Taxes on particular goods and activities
Federal excise taxes are imposed on specific products and activities rather than on income. The IRS administers many of them, including taxes connected with fuel, heavy highway vehicles, air transportation, and certain manufactured goods, and businesses typically report them on a quarterly return. Excise taxes on alcohol, tobacco, firearms, and ammunition are generally handled by the Alcohol and Tobacco Tax and Trade Bureau, which has its own permits and filings. Depending on the tax, the party liable may be a manufacturer, an importer, a retailer, or a business that collects the tax from customers. State excise taxes are separate and often apply to the same products.
Questions that decide liability
Many excise disputes come down to whether a product falls within a taxable category, who in the supply chain is the taxpayer, and whether an exemption or a registration applies. Some activities require registration with the IRS before they can be carried out tax-free. When a business collects an excise tax from customers and fails to pay it over, the people responsible can face personal exposure, similar to the treatment of payroll taxes in some respects. Gather product specifications, sales and purchase records, import documents, any registrations or permits, and returns already filed. Contracts with suppliers and customers can show how the parties expected the tax to be handled.
Where we usually begin
We first confirm which agency administers the tax at issue, since the IRS and the Alcohol and Tobacco Tax and Trade Bureau run separate audit and collection processes. Then we look at whether past periods were reported correctly and whether any refund or credit may be available for tax paid in error. If an audit or notice is already underway, we review its scope and deadlines. In a first meeting we also discuss how to set up ongoing reporting so that a new product or a change in your operations does not create a gap again.
