Taxes are a huge part of everyone's life. Like it or not, they play a crucial role in how you manage your financial affair. Taxes come in all different forms, from sales and income tax to property and capital gain tax. Having an understanding of taxes is critical for a successful financial life. While most of us have a rudimentary grasp on the basics of taxation, there are some taxes, such as excise taxes, which are understood by few. This article will provide a basic outline of what excise taxes are to help you expand your knowledge of the taxes you pay on a daily basis. (To learn more, read The History Of Taxes In The U.S.)
TUTORIAL: Personal Income Tax Guide
Defining Excise Taxes
Excise taxes are levied on the production or sale of specific items. Excise taxes are different than duties, as duties are taxes on imported items and excise taxes are taxes on items produced domestically. An easy way to think about this is excise taxes are inland taxes and duties are border taxes. In other words, if it crosses the border and is taxed, it's a duty. If it stays within the border and is taxed, it's an excise tax.
Moving Your Car
One of the least expected excise taxes is the tax on your car when you move to another state. Call the city clerk in your new city to inquire how much to expect to pay in excise taxes for your car. The amount is based on the value of the car, its age, make and model. Some states even require that you pay this tax every year when you register your car. The good news is it generally goes down year after year as the value of your car depreciates. Not every state charges this excise tax, although many do.
If you are being transferred, your employer may pick up this extra expense. If your company doesn't explicitly include it in its moving compensation package, it doesn't hurt to ask. In some cases, this excise tax can approach $800 or more on some makes and models of automobiles. For this reason, it may be wise to downscale your car due to these excessive taxes.
The Bottom Line
As in all things, knowledge is king. The more you know, the better decisions you can make regarding moving with your car. Sometimes it can actually be smarter to buy another car at your new location than to try to re-register a high value or highly taxed make and model vehicle. Research on the Internet the particular location you are moving to determine if the vehicle excise tax is excessive. (For help with your move, check out 7 Tips To Move On The Cheap.)