What Is Sin Tax Law?

March 6, 2020

Sin tax laws establish taxes for certain “sinful”; items, such as alcohol, tobacco, soft drinks, junk food and gambling. Businesses who sell these items must collect sin tax from their customers and remit this amount to their state or municipality depending on local laws. Encino tax consultants can help California companies ensure that they are paying sin taxes, also known as excise taxes, correctly.

Cigarette Taxes

California retailers and consumers may be affected by several types of sin taxes. The state charges a 50-cent sin tax on every pack of cigarettes, which funds child early intervention and education programs at the state and county levels.

Cannabis Taxes

California also requires dispensary owners to charge a 15% excise tax on each ounce of cannabis sold in the state. Encino tax advisors provide valuable advice for cannabis business proprietors to make sure they are in compliance with this law.

Liquor Taxes

Liquor stores also charge sin taxes on beer, wine and spirits. Beer and wine are taxed at a rate of 20 cents per gallon, while the liquor excise tax is $3.30 per gallon.

Other Sin Taxes

In addition to taxes on alcohol, cannabis and cigarettes, California has an excise tax of 30 cents per gallon on gasoline. This is the second highest gas tax rate in the nation. Cell phone service plans are subject to a tax of $10.67 per month. 

Car title and registration fees are also categorized as excise taxes in California. These taxes are charged on any transfer or sale of a motorcycle or car in the state. These taxes are paid by the consumer to the California Department of Transportation.

Most California businesses pass sin taxes along to the consumer by raising the prices of the goods in question. For example, a $50 one-gallon bottle of vodka would actually cost $53.30. Because excise taxes can be complicated, consider hiring experienced Los Angeles tax preparation services.