What is an excise tax?

An excise tax is imposed when certain acts are performed, for engaging in particular occupations, for obtaining certain licenses, and for the enjoyment of certain privileges granted by the government. There are a variety of excise taxes which arise in all sorts of activities - manufacturing, retailing, wagering, environmental activities, qualified investment entities, "golden parachute" arrangements, and certain group health plans - to name a few. In addition, anytime you have to pay for a license or a permit - building permits, occupational licenses, dump fees, and even parking meters - these payments can be considered as an excise tax.