Sin Tax: What the Selective Tax Is, Product List and When It Starts
Learn what the Selective Tax (IS) is, why it is called the sin tax, which products are covered and when it takes effect.
Executive Summary
The Selective Tax (IS) is the new federal tax that partially replaces the IPI starting in 2026, targeting products considered harmful to health and the environment. Unlike CBS and IBS, the IS applies only once along the chain and does not generate credits for the buyer. Vivian Sampaio explains what changes, who pays and how to prepare.
What Is the Selective Tax?
The Selective Tax (IS) is a federal tax created by LC 214/2025 with an explicitly extra-fiscal purpose — that is, its main goal is not to raise revenue, but to discourage the consumption of products that generate high social costs: disease, accidents, pollution and environmental damage.
The logic is simple: if a product is costly to society, those who sell it pay a higher tax. This is not a Brazilian innovation — it works this way in the United States, in the United Kingdom and in several European Union countries.
The IS replaces the IPI for a specific list of goods and is non-cumulative: it applies only once, on the transaction carried out by the manufacturer or importer. The subsequent buyer is not entitled to a credit for this tax.
Why “Sin Tax”?
The term comes from international economic literature (sin tax in English). Governments around the world use differentiated taxation to discourage the consumption of products that, in addition to causing individual harm, generate negative externalities for society as a whole:
- Tobacco and alcoholic beverages: hospital costs and treatment of chronic diseases
- Sugary drinks: epidemic of diabetes and obesity, pressure on the public health system (SUS)
- Fossil fuels: air pollution, climate change
In practice, companies in these sectors must build this additional cost into the final price. Since there is no tax credit, the tax is a sink — it applies and then disappears from the chain, raising the price to the consumer.
List of Products Subject to the Selective Tax
LC 214/2025 establishes the following list of products covered by the IS:
Sugary Drinks
- Soft drinks and industrialized juices with added sugar
- Energy drinks with high sugar content
Alcoholic Beverages
- Beer, wine, sparkling wines and spirits
- Mixed drinks and coolers
- Specific rates by type of beverage are still to be defined by regulation
Tobacco Products
- Industrial and artisanal cigarettes
- Electronic cigarettes (once regulated)
- Other tobacco-derived products
Fossil Fuels
- Gasoline, diesel, aviation kerosene
- Vehicular natural gas (CNG)
Motor Vehicles
- Automobiles with internal combustion engines
- Motorcycles above a certain engine displacement
- Regulation will define displacement and CO2 emission criteria
Rates: How Are They Calculated?
The IS rates do not follow a simple calculation base — they are set per product, taking into account:
- Degree of harm to health or the environment
- Current tax burden of the product (so as not to generate an excessive increase)
- Goal of changing behavior
LC 214/2025 defines percentage ranges, but the specific rates will be regulated over the course of 2026.
Practical example — Sugary drink: A soft-drink company buys raw material for R$ 5,000 and sells the final product for R$ 12,000. The IS applies to the sale value: if the rate is 10%, the tax will be R$ 1,200. This amount does not generate a credit for the retailer who buys from the manufacturer, raising the final price to the consumer.
When Does It Take Effect?
EC 132/2023 established a transition schedule:
What Does the Business Owner Need to Do Now?
- Map products — identify whether your portfolio includes items subject to the IS
- Review pricing — the IS does not generate a credit, so it must be built into the final price
- Update tax systems — SPED and the NF-e (electronic invoice) will need to segregate the IS in a specific field
- Assess product substitution — if taxation makes certain products unviable, it may be time to reshape the portfolio
Difference Between IS, CBS and IBS
Want to understand how the tax reform affects your sector? On /napratica VMAHUB publishes practical guides for companies. For a personalized analysis of your case, talk to our team: [email protected]
Read also:
- IS vs IPI: What Changes for Industry
- CBS: What It Is and How It Replaces PIS/Cofins
- Does the Tax Reform Raise Taxes?
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