Ad valorem or progressive tax placed on products and/or services that are not necessary or essential. An indirect tax, it raises the price of the product or service and only incurred by people who buy or use the luxury item or service.

The term has remained even though many products that are considered as luxury taxes today are no longer deemed as Luxuries. Today, it pertains to sinful products like tobacco, alcohol, yachts, villas, jewelry, and top of the line automobiles. These are executed in an attempt to alter consumption patterns as to collecting tax revenues.

Also called excise taxes or sin taxes.