Legislation

Does the Federal Excise Tax Apply to Bowstrings? YES – Just Ask the IRS

In the early 1970s, with support from archery manufacturers, the Pittman-Robertson Act’s requirements were extended to the first sale of bows, arrows and specified archery accessories, including bowstrings.

Author: Cassie Scott

Do you make and sell bowstrings?

Or do you buy them from a local friend and sell them at your archery store? If so, do you pay the federal excise tax on them? If not, read this. You’re flirting with trouble.

Since 1937, firearms and ammunition manufacturers have paid an 11 percent federal excise tax on the first sale of guns and ammo under the Federal Aid in Wildlife Restoration Act, aka the Pittman-Robertson Act. In the early 1970s, with support from archery manufacturers, the P-R Act’s requirements were extended to the first sale of bows, arrows and specified archery accessories, including bowstrings.

The FET on arrows was modified in November 2004 to make it a flat tax on the first sale of the arrow shaft itself. It exempted fletching, vanes, nocks, inserts, points and other arrow components. One reason the ATA Board of Directors agreed to the flat tax was to ensure archery shops wouldn’t be designated as arrow manufacturers simply for cutting shafts and attaching inserts, nocks and fletching.

“Through conversations I’ve had over the years, I’m very convinced that anybody who has not legitimized themselves, or considers themselves a manufacturing company, is not paying excise taxes,” said Scott Parrish, owner of FirstString. Photo Credit: Shane Indrebo

The FET is collected by the Internal Revenue Service, which transfers the funds to the U.S. Fish and Wildlife Service for distribution to state wildlife agencies, which use the money for authorized conservation programs. Critical bowhunting programs as well as educational programs like NASP have enjoyed funding from the excise tax dollars paid by the archery industry.

Professional bowstring manufacturers like FirstString, Vapor Trail Inc., Zebra Bowstrings, Winner’s Choice Custom Bowstrings and a few other companies comply with the law and pay the FET. However, they often run into midsize and sole-proprietor archery retailers who make and sell individually packaged bowstrings, but don’t realize they must pay the FET, too.

“Through conversations I’ve had over the years, I’m very convinced that anybody who has not legitimized themselves, or considers themselves a manufacturing company, is not paying excise taxes,” said Scott Parrish, owner of FirstString. “I’ve asked many retailers making their own strings, ‘What is your FET contribution?’ and they often say they don’t have one because they aren’t a manufacturer. Well, the truth is, once you start manufacturing a product, you’re a manufacturer.”

John Betker, director of sales and marketing for Vapor Trail Inc., recalls similar situations.

“I’ve talked to a lot of independent dealers who make their own strings and cables, and don’t pay their FET,” Betker said. “It’s surprising to see these guys admit so blindly to an illegal act and not even know it.”

In several cases, dealers don’t consider themselves manufacturers, and don’t know the relevant laws specifying the legalities and obligations of manufacturing.

Jay McAninch, ATA’s former president/CEO, said many people inadvertently and unknowingly violate IRS laws on the FET when making bowstrings while others simply don’t understand the law and how the IRS operates. “Anytime a bowstring is sold, even if it’s just one string, they’re required to pay an 11 percent FET,” McAninch said. “And if they don’t, they’re breaking the law.”

Besides being unfair, unlawful and harmful to the industry, nonpayment of FET also hurts the nation’s conservation efforts by reducing contributions to Pittman-Robertson programs. Photo Credit: Shane Indrebo

Distorted Market Values

“With the tax as high as it is, when competitors don’t pay it, they create a very unfair market advantage for those who do,” Parrish said. “If competitors can build their product for 11 percent less than I can, that’s painful for me and others playing by the rules.”

Manufacturing bowstrings is a large investment. Materials and labor costs are expensive, but when people build bowstrings and don’t charge customers the required FET, they’re undercutting their competitors and tilting the field unfairly for law-abiding competitors.

 

Skewed Pittman-Robertson Contributions

Besides being unfair, unlawful and harmful to the industry, nonpayment of FET also hurts the nation’s conservation efforts by reducing contributions to Pittman-Robertson programs. P-R funds support state wildlife agencies, which control and manage all facets of bowhunting including managing wildlife, buying properties for public hunting, and ensuring public access to those lands.

“Companies or people not paying the FET on bowstrings aren’t supporting the industry by contributing to the kitty that helps grow and maintain our sport,” Betker said.

Intentionally or not, offenders put themselves and their business at risk by not paying the FET. That can bring fines, penalties, legal fees and other consequences including jail time. Photo Credit: Shane Indrebo

High Risks Involved

In addition, intentionally or not, offenders put themselves and their business at risk by not paying the FET. Ignoring the FET obligation inevitably gets the IRS’s attention. That can bring fines, penalties, legal fees and other consequences including jail time.

“I’m confident that most archery businesses who partake in these activities probably don’t have the paperwork required to support an audit,” Betker said. “That’s a big liability, personally and professionally.”

 

Inadequate Liability Insurance

In addition, most small-business retailers don’t carry the proper insurance to handle a lawsuit, should complications with their products arise.

“Retailers and dealers need to understand if they produce and sell their own bowstrings, they’re a manufacturer and need to have insurance that’s relevant to manufacturers,” Parrish said. “Most shops only have general liability insurance, which doesn’t cover manufacturing. If they get sued, they won’t fare well.”

If a bowstring becomes defective, fault quickly falls on the manufacturer and installer. “If you’re both, you just took on two-thirds of the burden,” Parrish said. He believes most small archery shops don’t have the money to fight such battles without the proper insurance.

Like it or not, archery dealers and manufacturers must comply with the federal law. They can do that in one of two ways:

Pay the FET. In doing so, it levels the playing field for all bowstring competitors;

Buy commercially made bowstrings from manufacturers who factor in the FET.

Whatever method retailers and dealers choose, and whatever questions they might have, the ATA strives to be supportive, offer advice and help with the transition.

“The ATA advocates for our members and is here to help,” McAninch said. “We don’t work for the IRS, nor are we working on behalf of the IRS. We simply want all bowstring manufacturers to stay out of trouble, be profitable and to operate on a fair and level playing field. We also want our consumers, archers and bowhunters to have the best possible products and protection should anything go wrong.”

For FET-related questions and concerns, please contact Wendy Lang, ATA’s senior manager of membership, at (507) 233-8134 or wendylang@archerytrade.org.

ATA members can also find important FET information on the member-only section of ArcheryTrade.org. In fact, the ATA recently created a free comprehensive guide to federal excise taxes to help ATA members understand the FET system. To receive a free FET guide by mail, contact Lang.

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