CHAPTER 11: EXCISE TAX

 Excise tax is a hybrid consumption tax which only imposed on certain goods or services. Levied only on domestic
consumption, except in mineral products.

Levied
 Generally: At the point of production or importation.
 Exception: At the point of sale (for cosmetic surgery and mineral products)

Scope of excise tax

 Limited only to certain goods and cosmetic surgery services.

Subject to excise tax:

a. Alcohol products – distilled spirits, wines and fermented liquors
b. Tobacco products – cigars and cigarettes
c. Petroleum products – gas, gasoline, diesel, wax, lubricant oils and greases, kerosene, naphtha, denatured
alcohol, coke, asphalt and bunker fuel oil
d. Mineral products – metallic or non-metallic minerals and quarry resources
e. Miscellaneous products – automobiles, non-essential goods like jewelry, perfume, yacht, and sweetened
beverages like soft drinks and sweetened drinks
f. Non-essential service – cosmetic surgery

Nature of an excise tax

A. Regulatory tax
I. Environmental tax (also known as green tax) – imposed on products which causes harm to
environment (E.g., petroleum products and mineral products)
II. Sumptuary tax (also known as vanity tax) – imposed to restrain luxury or extravagance (E.g.,
miscellaneous and non-essential service)
III. Sin tax (also known as health tax) – imposed on the consumption of sin products or those known to
pose health risk (E.g., alcohol products and tobacco products)
B. Indirect tax – levied upon producers or importers, but will pass-on to the consumers. The economic taxpayer
is not the statutory taxpayer.
C. Consumption tax (pre-consumption tax) – levied at the point of production or importation, except to
cosmetic service and mineral products.
D. Additional business tax – secondary tax on certain products and services. Doesn’t matter if a VAT taxpayer or
non-VAT taxpayer. An additional tax to VAT or percentage tax.
E. Specific and ad valorem tax – imposed based on physical unit of measurement and on selling price and other
specified value.

Basis in computation of excise tax

A. For locally produced goods – Gross Selling Price, exclusive of VAT
o Since excise tax is generally taxable before removal from production, thus the wholesale price constitutes
gross selling price.
 Excise tax = [(Wholesale invoice price * 12/112) * excise tax %]
o Exception: If wholesale price < total manufacturing costs
 Total manufacturing costs = Production costs + Cost to sell
 Excise tax = [(Total manufacturing costs * 110%) * excise tax %]

B. For imported goods - Gross Selling Price, unless otherwise specified by law.
o Excise tax = Domestic wholesale price, net of VAT * excise tax %
o Note: excise tax is separately included in computation for custom duties and total landed cost.

Domestically produced excisable Imported excisable products

 products
Persons liable to Producer Importer
excise tax?
Exception: I. Indigenous petroleum, natural gas To non-exempt buyer, if
or liquefied natural gas subsequently sold by exempt seller.
 For local sale: First buyer or
assignee
 For export sale: The owner,
lessee, concessionaire or
operator of mining claim

II. Removal without payment – the

owner or person having possession of the
goods.

When to file and Before removal from production Before removal from customs
pay excise tax?
Exception: For mineral or mineral products:
15 days after the end of the quarter when
such were removed.

Excise tax treatment on importation by exempt persons

 General rule: Exempt
 Exception: For sin products such as:
o Cigars
o Cigarettes
o Distilled spirits
o Fermented liquors
o Wines

Subsequent sale by exempt persons

Sin products Non-sin products
To ecozone/foreign Exempt (already paid excise tax) Exempt (foreign consumption)
To domestic / Exempt (already paid excise tax) Excise tax (importation)
outside ecozone

Tax treatment on the export of excisable goods

 General rule: May be claimed as tax refund or tax credit
 Exception: Mineral products (excluding coke and coal) - as a measure to offset environmental impact.