What is an excise tax?

An excise tax can be applied whenever someone buys a particular type of good and is usually included with the good's price. Certain activities, such as using a truck on the highway or buying motor fuel, can also incur an excise tax.

An excise tax can also be used as a fee from the IRS for an unsuitable transaction made on a retirement account. Since the U.S. government doesn't add an excise tax directly to certain goods and activities, it's considered an indirect tax. Merchants and producers are considered the intermediaries and have to pay the tax. The excise tax can either be classified as a specific cash amount or a specific percentage.