Key Takeaways
- When you fly, you're paying a 7.5% federal tax on your airline ticket plus extra fees.
- Alcohol taxes vary depending on the type and content, so your beer, wine, and spirits all have different federal tax rates.
- Tobacco products are taxed federally, with specific rates for cigarettes, cigars, and chewing tobacco.
- If you own a car with an internal combustion engine, federal excise taxes are part of the fuel price, with different rates for regular unleaded, natural gas fuels, and diesel.
Many items are taxed
When we think of federal taxes, the first things that come to mind are the taxes taken out of our paychecks and the income tax forms we fill out each year. However, we actually pay in a lot more to the federal government than what is calculated on our annual returns through something called excise taxes.
In 2015, excise tax collections comprised just three percent of all IRS revenues, but that represented $98.3 billion in excise tax collections. Federal taxes are attached to many of the items we purchase on a regular—sometimes even daily—basis. The reason we don’t notice or consider these taxes is that they're hidden in the purchase price of the item we’re buying.
Air transportation taxes
As if air fares and baggage fees weren’t high enough, you’ll also get hit with federal air transportation taxes when you buy airline tickets. In most cases, airline carriers advertise base fares that do not include the extra federal taxes. When you finalize your purchase, a federal tax of 7.5 percent, plus a segment fee of $4 each way and September 11 Security Fee of $5.60, are tacked on to your final cost.
Alcohol taxes
The federal tax rates for beer, wine and spirits vary depending on the type of alcohol you buy and the alcohol content of the beverage. For beer, you’ll pay the federal government between 2 and 5 cents per can, or 12 to 30 cents per six pack. The tax per 750 ml bottle of wine ranges from 4 cents for hard ciders to 67 cents for naturally sparkling varieties. Spirits or hard liquors have the highest liquor tax because of their high alcohol content. An average 80-proof 750 ml bottle of hard liquor will cost you $2.14 in federal tax.
Tobacco product tax
If you smoke or chew tobacco, a portion of your purchase price is devoted to federal tax. A standard pack of 20 cigarettes or 20 small cigars has a $1.01 federal tax, a large cigar has a 40 cent tax and a one-ounce tin of chewing tobacco has a three cent tax. For loose pipe tobacco, you'll pay an extra 17.6 cents per 1-ounce pouch.
TurboTax Tip:
The federal government adds various amounts to everyday charges, like the communications tax which adds fees to your monthly phone bill.
Firearms and ammunition tax
Whether you hunt for sport, carry a concealed weapon or just own personal firearms, you’ll pay a federal tax on the sales price of the gun and any ammunition. For the purchase of pistols and revolvers, the federal rate is 10 percent, and for all other firearms and ammunition, the rate is 11 percent. These taxes are in addition to any state and local sales taxes.
Fuel tax
When you fuel up, a portion of the price goes toward federal taxes. The amount of tax depends on the type of gas you buy. For regular unleaded, you’ll pay 18.4 cents per gallon; for natural gas fuels, like E-85, you’ll pay 11.4 cents per gallon; and for diesel you’ll pay 24.4 cents per gallon. These taxes are included in the price you see on gas station signs, so it’s easy to miss this hidden tax.
Gas guzzler tax
Aside from saving money on gasoline, one more reason to drive a fuel-efficient vehicle is to avoid the gas guzzler tax. The federal government imposes this tax on the purchase of new cars based on their miles-per-gallon fuel efficiency. If you buy a vehicle that gets better than 22.5 miles to the gallon, you won't pay the gas guzzler tax.
However, if you get 21.5 to 22.5 miles a gallon, you’ll pay an extra $1,000 for this tax; and up to $7,700 if your vehicle gets worse than 12.5 miles to the gallon. This tax applies only to new car purchases, so you won't pay it when you buy a used vehicle, regardless of its fuel efficiency.
Cell phone and landline phone taxes
The federal government charges a communications tax to your phone bill for local use only. Prior to 2006, the government also imposed the tax on long distance use, but it was determined that taxing long distance service was no longer necessary. This tax adds 3 percent of your local phone bill charges to your monthly bill.
Indoor tanning tax
As of July, 2010, all indoor tanning salons are required to pay an excise tax under the Affordable Care Act. If you use indoor tanning services, you’ll pay an extra 10 percent of the service price to cover this tax. This tax is limited specifically to indoor tanning services. You won’t be taxed for spray tans, tanning lotions or accelerators, or for gym memberships that include use of indoor tanning facilities.
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