According to the Internal Revenue Service (IRS), both individuals and businesses pay excise taxes as part of the price of several categories of goods. Gasoline is one of the most common examples as is alcohol, cigarettes, and anything else the IRS deems to have a high social cost. The IRS may also impose excise taxes on specific activities such as commercial trucks using the highways and most forms of wagering. We discuss some of the lesser-known forms of excise taxes below as well as any recent changes to excise tax law below.
Excise Taxes Charged to Airline Owners
Under the most recent tax reform legislation, the IRS exempted certain payments made by some lessees and all aircraft owners. To qualify for an exception on excise taxes collected from taxable air transportation, the payments must be related to maintenance costs of a private aircraft.
Indoor Tanning Services
The passage of the Affordable Care Act (ACA) during the Obama administration subjected all tanning salon owners to a 10 percent excise tax on the services provided to customers. The IRS charges the excise tax because it considers indoor tanning an unnecessary service. If you’re a tanning salon owner, make sure that you know whether you’re required to file a separate excise tax form when you complete your business return.
Credit for Using Certain Types of Biofuel
The IRS allows for fuel tax credits for individuals and businesses that use alternative types of fuel. These include:
- Alternative fuel credit and mixture
- Biodiesel, which includes renewable diesel and mixture
- Second-generation biofuel producer
The 637 Registration Program
The IRS requires taxpayers who engage in specific types of activities that relate to excise taxes to register the activity before engaging in it. You can go to this link to find out if your activity qualifies for excise taxes and/or to complete the registration form. The IRS refers to this as the 637 Registration Program. You can find a list of activity categories down the left-hand side of the form beginning with A and ending with UV. Next to that column is a set of instructions that includes the type of documentation you must provide with each category of excise tax activity.
Excise Taxes and the Environmental Protection Agency
The Environmental Protection Agency (EPA) currently maintains a list of devices that reduce the amount of idling by tractors. Taxpayers and businesses operating tractors on this list may be eligible for an exemption of the 12 percent tax normally imposed. Different types of motor fuel may also be subject to different tax amounts since the entire excise tax program operates primarily on the sale of gasoline.
Archery and Fishing Equipment Excise Tax
One of the lesser-known and infrequently used excise taxes is that applied to the transportation and sale of archery and fishing equipment. However, this highlights the importance of individual taxpayers and businesses checking to find out whether their primary activities fall into a category that requires the IRS to collect an excise tax.
Understanding Excise Tax Requirements Can Be Complicated
At Chicagoland CPAs, it’s our job to reduce your tax burden to the lowest possible level. Part of our tax strategy is helping to lower or reduce your excise tax obligations whenever possible. If you have additional questions about this aspect of IRS law or would just like to get a jump start on your 2019 return, please don’t hesitate to schedule an appointment with us.
