March 2016 • www.CPAPracticeAdvisor.com 19
T he t h ing is – excise ta xes a re
typically based on the volume sold
for a specifed unit of measurement,
while sales ta x is a percentage (ad
valorem) tax based on the price of a
good or service. Additionally, excise
taxes ofen have many more variables
that are used to determine the ta x
rate. Let's look at fuel as an example,
t he posit ion i n t he supply cha i n
where the transaction takes place, the
origin of the fuel and the licenses held
by the parties involved all play a part
in the amount of excise tax due.
Sales tax calculation has diferent
challenges. Te same product can
have a diferent tax rate, or no sales
tax obligations at all, from one street
to the next based on jurisdictional
boundaries. For example, in some
states like New York, propane and
electricit y that is sold for use in a
commercial seting is charged the
s t ate sa le s t a x , howe ver i f t he se
products/services are sold for resi-
dential use, state sales tax does not
apply, but cou nt y, c it y a nd SPD
(special purpose districts) sale taxes
are charged. Believe it or not, some
states create specia l pu r pose ta x
d i st r ic t s for t he sole pu r pose of
taxing specifc products or services.
Tese districts are most ofen cre-
ated around schools and hospitals.
Often sales taxes must be calcu-
lated as a "gross receipts tax," meaning
The Sticky Business
of Excise and Sales
Tax Requirements
By Gail Cole
M
any industries find them -
selves with a unique ta x
conundr um … they are
required to calculate and fle
both sales and excise taxes
to run their day-to-day busi-
ness. So, what's the big deal?
A Year in the Life of a SALT Accountant
is sponsored by Avalara
y B u s i n e s s
c c o u n t a n t
b y A v a l a r a
Excise Tax - Handy Links
» IRS General Summary
www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Excise-
Tax
IRS Excise Tax Forms:
» Form 2290 Heavy Highway Vehicle Use Tax
www.irs.gov/uac/About-Form-2290
» Form 730: Monthly Return for Wagers
www.irs.gov/uac/Form-730,-Monthly-Tax-Return-for-Wagers
» Form 11-C: Occupational Tax and Registration
Return for Wagering
www.irs.gov/uac/Form-11-C,-Occupational-Tax-and-Registration-
Return-for-Wagering
» Form 720: Quarterly Federal
Excise Tax Return
www.irs.gov/uac/Form-720,-Quarterly-
Federal-Excise-Tax-Return
State
Excise
Taxes:
»
Gasoline
taxfoundation.org/blog/how-high-
are-gas-taxes-your-state
»
Cigarettes
www.tobaccofreekids.org/re
-
search/factsheets/pdf/0097.pdf
»
Liquor
taxfoundation.org/blog/map-state-
spirits-excise-tax-rates-2015
»
Wine
www.wineinstitute.org/fles/
State%20Wine%20Excise%20Tax%20
Rates.pdf
»
Beer
www.brewersassociation.org/
government-affairs/laws/state-
excise-tax-rates/
Gail Cole is a sales tax expert with
Avalara who has a penchant for dig-
ging through the depths of BOE sites
and discovering and reporting rate
changes across the country.
t h at t he t a x
mu s t b e c a lc u -
lated on the total of the
product and the excise
taxes collected. Tis puts
an extra burden on the tax
calculation process, since
excise and sales taxes can't
be c a lc u l ated i ndepen-
dently. Te excise tax must
be determined and calcu-
lated f irst, then the result
added to the product price to
create the basis for the subse-
quent sales tax calculation.
I ndu s t r ie s l i k e propa ne
d istr ibutors, electr icit y and
nat ura l gas prov iders, home
heating oil distributors, tobacco
w holesa lers, a nd equ ipment
rental businesses are faced with
the challenge of calculating both
excise and sales tax correctly in
order to achieve tax compliance.
Now let 's an swer our or ig inal
question – so, what 's the big deal?
To be able to accurately calculate
both tax types, companies must be
able to pinpoint sales tax rates at a
specif ic point on a map as well as
keep up w it h a l l of t he rates a nd
rules of the excise ta xes they owe.
Tis is no task. Does your business
have the tools to achieve tax compli-
ance today?