Federal Fishing Excise Tax

[Corkie Monster]

Has anyone heard of this tax? 10% on each item plus the regular tax on top of that, how does anyone make any money?

http://www.irs.gov/publications/p510/ch05.html#d0e6860

Sport Fishing Equipment
A tax of 10% of the sale price is imposed on many articles of sport fishing
equipment sold by the manufacturer. This includes any parts or accessories
sold on or in connection with the sale of those articles.

Pay this tax with Form 720. No tax deposits are required.

Sport fishing equipment includes all the following items.

Fishing rods and poles (and component parts), fishing reels, fly fishing
lines, and other fishing lines not over 130 pounds test, fishing spears,
spear guns, and spear tips.

Items of terminal tackle, including leaders, artificial lures, artificial
baits, artificial flies, fishing hooks, bobbers, sinkers, snaps, drayles,
and swivels (but not including natural bait or any item of terminal tackle
designed for use and ordinarily used on fishing lines not described in (1)).

The following items of fishing supplies and accessories: fish stringers,
creels, bags, baskets, and other containers designed to hold fish, portable
bait containers, fishing vests, landing nets, gaff hooks, fishing hook
disgorgers, and dressing for fishing lines and artificial flies.

Fishing tip-ups and tilts.

Fishing rod belts, fishing rodholders, fishing harnesses, fish fighting
chairs, fishing outriggers, and fishing downriggers.

[Chromaflage]

Yup. The 10% excise tax has been in place for many years.

[cosmo]

It's there in just about everything you buy. The money is redistributed to the states from the feds based upon the number of licenses sold in the state.

So when you see federal dollars as part of the budget, realize a hunk of that came directly from anglers. In 2008 Oregon got 9 million "federal" angler dollars, and I believe 8 million from the hunting related tax (yes, there's a hunting tax too).

Of course, commercial fishermen are exempt this tax, commonly referred to as Sport Fish Restoration Funds. That's why you see gear in Englund's marked "For Commercial Sale Only"....no restoration funds have been collected on those items.

This is also why rising license fees become so problematic. Every angler that chooses not to fish results in the loss of their direct license dollars, and roughly $6 from the federal government, a double whammy...

[StickFish]

Yep as a rod builder I'm subject to the tax on rods that I manufacture and sell. Same with raw components. There is a Revenue Ruling that applies to rod builders and a guide published on another rod building web site - PM me if you need the link (not sure they sell something there or not). basically the rod builder takes 60% of the retail price of the rod and applies the 10% tax. That is supposed to relieve the end distributor of paying the tax twice, once when buying the raw components and again when selling the rod - isn't that fun.

[Shai]

Also if you are a rod builder or tackle manufacturer , make sure you register for a 637 exemption with the IRS, this will allow you to buy your raw materials dirrect from the manufacturer excise tax free . Then you burry the tax in the total cost of your finished rod or tackle item and collect it from the end user to pay to the IRS . That way the end consumer is not getting double taxed essentially . Best way to get all of the information is to call your local IRS office , after spending a little time on hold they can actually be very helpfull and they should be able to connect you with a sportfishing excise tax expert in that office .

[nobrownline]

Yes its called the Mitchell Act. It is then divied up and sent to the states.

[StickFish]

Originally Posted by Shai

Also if you are a rod builder or tackle manufacturer , make sure you register for a 637 exemption with the IRS, this will allow you to buy your raw materials dirrect from the manufacturer excise tax free . Then you burry the tax in the total cost of your finished rod or tackle item and collect it from the end user to pay to the IRS . That way the end consumer is not getting double taxed essentially . Best way to get all of the information is to call your local IRS office , after spending a little time on hold they can actually be very helpfull and they should be able to connect you with a sportfishing excise tax expert in that office .

An important couple of notes on the 637 exemption. It only works if you are purchasing the items directly from the manufacturer. Most of the manufacturers require that you purchase a certain dollar amount of product per year. So you will not be able to use a 637 exemption to buy goods from a distributor or wholesaler. For instance at Batson you have to buy $3000 of product each year to quailfy - that is a lot of blanks.

Next the Sportsfishing Excise Expert - there is only one in Jacksonville Florida. Please see the write up on rodbuilding (google 637 Exemption its the 4th item down) The Excise tax specialist listed at the bottom has read and approved the statement.

[Shai]

Originally Posted by StickFish

An important couple of notes on the 637 exemption. It only works if you are purchasing the items directly from the manufacturer. Most of the manufacturers require that you purchase a certain dollar amount of product per year. So you will not be able to use a 637 exemption to buy goods from a distributor or wholesaler. For instance at Batson you have to buy $3000 of product each year to quailfy - that is a lot of blanks.

Next the Sportsfishing Excise Expert - there is only one in Jacksonville Florida. Please see the write up on rodbuilding (google 637 Exemption its the 4th item down) The Excise tax specialist listed at the bottom has read and approved the statement.

There's a guy in the portland office that helped us with our 637 and is very knowledgeable with the 720 forms as well . If I find his number I'll post it . Many of the components you can buy from a distributor/wholesaler you can buy direct from the manufacturer so long as you have your ducks in a row, ein , ubi for washington , resale certificate and your 637 . to list a few.... pac bay , am tack , flex coat , REC , and I'm sure a resourcefull individual could find more . Many of these will have a minimum order policy but it is still one way to save yourself and your customer some money . We use ours mainly for our lure building components, because we buy thousands of small parts at a time qualifying for minumum orders is much easier .

Every extra bit of the excise tax I can avoid paying (legaly) the better , I can pass the savings on to folks who purchase products from me , and in the current political climate regarding hatcheries being shut down and fish manegment funding being cut , I really don't have much belief in it anyhow. I would rather not pay it at all , but then I'd get thrown in the clinker

[StickFish]

Please do not post his number without talking to him. He may know about the exemption since he is the Form 637 coordinator, but he isn't the specialist on the sportfishing tax. I sit right next to the excise group in Portland and well they should know their way around a form 720