Excise Taxes on Shopify: How Alcohol, Cannabis, and Tobacco Sellers Collect Fees
Running a Shopify store that sells regulated products like alcohol, cannabis, tobacco, or fuel comes with a unique set of obligations. Beyond the usual sales tax, you may be required — or strongly motivated — to collect excise taxes and pass them along appropriately. If you’ve ever stared at a compliance checklist and wondered how to get those fees showing up correctly on your Shopify checkout, you’re in good company.
This guide breaks down what excise taxes are, which product categories typically trigger them, how they differ from ordinary sales tax, and how merchants can use Canteen to add excise-style fees to their Shopify orders in a clear, customer-friendly way.
What Are Excise Taxes?
Excise taxes are charges levied on specific goods — typically goods that are considered harmful to health, the environment, or public welfare. Unlike sales tax, which is generally applied as a percentage of the total purchase price across most products, excise taxes tend to be:
- Product-specific: Applied only to defined categories (alcohol, tobacco, cannabis, fuel, etc.)
- Often unit-based: Charged per unit, per volume, or per weight rather than as a percentage of price
- Layered: Subject to both federal and state/provincial requirements in many jurisdictions
In most cases, excise taxes are embedded into the price consumers pay — you’ve seen this at the gas pump or in the fine print on a case of beer. But for online sellers, making that fee visible and accurate at checkout requires deliberate configuration.
Excise Tax vs. Sales Tax: Key Differences
It helps to understand how excise taxes differ from the sales tax you’re probably already collecting:
| Sales Tax | Excise Tax | |
|---|---|---|
| Scope | Most goods and services | Specific regulated categories |
| How it’s calculated | % of sale price | Per unit, volume, or weight (often) |
| Who pays | End consumer | Often the producer/importer, passed along |
| Visibility | Shown at checkout | Sometimes included in price, sometimes separate |
| Administered by | State/provincial revenue agencies | Federal + state agencies |
For online merchants, the practical question is: do you need to show this as a line item to your customers? In many cases, the answer is yes — either for regulatory transparency or simply for customer trust.
Which Product Categories Face Excise Taxes?
If you sell any of the following on Shopify, excise obligations are likely relevant to your business:
Alcohol
Alcohol is one of the most heavily excised categories in the US and internationally. Federal excise taxes apply to beer, wine, and distilled spirits at varying rates based on alcohol content and volume. States layer on additional excise taxes, which vary widely. Direct-to-consumer alcohol sellers — wineries, craft distilleries, breweries — often need to account for these in pricing and remittance.
Cannabis
The cannabis industry faces some of the most complex excise tax structures in existence. At the state level (since cannabis remains federally controlled in the US), excise taxes can be assessed as a percentage of retail price, per unit, or on cultivator/distributor transactions. States like California, Illinois, and Colorado each have distinct frameworks. Canadian cannabis retailers face federal excise duties as well.
Tobacco and Vaping Products
Cigarettes, cigars, smokeless tobacco, and increasingly, vaping/e-cigarette products are subject to both federal and state excise taxes. Many states have expanded their tobacco excise frameworks to include vapor products and nicotine pouches in recent years.
Fuel and Petroleum Products
Fuel excise taxes are typically embedded into pump prices and handled upstream in the supply chain, but merchants dealing in fuel-related products (or industrial fuel sales) may still need to account for these fees.
Other Regulated Categories
Depending on your jurisdiction, other product categories like firearms, ammunition, tanning beds, or certain health products may also carry excise obligations. Always verify with a tax professional familiar with your specific industry.
Federal vs. State Excise Requirements
One of the most confusing aspects of excise taxes is that they often exist at multiple levels simultaneously.
Federal Excise Taxes
The IRS administers federal excise taxes in the United States. For most merchants, the most relevant federal excise categories are alcohol (administered through the Alcohol and Tobacco Tax and Trade Bureau, or TTB) and tobacco. Federal excise taxes are typically collected and remitted by producers, importers, or distributors — meaning that if you’re a retailer buying from a licensed distributor, federal excise may already be embedded in your wholesale cost.
State Excise Taxes
State excise taxes are administered separately and vary enormously. Some states impose them at the retail level, meaning you as the merchant are responsible for collecting and remitting. Others impose them upstream. Direct-to-consumer sellers — particularly in alcohol and cannabis — frequently need to collect state excise taxes directly.
Important: The rules around who collects and remits excise taxes vary significantly by state, product type, and your role in the supply chain. Always consult with a tax professional or compliance attorney for your specific situation. This guide is educational, not legal or tax advice.
Why You Might Display Excise Fees as a Separate Line Item
Even if the excise tax is already embedded in your product cost, there are good reasons to surface it as a visible fee at checkout:
- Regulatory transparency: Some jurisdictions require it
- Customer trust: Customers appreciate knowing what they’re paying for
- Record-keeping: Separating excise from product revenue simplifies accounting and remittance tracking
- Consistent pricing: Allows you to maintain base product prices while adjusting for excise rate changes
How to Add Excise-Style Fees to Shopify Orders with Canteen
Shopify’s native checkout doesn’t have a built-in mechanism for adding product-specific fees or surcharges outside of shipping rates and standard tax settings. This is where Canteen comes in.
Canteen is a Shopify app built specifically for merchants who need to add fees, deposits, or surcharges to their orders — either on specific products or across the cart. Here’s how merchants typically use it for excise-style fees:
Step 1: Define Your Fee
Decide how your excise fee should be structured. Common approaches include:
- Flat fee per product: e.g., a fixed dollar amount added for each bottle of spirits
- Percentage of product price: e.g., a percentage surcharge applied to regulated products
- Cart-level fee: A single line item added when the cart contains regulated products
Step 2: Install and Configure Canteen
Install Canteen from the Shopify App Store, then navigate to the fee configuration dashboard. You can create a new fee rule and specify:
- The fee name (e.g., “Excise Tax,” “State Alcohol Fee,” or whatever is accurate for your use case)
- The fee amount (flat dollar or percentage)
- Which products or collections the fee applies to
Step 3: Apply the Fee to Relevant Products
Canteen lets you scope fees to specific products or collections. For excise purposes, you’d typically create a collection containing your regulated products and apply the fee to that collection. This keeps the fee targeted and ensures non-regulated products aren’t affected.
Step 4: Verify at Checkout
Test a checkout flow with a regulated product in the cart. The fee should appear as a clear, labeled line item before the customer completes their purchase.
Step 5: Review Reporting
Canteen provides fee reporting that helps you track how much you’ve collected. This is useful for reconciliation and remittance — you’ll want to know exactly how much excise fee revenue came in each period.
Compliance Tips for Regulated Product Merchants
Managing excise taxes goes beyond checkout configuration. Here are some broader compliance practices to keep in mind:
Work with a specialist accountant. Excise tax compliance is complex and penalty-heavy. A CPA or tax attorney with experience in your specific product category (alcohol, cannabis, tobacco) is essential.
Stay current on rate changes. Excise tax rates change — sometimes annually. Build a process for reviewing and updating your fee amounts when rates change.
Understand your role in the supply chain. Whether you’re a producer, importer, distributor, or retailer affects your obligations significantly.
Keep clean records. Regulators may audit your excise remittances. Document your fee collection, remittance, and any exemptions clearly.
Don’t conflate excise with sales tax. Keep these as separate line items in your accounting and, where applicable, in your customer-facing checkout.
Consult your licensing agreements. Many regulated product categories require state licenses that come with their own fee collection and reporting obligations.
The Bottom Line
Selling regulated products on Shopify doesn’t have to mean a messy, opaque checkout experience. By understanding your excise tax obligations and using a tool like Canteen to surface fees clearly at checkout, you can run a compliant, transparent store that customers trust.
The configuration itself is straightforward — the hard part is knowing your regulatory obligations in the first place. Invest in good tax guidance for your industry, then use the right tools to execute on it cleanly.
Ready to start collecting fees the right way? Check out Canteen — built for Shopify merchants who need to add fees, deposits, and surcharges to their store.
