An excise is imposed on producers and their production, as opposed to a sales tax which is imposed on sales by retailers and wholesalers. Section 90 of the Australian Constitution grants the federal government an exclusive right to impose duties of customs, excise and export of goods. Successive High Court decisions have expanded the definition of excise beyond production to the point of sale.

In Ha vs NSW , one of the questions that was required to be answered in the defence of business franchise fees on tobacco sales was; Must local production or manufacture be a discrimen of the application of a tax answering the description of a duty of excise?

The pecuniary liability (other than the fixed fee of $10) imposed by the Act on the sellers of tobacco is calculated on the value of tobacco sold whether or not the tobacco is of Australian production or manufacture.

In fact, as the case stated shows, most tobacco sold in Australia is of local origin, only a small proportion of the value of total Australian sales being imported. But the defendants and the intervening Attorneys-General submit that, so long as the tax is imposed on the sale of tobacco generally, it cannot be said to be a tax on the production or manufacture of tobacco in Australia and therefore it cannot be said to be a duty of excise since duties of excise are taxes on local (that is, Australian) production or manufacture.

The same submission was firmly rejected by Dixon CJ in Dennis Hotels Pty Ltd v Victoria

Since the Dennis Hotels case, the definition of excise has been expanded from an imposition on production, to one of sales. The judges stated;

Once it is accepted that duties of excise are not limited to duties on production or manufacture, we think that it should be accepted that the preferable view is to regard the distinction between duties of customs and duties of excise as dependent on the step which attracts the tax: importation or exportation in the case of customs duties; production, manufacture, sale or distribution - inland taxes - in the case of excise duties.

They determined that the federal government had a monopoly on taxation up to the very point of receipt by the customer;

If there be any rock in the sea of uncertain principle, it is that a tax on a step in the production or distribution of goods to the point of receipt by the consumer is a duty of excise.

The Ha vs NSW decision barely passed with four for it, three against. The three dissenters viewed excise as a tax that could only be levied on production.

Tobacco, alcohol and petrol were three commodities that were most affected by the decision. The constitution requires that the Federal Government apply an excise tax uniformly across the states; and the states had leveraged differing taxes on franchise fees related to those commodities. Consequently we see the unusual situation such as in Queensland where petrol is subsidised y the state to overcome the uniform taxation at the federal level.

The Great Constitutional Swindle contains a quote from Brad Selway;

I suspect that most business people in Australia know the difference between an excise and a sales tax. ... Constitutional lawyers, on the other hand, cannot tell the difference between these taxes.

More Information

• Federalism Up in Smoke? The High Court Decision on State Tobacco Tax
• What is an excise duty? Ha and Hammond v NSW

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