.
Examples of activities that are taxed:
- Wagering
- Highway usage by trucks.
There are instances when you may be eligible for a credit for federal excises taxes on certain fuels.
Next:
Excise Taxes: Tax Credit or Refund of Excise Taxes
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