IPT 2013 Sales & Use Tax
Symposium – Monterey, CA
Pay it Forward… Excise
and Stealth Taxes
Presenters
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Frank A. Falvo, Esq.
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Robert D. Jones, Principal
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Deloitte Tax, LLP
(412) 613-4791
Ryan, LLC
(913) 269-4915
What is an Excise Tax
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Excise Taxes have been in existence long
before income taxes
Modern form of excise taxes first developed
in Holland in early 17th century
England imposed excise taxes in 17th
century- led to Boston Tea Party
First US excise tax 1791-led to Whiskey
Rebellion
What is an Excise Tax (continued)
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Internal Revenue Code does not provide
definition of Excise Tax
IRC lists goods and services subject to
excise tax
An excise tax is a tax on certain goods,
services and activities
What is an Excise Tax (continued)
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IRS website states:
“Excise taxes are taxes paid when purchases are
made on a specific good, such as gasoline. Excise
taxes are often in the price of the product. There
are also excise taxes on activities, such as on
wagering or on highway usage by trucks.”
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Excise Taxes
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More than 40 different excise taxes
Generally filed on IRS Forms 720 and 2290
IRS collects approximately $50 billion/year
Alcohol and Tobacco Tax and Trade Bureaucollects approximately $30 billion/year
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Firearms and ammunition-TTB Form 5300.26
Alcohol and tobacco-TTB Form 5000.24
Excise Taxes
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Excise taxes generally classified in following
categories
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Manufacturer
Retail
Facilities and services
Use
Environmental
Manufacturers Excise Taxes
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Medical Device- IRC 4191
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2.3% excise tax on sale of certain medical
devices
Point of taxation- manufacturers, producers,
importers
Some manufacturers pass on tax in price of
article; others absorb tax- depends on market
Manufacturers Excise Tax (cont)
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Sports Fishing and Archery Equipment-IRC
4161
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10% tax on sports fishing equipment
11% tax on bows and arrows
Point of taxation- manufacturers, producers,
importers
Generally manufacturers pass on tax in price of
article
Manufacturers Excise Tax (cont)
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Coal-IRC 4121
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Vaccine-IRC 4131
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Excise tax imposed on each ton produced
Point of taxation-person who mined or produced
coal
Generally tax passed on in price of coal
75 cents per dose
Point of taxation-manufacturer, producer, importer
Generally tax passed on in price of vaccine
Manufacturers Excise Tax (cont)
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Firearms- IRC 4181
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Tobacco-IRC 5701
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10% pistols and revolvers; 11% ammo and other
firearms
Point of taxation-manufacturer, producer, importer
Tax passed on in price of article
Various taxes on tobacco products
Point of taxation-manufacturer or importer
Tax passed on in price of article
Retail Excise Tax
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Heavy trucks, tractors and trailers-IRC 4051
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12% tax on sales price
Point of taxation-person making first retail sale
Tax passed on to purchaser
Facilities and Services Excise Tax
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Air Transportation-IRC 4261 and 4271
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7.5% tax on amount paid for transportation of
persons by air
6.25% tax on amount paid for transportation of
property by air
Point of taxation-paid by person paying for the
transportation; collected by the air carrier and
paid over to IRS on Form 720
Environmental Excise Tax
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Ozone Depleting Chemicals (ODC)-IRC
4681
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Amount of tax based on type of ODC
Point of taxation-on sale or use by a producer,
manufacturer, or importer of any ODC or any
product imported into the United States that uses
an ODC in its manufacture or production
Generally tax not directly passed on, but may be
a cost factor in pricing of article
Foreign Insurance Excise Tax
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Policies issued by foreign insurers or
reinsurers-IRC 4371
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4% tax on casualty insurance policies, and
indemnity, fidelity and surety bonds
1% tax on life insurance, sickness and accident
policies and annuity contracts
1% tax on reinsurance
Point of taxation-imposed on the foreign insurer,
the insured and insurance broker
Tax sometimes passed on to customer
Alcohol Excise Taxes
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Distilled spirits, wines and beer-IRC Chapter
51
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Various tax rates depending on type of alcohol
Point of taxation
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Distilled spirits-as soon as distilled spirit comes into
existence.
Wines-imposed on production or importation
Beer-imposed on production or importation
Tax passed on in price of article
Definition of Stealth Tax
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Stealth Tax
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Type of levy used by governments to increase
revenue
Less visible to the taxpayer than income or
property taxes
Examples of Stealth Tax include
 Sales tax, value added tax, tobacco tax, liquor
tax, air travel tax and fuels tax
Definition of Stealth Tax (Cont’d)
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Stealth Tax
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Varies by jurisdiction
Built into the product pricing
Easier to collect; levied at point of sale and not
dependent on taxpayer’s income
Also implemented by introducing new taxes,
raising existing taxes or removing tax breaks
Examples of Stealth Tax
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Stealth Tax on Fuel
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State of California (Cal. Rev. & Tax Code Ann.
§§ 60050, and 8101)
 Fuels Tax
– Prior to July 1, 2011: 18 Cents/Gallon
– July 1, 2011 - June 30, 2012: 13 Cents/Gallon
– July 1, 2012 - June 30, 2014: 10 Cents/Gallon
Examples of Stealth Tax (Cont’d)
California
Periods
Prior to
7/1/2011
Gallons of Fuel
Fuels Tax
Total
50,000
$0.18
$9,000.00
7/1/2012
through
Current
50,000
$0.13
$6,500.00
50,000
$0.10
$5,000.00
50,000
$3.50
$175,000.00
50,000
$3.50
$175,000.00
Sales Tax
Total
1.87%
$3,272.50
2.17%
$3,797.50
Total Fuels and Sales Tax
$9,772.50
$8,797.50
Gallons of Fuel
Price/Gallon
Total
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7/1/2011
through
6/30/12
Examples of Stealth Tax (Cont’d)
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Stealth Tax on Fuel - Federal “Piggy-Back
Tax”
California
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Current Periods
Gallons of Refundable Fuel
State Fuels Tax
Fuels Tax Paid Total
50,000
$0.10
$5,000.00
Gallons of Refundable Fuel
Federal Fuels Tax Rate
Federal Refund
50,000
$0.243
$12,150.00
Federal Refund
CA Sales Tax Paid on Fuel
Total Piggy-Back Sales Tax Refund
$12,150.00
9.25%
$1,123.88
Examples of Stealth Tax (Cont’d)
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Stealth Tax on Fuel
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State of Wyoming (Wyo. Stat. Ann. § 39-17-204)
 Fuels tax
– July 1, 2011 - June 30, 2013: 13 cents/gallon
– July 1, 2013 - current: 23 cents/gallon
 Sales Tax: 6% per gallon
Examples of Stealth Tax (Cont’d)
Wyoming
Gallons of Fuel
State Fuels Tax
Fuels Tax Paid Total
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7/1/2011
through
6/30/13
7/1/2013
through
Current
50,000
$0.13
$6,500.00
50,000
$0.23
$11,500.00
Gallons of Fuel
Price/Gallon
Total
50,000
$3.50
$175,000.00
50,000
$3.50
$175,000.00
Sales Tax
Sales Tax Total
6.00%
$10,500.00
6.00%
$10,500.00
Sales Tax Owed
-$4,000.00
$1,000.00