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 sales taxes,