An excise tax is a tax levied on the manufacture, sale, or consumption of a commodity or any of various taxes on privileges often assessed in the form of a license or fee. In other words, it is a tax on doing something to property or on the privilege of holding some property or doing some act, not a tax on the property itself. A sales tax is a clear example of an excise tax. The tax is not on the property directly, but rather it is a tax on the transaction.

When a court refers to an income tax as being in the nature of an excise, it is merely stating that the tax is not on the property itself, but rather, it is a fee for the privilege of receiving gain from the property. The tax is based upon the amount of the gain, not on the value of the property.