DC Excise Tax Rates and Filing Information
Familiarize your business with DC's excise tax framework, from identifying applicable rates to fulfilling your reporting responsibilities.
An excise tax is an indirect tax imposed by a government on specific goods, services, or activities. Unlike income or property taxes, excise taxes are levied on a particular transaction, with the cost often passed from the business to the consumer. The District of Columbia uses a variety of these taxes as a significant source of public revenue, applying them to a range of products and commercial operations. These targeted levies support the District’s budget and fund specific public services.
Types of Excise Taxes in DC
Alcoholic Beverage Tax
The District imposes a tax on the sale of alcoholic beverages, with rates varying by the type of product. This tax is paid by the wholesaler but is factored into the retail price paid by consumers. For spirits and liquor, the tax is $2.50 per gallon. Wine is taxed at $0.45 per gallon, while beer is taxed at a lower rate of $0.09 per gallon. These rates are applied to all such beverages sold within the District’s borders.
Cigarette and Other Tobacco Products Tax
Tobacco products are subject to a significant excise tax in DC. For cigarettes, the tax is $5.35 per pack of 20. This rate is intended to generate revenue while discouraging smoking. Other Tobacco Products (OTP), which include items like cigars, pipe tobacco, and smokeless tobacco, are taxed at a rate of 107% of the wholesale price. This ensures that all forms of tobacco consumption are taxed heavily.
Motor Fuel Tax
A per-gallon tax is levied on motor fuels sold within the District. The current rate for gasoline is 36.2 cents per gallon. This tax is a primary funding mechanism for transportation infrastructure, including the maintenance and improvement of roads, bridges, and public transit systems. The tax is collected from distributors but is included in the price consumers pay at the pump.
Transient Accommodations Tax
The Transient Accommodations Tax, commonly known as the hotel tax, applies to the rental of rooms in hotels, motels, inns, and other short-term lodging, including home-sharing rentals. The tax is set at 15.95% of the total charge for the accommodation. This revenue source is driven by tourism and business travel, capturing funds from visitors to support District services and promotional activities.
Toll Telecommunication Service Tax
A tax is imposed on toll telecommunication services that originate or terminate in the District and are billed to a DC service address. This applies to long-distance telephone calls and other similar communication services. The tax is set at 11% of the sales price of the service. It is collected by the telecommunication provider and remitted to the District.
Arena and Ballpark Fees
Certain businesses in the District are subject to fees that function like excise taxes to help finance major public venues. The Arena Fee is a tiered fee paid by businesses with gross receipts over a certain threshold to support the Capital One Arena. Similarly, the Ballpark Fee is assessed on specific businesses to fund the bonds issued for the construction of Nationals Park.
Registering as an Excise Tax Filer
Before a business can legally collect and remit excise taxes, it must first register with the District of Columbia’s Office of Tax and Revenue (OTR). This registration is a foundational step for tax compliance and ensures the business is correctly set up in the District’s system. The process involves providing specific details about the business entity. Failure to register can result in penalties and legal complications.
The primary document for this process is Form FR-500, the Combined Business Tax Registration Application. This form consolidates the registration for various taxes, including excise, sales and use, and employer withholding. Businesses must file this form electronically through the District’s online tax portal, MyTax.DC.gov.
To complete Form FR-500, a business must have several key pieces of information available. This includes:
- The Federal Employer Identification Number (FEIN) or a Social Security Number (SSN) for a sole proprietor
- The legal name of the business and any trade names (doing business as)
- The business address and ownership details
- An indication of which excise taxes they will be collecting to ensure the correct tax accounts are activated
Filing and Paying DC Excise Taxes
Once registered, a business must file returns and remit the taxes it has collected. The District of Columbia mandates that all excise tax filings and payments be completed electronically through the MyTax.DC.gov web portal. This platform is the exclusive method for managing these obligations, as paper forms are not accepted.
After logging into their MyTax.DC.gov account, the filer selects the specific excise tax return for the relevant period. The system will prompt for summary information, such as total gross sales, non-taxable sales, and the resulting taxable sales. The portal automatically calculates the tax due based on the data entered and the applicable tax rate.
Most excise taxes in the District are required to be filed on a monthly basis. The standard deadline for filing the return and paying the tax is the 20th day of the month following the collection period. For example, taxes collected during July must be reported and paid by August 20th. Payments must be submitted electronically at the time of filing through an electronic funds transfer from the business’s bank account.