Case Study: Sales Taxes vs. Excise Taxes

Excise taxes are imposed on a specific good or activity, such as cigarettes, alcohol, and fuel. Because of their narrow base (applying a tax to a small selection of goods or services), excise taxes distort production and consumption choices. Sometimes this distortion is by design.

General tax revenues should come from more stable, broad-based consumption taxes like the general sales tax, imposed at the state-level on the retail sales of goods and services in the U.S. Ideally, sales taxes are imposed on all final sales of goods and services, but not on intermediate business-to-business transactions in the production chain, as in the case of gross receipts taxes (GRT).

Source Tax Foundation

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