Every year in the United States, taxes on sporting goods sales generate around $1.5 billion for conservation initiatives via the Pittman-Robertson and Dingell-Johnson acts. Together, these bills levy a 10% tax on most fishing equipment and an 11% tax on firearms, ammunition, and archery gear (see the exact breakdown here). In recent years, however, an increasingly large loophole has been growing—one that allows direct-to-consumer sales from foreign manufacturers to fly under the radar.
To understand the issue, MeatEater spoke with Mike Leonard, Vice President of Government Affairs at the American Sportfishing Association—an organization that has been lobbying for a bill in Congress to address the problem.
Leonard describes a typical scenario in which manufacturers are able to bypass the conservation tax. “Say you go onto Amazon, you look up fishing reels, and about half the brands that show up are known—either U.S.-based or have a U.S. presence—like Penn, Shimano, Diawa, Shakespeare, and so on, that we have every reason to believe are paying the excise tax. But the other half will be these hard-to-pronounce names—you know, all capital letters—mostly Chinese manufacturers that exclusively sell to the U.S. through online platforms like Amazon, Alibaba, Temu, or any of those. And because those transactions are essentially directly from the overseas manufacturer to the U.S. consumer, there’s no excise tax being collected.”
In response, advocacy groups—including the American Sportfishing Association—are garnering support for a bill in Congress, titled the Sporting Goods Excise Tax Modernization Act. In essence, it would treat online retailers in the situation outlined above as both the importer and the seller, and levy the standard conservation excise tax on them. The tax would apply only to fishing gear and archery equipment. It would not apply to firearms and ammunition, which are regulated by the ATF and therefore don’t have the same issues with foreign, online sales.
Notably, the bill doesn’t include any provisions as to how exactly the taxes would be collected from online retailer platforms. Most likely, it would happen on the back end, and the consumer would see new prices with the tax built in—as is the case with all other sporting-goods sales, both online and in brick-and-mortar stores.
Even for legitimate products, the fees are levied so high up in the supply chain (typically to the wholesale retailer) that most consumers don’t even realize they’re paying toward conservation programs every time they purchase fishing tackle or bow equipment. However, the conservation impact of the revenue is tremendous. On average, from 2007 to 2023, the fees on fishing and archery gear generated about $200 million annually, the bulk of which is returned to state wildlife agencies. (For more details on how the money is used, check out this article).
Unfortunately, there’s no estimate on the amount of revenue lost annually through the loophole, though the number is suspected to be at least in the single-digit millions. Technically, as the law is currently written, consumers who purchase foreign, untaxed sporting goods are supposed to file a Form 720 with the IRS to pay the excise tax. However, a government report published last year indicates that it costs the IRS $3.94 to process a form, which in many cases exceeds the tax revenue collected from a product like a $2 lure or a $20 fishing reel. As such, the IRS has effectively been ignoring the statute, and pretty much nobody is even aware of it.
“When this was all created back in 1950, no one anticipated living in a world in which you can go on the internet and buy a product from China, and then it shows up at your doorstep in a day or two,” Leonard said. “The term we’ve been using to describe this is ‘slippage,’ because it’s not necessarily tax ‘avoidance.’”
The new bill is an effort to bring online retail in line with the rest of the industry, and with Congress’s original intent with the Pittman-Robertson and Dingell-Johnson acts. It will also help stymie unfair foreign competition undercutting U.S. manufacturers’ prices that reflect the tax.
Currently, the bill is being considered as part of the Senate budget reconciliation package. Idaho senator Mike Crapo—also chairman of the Senate Finance Committee—is sponsoring the bill, and at a time when Congress is scrambling to maximize revenue sources, the legislation seems like a no-brainer. The next few weeks could be make-or-break for the bill, at least for now.
Read the full article here