Industry

The Federal Excise Tax and Your Business: What You Should Know

Not sure if you should be paying FET? Check this list to be sure you're on the right side of the IRS.
Photo Credit: Shane Indrebo

Author: Cassie Scott

When you open an archery store, you’re thinking most about your passion for the sport. You’re probably not thinking as much about taxes. (Because who wants to do that?)

If you’re an ATA member in the archery and bowhunting business who makes or sells taxable archery products, you may have to pay a Federal Excise Tax. And if you aren’t, you might be putting yourself and your business at risk.

Here’s what you need to know about the IRS regulations.

 

What is the federal excise tax?

The FET is a 10- to 11-percent tax manufacturers pay on the first sale of firearms, ammunition and some archery equipment. The tax goes back to the 1937 Wildlife Restoration Act, more commonly called the Pittman-Robertson Act. Archery equipment was added to the FET 35 years later in 1972. Since then, bows, arrows and all equipment that attaches to a bow and is used to shoot archery are subject to the FET.

Most people don’t relish the idea of paying taxes, but there is an upside: Revenues generated by the FET are collected by the IRS and sent to the U.S. Fish and Wildlife Service. That agency redistributes the money to state wildlife agencies for habitat restoration, hunter education, wildlife research, public-access programs and other high-priority nationwide conservation projects. The FET helps boost the archery and bowhunting industry by ensuring people have places to hunt and animals to pursue. And of course, this means more money in the pockets of archery store owners.

 

Is your business affected?

If you manufacture arrow shafts, bows with a draw weight of 30 pounds or more, or an accessory that attaches to a bow, you are required to make quarterly Federal Excise Tax payments to the IRS. Photo Credit: Shane Indrebo.

All firearms-, ammunition- and archery-industry members – with few exceptions – who manufacture, produce or import taxable equipment must pay the FET.

If you manufacture arrow shafts, bows with a draw weight of 30 pounds or more, or an accessory that attaches to a bow, you are required to make quarterly FET payments to the IRS. Companies other than those that manufacture products as described above also pay FET if they are involved in the final manufacture of products or in the first sale of taxable products in the U.S. That distinction includes retailers who make and sell items such as bowstrings and other taxable products.

No doubt, tax codes can be confusing. Be sure to review the IRS website, which describes who is liable for the FET. The site also explains how the IRS defines terms, such as manufacturer and importer, to determine the proper taxpayer.

 

Which archery products are taxed?

While many archery and bowhunting items are subject to the FET, a number of items, such as arrow fletching and shooting gloves, are not. To get the full picture visit the IRS website, which includes a complete, comprehensive list of which archery items are subject to the FET, as well as which archery items are not.

The Archery Trade Association also provides an archery quick reference guide and table of archery items subject to tax and items not subject to tax.

 

How does the FET program work?

The ATA provides their members with Federal Excise Tax information, advice and advocacy. They also send updates as they occur, provide an FET seminar at the ATA Trade Show, and work directly with the state wildlife agencies, the U.S. Fish and Wildlife Service, IRS and the U.S. Congress. Photo Credit: Shane Indrebo.

All companies responsible for paying FET must file a quarterly excise tax return. To file, use IRS Form 720, which is due by the last day of the month following the close of the quarter. For example, for taxes accruing during the first quarter of the calendar year (January-March), taxpayers must file a return by April 30. Taxes on the sale of archery equipment should be paid with a company’s quarterly return, not in deposits.

The ATA provides their members with FET information, advice and advocacy. They also send updates as they occur, provide an FET seminar at the ATA Trade Show, and work directly with the state wildlife agencies, the U.S. Fish and Wildlife Service, IRS and the U.S. Congress. ATA staff members are available anytime to help you stay out of trouble with the IRS.

 

Take action

For FET-related questions and concerns, contact Wendy Lang, ATA membership manager at (507) 233-8134 or wendylang@archerytrade.org. Lang will confidentially address your questions and concerns about FET obligations. She also recommends that ATA members ask their certified public accountant for tax-related advice.

ATA members can also find important FET information and documents on the member-only section of ArcheryTrade.org. Simply log in, navigate to the members-only section, and click on “Federal Excise Tax.” You can download documents on archery items subject to the tax, as well as the IRS’s Archery FET Handbook and IRS registration forms.

Prefer to reach out to the IRS directly? The IRS Field Agent for archery is Tim Boes. He can be reached at (616) 365-4620 or Timothy.Boes@irs.gov.

Stay in the know – and out of trouble – by learning more about the Federal Excise Tax today.

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