By Dan Forster, Archery Trade Association & Mitch King, BEAM Consulting, Inc.
Today’s business model for manufacturing and distributing archery and fishing equipment is much more complex than the traditional business models in place when excise taxes on hunting and angling equipment were first imposed in the 1930s and 1950s. Because of changes to the business model, there are increasing “leakages” in the American System of Conservation Funding, which threaten the financial underpinning of the North American Model of Wildlife Conservation.
If you are reading this article as a hunter, angler, or recreational shooter and are NOT familiar with the excise taxes on archery equipment associated with the Wildlife Restoration Program and Sport-fish Restoration Program, respectively, you need to crawl out from under your rock and accept these links as a reading assignment for another day. In lieu of a detailed understanding, suffice it to say that these excise taxes on select hunting and fishing equipment are the lifeblood of funding for state fish and wildlife agencies and provided fuel for the great conservation work achieved by these agencies and their partners for almost a century!
In addition to firearms and ammunition, which are not affected by “leakages” due to the tight importation oversight, taxable items under the Wildlife Restoration Program include bows, arrows, broadheads, and equipment that “attaches to a bow” like quivers, rests, stabilizers, kisser buttons, etc. Taxable products on the Sport Fish Restoration side include angling equipment such as rods, reels, tackle, etc.
The hunting and angling industries started primarily as U.S.-based industries where the manufacturer made the taxable product and sold it to a wholesaler. The wholesaler would then sell to a retailer who would put the product on the shelf, and you (the consumer) would buy the product and put it to good use in the field or on the water. This fairly simple business model was used by the federal government to develop their excise tax collection model, which stated that the entity responsible for paying the excise tax was the U.S.-based manufacturer, and the tax was computed based on the price the manufacturer charged the wholesaler for the taxable product.
Over the next 50-70 years, only minimal modifications to the excise tax collection process were made and dealt largely with taxable products that were manufactured outside of the U.S. and imported for use here. At inception, the business model for the importation of taxable products was relatively simple - U.S. based “importers” purchased foreign-made taxable products and sold them to wholesalers. These importers were treated as “manufacturers” and responsible for paying the tax.
Late in the 20th century, the archery and fishing industries started experiencing major shifts in their business models. Global markets, more efficient shipping techniques, and the continued development of internet connectivity demanded that industries change their approach to getting products from the manufacturing facility to the consumer. Over the last 25 years, we have seen a sea-change in how the consumer now shops for, purchases, and receives hunting and angling equipment. For consumers, this is a great thing – it is easier to shop for their hunting and angling equipment and the products are often cheaper, reflecting reduced overhead and handling costs.
In recent years, however, business models have evolved to the point that consumers now have the capability of dealing directly with foreign-based manufacturers or distributors and having their hunting and angling equipment delivered directly at home and without the taxable product being “owned” by a U.S.-based business entity. According to current rules and regulations, these transactions are simply being “facilitated” by these internet-based marketplaces and the facilitators are not responsible for collecting and remitting the excise tax.
This modern-day business model has created a situation where the consumer is now responsible for paying the tax after receipt of the product. It is simply not feasible or practical for consumers or the Internal Revenue Service to administer tax collections on relatively small internet purchases where the tax collected is often less than the cost of collection! The impact has been exacerbated more recently by large internet-based sales companies (e.g. Amazon, Alibaba, eBay, Alternative Sporting Services, Walmart,
These 21st-century business models have created a pathway for foreign manufacturers of taxable hunting and fishing equipment to gain a competitive advantage by selling directly (most often through internet marketplace facilitators) to the consumer and avoiding paying the required excise. This model is no longer fair and working.
U.S.-based industries that support conservation by complying with excise tax rules are being put at a distinct competitive disadvantage. Their foreign-based competitors use the antiquated excise tax collection model to gain a 10% or 11% pricing advantage. In a market where the profit margins are around 5%, this disadvantage is intolerable. Industry demands that we work swiftly and cooperatively to make application of this tax model fair or find an alternative for funding conservation in the U.S. While the financial impacts are difficult to assess, they are likely in the $10s of millions annually and growing!
State fish and wildlife agencies are also suffering from this excise tax leakage. These losses directly impact an agency’s ability to manage fish and wildlife resources and provide easy public access for hunters and anglers. This loss of funding support for state fish and wildlife agencies will ultimately impact hunters and anglers through reduced resource management and reduced access to pursue their passion.
Both the Archery Trade Associations and the American Sportfishing Association began educating state agencies, conservation partners, and members of Congress on this growing problem in early 2020. As a direct result, Senator Mike Crapo (R-ID) asked the Government Accountability Office (GAO) to “review issues with collecting sport fishing and archery excise taxes on direct-to-consumer imports.” The GAO serves as the research arm for Congress, and they began review in January 2023. After a 19-month effort, the GAO published its final report, "Excise Taxes – Action Needed to Improve Compliance for Sport Fishing and Archery Imports” on July 29, 2024. Their effort and findings were incredibly positive for industry, states, and conservation communities!
The GAO report states, “GAO analyzed laws, regulations, and IRS guidance and data on sport fishing and archery excise taxes. GAO interviewed federal agency officials, industry, state fish and wildlife, and other stakeholders. GAO reviewed agency documentation and assessed agencies’ efforts against established GAO criteria for a good tax system.”
As such, “GAO is recommending that Congress consider making U.S. online marketplaces responsible for sport fishing and archery excise taxes on consumer import sales in which they are involved.”
This strategic ask of congress to consider changing the law to place the responsibility for collecting the tax on the internet marketplace facilitators was met with quiet applause from industry, state fish and wildlife agencies, and other vested partners. This suggestion, if ultimately passed into law, would repair the leakage by imposing the excise taxes higher up the distribution chain (if not purchased directly from a foreign seller) and would align with criteria for a good tax system, such as equity and efficiency. Without legislation making U.S. online marketplaces responsible for the excise taxes on consumer import sales in which they are involved, collecting revenue on these sales will remain neither simple, transparent, nor administrable, and issues with inequity and inefficiency will persist. Shifting responsibility to the U.S. online marketplaces involved in direct-to-consumer import sales would not address all challenges but will bring tax collection of consumer imports closer into alignment with the criteria of a good tax system.
Implementing these or other solutions will be a heavy lift. Changes in tax law or tax code are often complicated. The good news is the GAO, impacted industries, state fish and wildlife agencies, and a plethora of conservation partners are united in the importance of resolving this problem. Stand by for more information and opportunities to show support for repairing a “leaking” tax system to maintain conservation excellence for the next generation.
The GAO Excise Taxes report is free of charge on the GAO website at https://www.gao.gov.
Dan Forster, Archery Trade Association & Mitch King, BEAM Consulting, Inc.
