Excise Tax Examples: Fuel, Alcohol, Tobacco, and Firearms

Excise tax examples show up in daily life more often than most people realize: the federal government taxes gasoline at 18.4 cents a gallon, airline tickets at 7.5% of the fare, a pack of cigarettes at roughly $1.01, and indoor tanning sessions at 10%, while states and cities add their own layers on hotel rooms, cannabis, sugary drinks, and rental cars. Unlike a general sales tax that covers most retail purchases, an excise tax targets a specific product, service, or activity, and the revenue often funds something tied to that product’s impact.

Fuel and Transportation

Gasoline carries a federal excise tax of 18.3 cents per gallon, and diesel and kerosene are taxed at 24.3 cents per gallon. A 0.1-cent surcharge for the Leaking Underground Storage Tank Trust Fund brings the effective rates to 18.4 cents for gasoline and 24.4 cents for diesel.¹ The money flows into the Highway Trust Fund, which pays for road maintenance and transit projects.

Airline travel is taxed at 7.5% of the domestic ticket price, plus a flat $3.00 charge per domestic flight segment.² That revenue supports the Airport and Airway Trust Fund, which finances aviation infrastructure and safety programs.³

Heavy vehicles face a 12% excise tax on the first retail sale of truck chassis, truck bodies, trailer chassis, and highway tractors. It applies to trucks weighing more than 33,000 pounds and trailers weighing more than 26,000 pounds, and it covers parts and accessories installed within six months of the vehicle entering service.⁴ The tax is currently scheduled to expire on October 1, 2028.

Alcohol

Federal alcohol rates vary by beverage. Distilled spirits carry the steepest rate at $13.50 per proof gallon.⁵ Wine rates depend on alcohol content and type: still wines with 16% alcohol or less are taxed at $1.07 per wine gallon, sparkling wines reach $3.40 per wine gallon, and hard cider gets the lightest treatment at 22.6 cents per wine gallon.⁶

Beer is taxed by the barrel (31 gallons). The standard rate is $18 per barrel, but the first 6,000,000 barrels from any brewer qualify for a reduced $16 rate. Small brewers producing no more than 2,000,000 barrels annually pay just $3.50 per barrel on their first 60,000 barrels.⁷ Those graduated rates give craft breweries a cost advantage over large-scale producers.

Tobacco

Cigarettes are taxed at $50.33 per thousand for standard-size cigarettes, which works out to roughly $1.01 per pack of 20. Larger cigarettes weighing more than three pounds per thousand face a higher rate of $105.69 per thousand.⁸ These are federal rates only. State and local governments typically stack additional tobacco taxes on top.

Firearms, Tanning, Wagering, and Chemicals

Firearms and ammunition face an ad valorem excise tax at the manufacturer level. Pistols and revolvers are taxed at 10% of the sale price, while other firearms, shells, and cartridges are taxed at 11%.⁹ Revenue from this tax has historically funded wildlife conservation and habitat restoration.

Indoor tanning services carry a 10% excise tax on the amount paid. The salon collects the tax from the customer and remits it to the IRS quarterly.¹⁰

Legal sports wagers are taxed at 0.25% of the total amount wagered. Unauthorized wagers face a steeper 2% rate, reflecting Congress’s longstanding approach of using excise taxes to discourage illegal gambling operations.

Manufacturers and importers of certain hazardous chemicals owe Superfund excise taxes. The rates vary by chemical. Common petrochemicals like benzene, butane, and propylene are each taxed at $9.74 per ton, while sulfuric acid runs $0.52 per ton and potassium hydroxide $0.44 per ton. The IRS periodically adds new taxable substances to the list.¹¹

State and Local Examples

State and local governments layer their own excise taxes on top of federal ones, often targeting industries that are locally significant or politically easy to tax.

Hotel occupancy taxes are among the most widespread. Travelers pay a percentage of their nightly room rate, with combined state and local rates ranging from roughly 2% to over 15% depending on the destination. Revenue typically funds tourism promotion, convention centers, and local infrastructure. Visitors pay the cost while the hotel remits the tax, which makes occupancy taxes politically popular since the burden falls largely on non-residents.

Cannabis excise taxes have become a major revenue source in states where recreational use is legal. Rates vary dramatically, from single digits in some states to 37% in the highest-taxed jurisdictions. Some states tax based on THC concentration, charging higher rates for more potent products. These taxes typically stack on top of regular state and local sales taxes.

A handful of cities impose excise taxes on sugary beverages, generally charging one to two cents per ounce. These taxes are levied on distributors rather than directly on consumers at the register, though the cost passes through to shelf prices. Revenue usually goes toward public health programs or early childhood education.

Car rental excise taxes are another common local levy. State and municipal rates can add up quickly, with combined taxes and fees exceeding 20% in some locations. Airports and tourist-heavy areas often impose additional surcharges on top of the base rental tax. Gambling operations face local levies too, with a portion of gross receipts from slot machines and table games flowing to the regional treasury.

Specific Versus Ad Valorem Rates

Two calculation methods run through the examples above, and the difference matters because it affects how the tax behaves as prices change.

A specific excise tax charges a flat dollar amount per unit. Gasoline at 18.4 cents per gallon is a specific tax: whether gas costs $2.50 or $4.00, the tax stays the same per gallon.¹ The cigarette tax works the same way: $50.33 per thousand cigarettes regardless of the brand’s shelf price.⁸ Specific taxes produce predictable revenue but lose purchasing power to inflation unless Congress raises them.

An ad valorem excise tax is a percentage of the sale price, so it scales with the cost of the product. The 12% heavy truck tax and the 10% to 11% firearms tax are both ad valorem: the more expensive the truck or rifle, the more tax the buyer pays.⁴⁹ The airline ticket tax and the indoor tanning tax follow the same pattern. Ad valorem taxes keep pace with inflation naturally but produce less predictable revenue because the tax base fluctuates with market prices.

Who Actually Pays

Most excise taxes are indirect. The business that writes the check to the government is not the same entity that bears the cost. A fuel wholesaler pays the excise tax at the terminal, then bakes it into the price charged to gas stations, who pass it along to drivers. A cigarette manufacturer pays the per-pack tax and rolls it into the wholesale price. The consumer absorbs the cost through higher prices but never interacts with the tax authority.

This setup exists for efficiency. Collecting from a few hundred refineries or manufacturers is simpler and cheaper than collecting from millions of end users. Indoor tanning is one exception where the consumer-facing business collects the tax directly from the customer at the point of sale.¹⁰

State and local governments are generally exempt from federal excise taxes under the doctrine of reciprocal tax immunity. A city bus fleet doesn’t pay the federal fuel excise tax, and a state agency buying a heavy truck is exempt from the 12% retail tax.

1
Office of the Law Revision Counsel. 26 USC 4081 – Imposition of Tax
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Office of the Law Revision Counsel. 26 USC 4261 – Imposition of Tax
3
Federal Aviation Administration. Current Aviation Excise Tax Structure and Rates 2026
4
Office of the Law Revision Counsel. 26 USC 4051 – Imposition of Tax on Heavy Trucks and Trailers Sold at Retail
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Office of the Law Revision Counsel. 26 USC 5001 – Imposition, Rate, and Attachment of Tax
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Office of the Law Revision Counsel. 26 USC 5041 – Imposition and Rate of Tax
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Office of the Law Revision Counsel. 26 USC 5051 – Imposition and Rate of Tax
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Office of the Law Revision Counsel. 26 USC 5701 – Rate of Tax
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Office of the Law Revision Counsel. 26 USC 4181 – Imposition of Tax
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Office of the Law Revision Counsel. 26 USC 5000B – Imposition of Tax on Indoor Tanning Services
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Office of the Law Revision Counsel. 26 USC 4661 – Imposition of Tax