Excise tax
What excise tax is, how it's charged, who pays it, and how it works for small businesses in New Zealand.
March 2024 | Published by Xero
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Excise tax is a tax on specific products, often ones a government wants people to buy less of, such as alcohol, tobacco and fuel.
- Businesses and manufacturers pay the tax, but the cost is usually passed down the supply chain to consumers.
- In New Zealand, NZ Customs collects excise on locally made or imported alcohol, tobacco and fuel, and it's charged on top of 15% GST.
- Excise targets a narrow list of goods and is charged per unit or as a percentage of price, while GST applies broadly at a flat rate.
What is excise tax?
Excise tax is a tax levied on specific products, usually to discourage people from consuming them. Businesses pay the tax, but the cost is generally passed on to the consumer through a higher price.
Excise rates can be high, so if you sell products that attract excise, you'll want to account for it carefully and build it into your pricing.
Common excise taxes
Governments tend to apply excise to goods linked to health, safety or environmental costs. You'll commonly see excise tax on the following:
- alcohol
- tobacco and vaping products
- gambling
- sugar or sugary products
- energy consumption, especially petrol
- air travel
- luxury goods, especially vehicles
- heavy vehicles
How excise tax is charged
Excise tax is usually charged in one of two ways, depending on the product and the rules in your region. Both structures raise the final price you pass on to customers.
- Specific excise, also called volumetric excise, is charged per unit, weight or volume, for example per litre of fuel or per pack of cigarettes
- Ad valorem excise is charged as a percentage of the product's price
Excise is charged on top of GST, and the rate is often substantially higher than GST alone.
Who pays excise tax?
Excise tax is generally paid by the business or manufacturer that makes or imports the goods. The cost is then passed down the supply chain, so consumers usually pay it through the retail price.
There are some exceptions, and the party responsible can vary by country and product. In some cases it's the importer or a party further down the supply chain rather than the original manufacturer who pays.
Excise tax in New Zealand
In New Zealand, NZ Customs collects excise under the Customs and Excise Act 2018. It applies to locally made or imported alcohol, tobacco and fuel, and it's charged on top of 15% GST.
Alcohol and tobacco excise rates are adjusted for inflation using the Consumers Price Index (CPI) each year, and the alcohol adjustment usually takes effect on 1 July. Fuel excise duty (FED) applies to petrol.
There's no excise on goods you export. If you make excisable products, you'll need a licence for the premises where those products are made or stored.
Excise tax vs excise duty
The terms excise tax and excise duty overlap, and how they're used depends on where you are. It's worth knowing the distinction so you use the right term for your region.
In some regions, excise duty is simply another word for excise tax. In others, goods made locally attract excise tax, while imported equivalents attract excise duty.
Excise tax vs GST
Excise tax and GST are both indirect taxes, but they work differently. Knowing how they compare helps you price accurately and plan for what you owe.
GST applies broadly to most goods and services at a flat 15%. Excise targets specific goods and is charged per unit or as a percentage of price, on top of GST.
Why excise tax matters to small business
If excise applies to your industry, it affects your costs, your pricing and your cash flow. Getting across it early helps you avoid surprises when a bill is due.
Start by working out which excise taxes apply to what you sell, then factor them into your price modelling so your margins hold up. Keep enough cash flow on hand to pay excise when it falls due, and treat it as part of your everyday small business accounting.
Stay on top of your tax obligations with Xero
Excise, GST and other taxes are easier to manage when your finances sit in one place. Xero accounting software helps you track GST, see your numbers in real time and plan cash flow so you're ready when a tax bill lands.
Take the admin off your plate and get one month free.
FAQs on excise tax
Here are answers to some frequently asked questions about excise tax for small business owners.
Who pays excise tax in New Zealand?
Manufacturers and importers of alcohol, tobacco and fuel pay excise to NZ Customs. They usually pass the cost on to consumers through the retail price.
Is excise tax the same as GST?
No. GST applies broadly at a flat 15%, while excise targets specific goods and is charged per unit or as a percentage of price.
What products have excise tax in New Zealand?
Excise applies to locally made or imported alcohol, tobacco and fuel. Vaping products and some other goods can also attract excise.
Is excise tax charged on top of GST?
Yes. Excise is charged in addition to the 15% GST, and the excise rate is often higher than GST.
Related Terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.