California’s excise tax is a set of product-specific levies on gasoline, diesel, alcohol, cigarettes and other tobacco, electronic cigarettes, and cannabis, collected from producers, distributors, or retailers rather than added at the register. The California Department of Tax and Fee Administration (CDTFA) administers nearly all of them. Rates range from a penny per gallon on some wine to 15 percent of retail on cannabis, with fuel taxes adjusted annually for inflation.
How It Differs From Sales Tax
Sales tax is broad and shows up at checkout on most retail purchases. Excise tax is narrow, product-specific, and usually collected much earlier in the supply chain from fuel suppliers, alcohol manufacturers, tobacco distributors, or cannabis retailers. Because businesses build the excise tax into the shelf price, consumers rarely see it broken out on a receipt.
That structure matters when you try to figure out the real tax load on something like a gallon of gas. The state excise tax is baked into the pump price, the federal excise tax is baked in too, and sales tax then applies to the combined total. For cannabis, the excise tax is calculated at retail and may appear as a separate line, but the retailer still handles the money. In every case, the business holding the CDTFA permit is legally responsible for remitting the tax, not the customer.
Gasoline and Diesel
California’s gasoline excise tax has three statutory layers, all per gallon. A base tax of $0.18 dates back decades. A second layer of $0.173 was added to offset the revenue effect of exempting gasoline from part of the sales tax. A third layer of $0.12 was added in 2017 under the Road Repair and Accountability Act (SB 1) for infrastructure repairs. Since July 2020, the CDTFA adjusts all three layers annually for inflation.1California Department of Tax and Fee Administration. California Revenue and Taxation Code 7360 – Levy of Tax As of January 2026, California’s total state gasoline taxes and fees run about 70.9 cents per gallon, the highest in the nation.
Diesel carries its own excise tax, set at $0.466 per gallon as of July 1, 2025, and also subject to annual CPI adjustments.2California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees — Fuel Taxes Both taxes are paid by licensed fuel suppliers when fuel leaves the terminal rack, enters the state, or is sold to an unlicensed buyer. Revenue flows to the State Transportation Fund for roads and mass transit.
Alcohol
California’s alcohol excise rates are fixed in statute and haven’t changed in decades, putting them among the lowest in the country. Beer is taxed at $1.24 per 31-gallon barrel, roughly four cents a gallon. Still wine at 14 percent alcohol or less is one cent per gallon; still wine above 14 percent is two cents. Sparkling wine and champagne are 30 cents per gallon. Sparkling hard cider is two cents. Distilled spirits carry a significantly higher per-gallon rate.3California Department of Tax and Fee Administration. California Revenue and Taxation Code 32151 – Alcoholic Beverage Tax Rates
Manufacturers, wine growers, and importers pay the alcoholic beverage tax to the CDTFA. At these rates, the state excise portion of a bottle of California wine or a six-pack is negligible next to the retail price.
Cigarettes and Other Tobacco
Cigarettes are taxed at $0.1435 per stick, which is $2.87 on a standard pack of 20. Distributors buy California cigarette tax stamps from the CDTFA and affix one to every pack before distribution.4California Department of Tax and Fee Administration. Cigarette and Tobacco Products Excise Tax Other tobacco products such as cigars, pipe tobacco, and chewing tobacco are taxed as a percentage of wholesale cost. The CDTFA sets that percentage annually to match the combined cigarette rate; as of July 2025, it is 54.27 percent of wholesale cost.5California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees
Electronic Cigarettes
Since July 2022, California has imposed the California Electronic Cigarette Excise Tax (CECET) at 12.5 percent of the retail selling price, excluding sales and use tax.5California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees It covers vape pens, e-liquids, pods, and similar products. Retailers and distributors must hold a CDTFA permit and remit the tax. Small retailers who added vaping products often miss this obligation, which is separate from ordinary sales tax.
Cannabis
The cannabis excise tax rate is 15 percent of gross receipts from any retail sale of cannabis or cannabis products, effective as of October 2025. Assembly Bill 564 set that rate and delayed the next potential adjustment until fiscal year 2028–29. The rate can never exceed 19 percent.6California Department of Tax and Fee Administration. California Revenue and Taxation Code 34011.2 – Cannabis Excise Tax
The retailer collects the 15 percent from the purchaser at the point of sale, then remits it to the distributor, who reports and pays it to the state. Cannabis is also subject to state and local sales tax, and the excise tax is included in the base used to calculate that sales tax, so consumers effectively pay tax on a tax.
Tire and Battery Fees
Two per-unit fees work like excise taxes even though they carry different labels, and both show up as line items at the register:
- California Tire Fee: $1.75 on every new tire sold in the state, collected by the retailer. Retailers keep 1.5 percent for collection costs and remit the rest quarterly to the California Tire Recycling Management Fund.7California Legislative Information. California Code PRC 42885 – California Tire Recycling Act
- Lead-Acid Battery Fee: $2 paid by the consumer on any new lead-acid battery (car, motorcycle, and similar). A separate $2 Manufacturer Battery Fee is imposed on producers.8Department of Toxic Substances Control. California Lead-Acid Battery Fees
Both must appear as separate line items on the invoice.
Permits, Filing, and Late Penalties
Any business that manufactures, distributes, imports, or retails a taxable product must register with the CDTFA for the appropriate permit before engaging in that activity.9California Department of Tax and Fee Administration. California Department of Tax and Fee Administration Homepage Returns are typically due monthly or quarterly, depending on the tax type.
Late filing generally triggers a 10 percent penalty, and late payment triggers another 10 percent, with the combined penalty capped at 10 percent of the tax owed for the reporting period. Some taxes carry heavier consequences. Cannabis has an additional 50 percent failure-to-pay penalty on top of the standard 10 percent, and any unlicensed person engaged in commercial cannabis activity faces a penalty of 25 percent of the tax or $500, whichever is greater. Alcoholic beverage tax returns trigger a $50 penalty just for filing late, even on a zero-tax return.10California Department of Tax and Fee Administration. Interest, Penalties, and Collection Cost Recovery Fee
How Long to Keep Records
The IRS generally requires businesses to retain excise tax records for at least three years from the filing date. That extends to six years if you underreport income by more than 25 percent, and there is no time limit if no return was filed or if a return was fraudulent.11Internal Revenue Service. Topic No. 305, Recordkeeping California does not publish a separate retention schedule for state excise tax records, so matching the federal three-year minimum is the practical baseline. Four years covers most audit scenarios comfortably.