Between 1864 and 1930, Italian municipalities relied heavily on consumptionduties to generate income. The largest municipalities collected these duties astariffs at local customs borders, and this paper argues that high reliance on suchduties, similar to high reliance on trade tariffs, indicates low fiscal capacity. Reducing reliance on consumption taxes by removing local customs borders cantherefore be taken as a sign of future fiscal capacity building. This study usesthe 1902 reform of the "Dazio consumo" as a quasi-exogenous variation to investigate the long-term effects of this build-up in fiscal capacity