What Is an Indirect Tax?

An indirect tax is a tax that increases the price of a product. Essentially, consumers pay more for a product because the tax is included in the price of the product and is less obvious. Common products that have indirect tax are cigarettes, alcohol and gas. Indirect tax differs from direct taxes because it can be added for a particular product. Direct taxes do not allow the tax to be added onto the product. Common direct taxes are income and property taxes. States will commonly try to utilize indirect taxes as a way to raise revenue.