Series 50: Ad Valorem Tax

Ad Valorem Tax

An ad valorem tax (Latin for “according to value”) is a tax based on the price or value of a product. It is distinguished from a unit or specific tax, which is based on a product’s volume. Income taxes, sales taxes, and property taxes are all ad valorem taxes. Alcohol, cigarette, and gasoline taxes are unit taxes because they are based on quantity, not price. A specific tax on alcohol, for example, is charged by the bottle, no matter how expensive the brand.

Ad valorem taxes may be transactional and based on price, such as sal