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Subject: irs plub510 excise taxes on sporting equipment
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 ac- cessories 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 fol- lowing items.
1. 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.
2. Items of terminal tackle, including leaders, artificial lures, artificial baits, artificial flies, fishing hooks, bobbers, sinkers, snaps, drayles, and swivels (but not including nat- ural bait or any item of terminal tackle de- signed for use and ordinarily used on fish- ing lines not described in (1)).
3. 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.
4. Fishing tip-ups and tilts.
5. Fishing rod belts, fishing rodholders, fish- ing harnesses, fish fighting chairs, fishing outriggers, and fishing downriggers.
See Revenue Ruling 88-52 in Cumulative Bulle- tin 1988-1 for a more complete description of the items of taxable equipment.
Fishing rods and fishing poles. The tax on fishing rods and fishing poles (and component parts) is 10% of the sales price not to exceed $10 per article. The tax is paid by the manufac- turer, producer, or importer.
Fishing tackle boxes. The tax on fishing tackle boxes is 3% of the sales price. The tax is paid by the manufacturer, producer, or importer.
Electric outboard boat motors. A tax of 3% of the sale price is imposed on the sale by the
Chapter 5 Manufacturers Taxes Page 31manufacturer of electric outboard motors. This includes any parts or accessories sold on or in connection with the sale of those articles.
Certain equipment resale. The tax on the sale of sport fishing equipment is imposed a second time under the following circumstances. If the manufacturer sells a taxable article to any person, the manufacturer is liable for the tax. If the purchaser or any other person then sells it to a person who is related (discussed next) to the manufacturer, that related person is liable for a second tax on any subsequent sale of the article. The second tax, however, is not im- posed if the constructive sale price rules under section 4216(b) apply to the sale by the manu- facturer.
If the second tax is imposed, a credit for tax previously paid by the manufacturer is available provided the related person can document the tax paid. The documentation requirement is generally satisfied only through submission of copies of actual records of the person that pre- viously paid the tax.
Related person. For the tax on sport fish- ing equipment, a person is a related person of the manufacturer if that person and the manu- facturer have a relationship described in section 465(b)(3)(C).
Bows, Quivers, Broadheads, and Points
The tax on bows is 11% (.11) of the sales price. The tax is paid by the manufacturer, producer, or importer. It applies to bows having a peak draw weight of 30 pounds or more. The tax is also imposed on the sale of any part or acces- sory suitable for inclusion in or attachment to a taxable bow and any quiver, broadhead, or point suitable for use with arrows described be- low.
Pay this tax with Form 720. No tax deposits are required.
Arrow Shafts
The tax on arrow shafts is listed on Form 720. The tax is paid by the manufacturer, producer, or importer of any arrow shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow that after its assembly meets either of the following conditions.
It measures 18 inches or more in overall length. It measures less than 18 inches in overall length but is suitable for use with a taxable bow, described earlier.
Exemption for certain wooden arrows.
After October 3, 2008, the tax does not apply to any shaft made of all natural wood with no lami- nations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished
product) and used in the manufacture of any ar- row that after its assembly meets both of the fol- lowing conditions.
It measures 5 16 of an inch or less in diame- ter. It is not suitable for use with a taxable bow, described earlier.
Pay this tax with Form 720. No tax deposits are required.
Coal
A tax is imposed on the first sale of coal mined in the United States. The producer of the coal is liable for the tax. The producer is the person who has vested ownership of the coal under state law immediately after the coal is severed from the ground. Determine vested ownership without regard to any contractual arrangement for the sale or other disposition of the coal or the payment of any royalties between the pro- ducer and third parties. A producer includes any person who extracts coal from coal waste refuse piles (or from the silt waste product that results from the wet washing of coal).
The tax is not imposed on coal extracted from a riverbed by dredging if it can be shown that the coal has been taxed previously.
Tax rates. The tax on underground-mined coal is the lower of:
sell the coal for a delivered price. The f.o.b. mine or f.o.b. cleaning plant is the point at which you figure the number of tons sold for ap- plying the applicable tonnage rate, and the point at which you figure the sale price for ap- plying the 4.4% rate.
The tax applies to the full amount of coal sold. However, the IRS allows a calculated re- duction of the taxable weight of the coal for the weight of the moisture in excess of the coal's in- herent moisture content. Include in the sale price any additional charge for a freeze-condi- tioning additive in figuring the tax.
Do not include in the sales price the excise tax imposed on coal.
Coal used by the producer. The tax on coal applies if the coal is used by the producer in other than a mining process. A mining process means the same for this purpose as for percent- age depletion. For example, the tax does not apply if, before selling the coal, you break it, clean it, size it, or apply any other process con- sidered mining under the rules for depletion. In this case, the tax applies only when you sell the coal. The tax does not apply to coal used as fuel in the coal drying process since it is consid- ered to be used in a mining process. However, the tax does apply when you use the coal as fuel or as an ingredient in making coke since the coal is not used in a mining process.
You must use a constructive sale price to figure the tax under the 4.4% rate if you use the coal in other than a mining process. Base your constructive sale price on sales of a like kind and grade of coal by you or other producers made f.o.b. mine or cleaning plant. Normally, you use the same constructive price used to fig- ure your percentage depletion deduction.
Blending. If you blend surface-mined coal with underground-mined coal during the cleaning process, you must figure the excise tax on the sale of the blended, cleaned coal. Figure the tax separately for each type of coal in the blend. Base the tax on the amount of each type in the blend if you can determine the proportion of each type of coal contained in the final blend. Base the tax on the ratio of each type originally put into the cleaning process if you cannot de- termine the proportion of each type of coal in the blend. However, the tax is limited to 4.4% of the sale price per ton of the blended coal.
Exemption from tax. The tax does not apply to sales of lignite and imported coal. The only other exemption from the tax on the sale of coal is for coal exported as discussed next.
Exported. The tax does not apply to the sale of coal if the coal is in the stream of export when sold by the producer and the coal is ac- tually exported.
Coal is in the stream of export when sold by the producer if the sale is a step in the exporta- tion of the coal to its ultimate destination in a foreign country. For example, coal is in the stream of export when:
1. The coal is loaded on an export vessel and title is transferred from the producer to a foreign purchaser, or
2. The producer sells the coal to an export broker in the United States under terms of
Page 32
Chapter 5
Manufacturers Taxes
of:
$1.10 a ton, or 4.4% of the sale price.
The tax on surface-mined coal is the lower
55 cents a ton, or 4.4% of the sale price.
Coal will be taxed at the 4.4% rate if the sell- ing price is less than $25 a ton for under- ground-mined coal and less than $12.50 a ton for surface-mined coal. Apply the tax propor- tionately if a sale or use includes a portion of a ton.
Example. If you sell 21,000 pounds (10.5 tons) of coal from an underground mine for $525, the price per ton is $50. The tax is $1.10 × 10.5 tons ($11.55).
Coal production. Coal is produced from sur- face mines if all geological matter (trees, earth, rock) above the coal is removed before the coal is mined. Treat coal removed by auger and coal reclaimed from coal waste refuse piles as pro- duced from a surface mine.
Treat coal as produced from an under- ground mine when the coal is not produced from a surface mine. In some cases, a single mine may yield coal from both surface mining and underground mining. Determine if the coal is from a surface mine or an underground mine for each ton of coal produced and not on a mine-by-mine basis.
Determining tonnage or selling price. The producer pays the tax on coal at the time of sale or use. In figuring the selling price for applying the tax, the point of sale is f.o.b. (free on board) mine or f.o.b. cleaning plant if you clean the coal before selling it. This applies even if you
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 ac- cessories 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 fol- lowing items.
1. 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.
2. Items of terminal tackle, including leaders, artificial lures, artificial baits, artificial flies, fishing hooks, bobbers, sinkers, snaps, drayles, and swivels (but not including nat- ural bait or any item of terminal tackle de- signed for use and ordinarily used on fish- ing lines not described in (1)).
3. 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.
4. Fishing tip-ups and tilts.
5. Fishing rod belts, fishing rodholders, fish- ing harnesses, fish fighting chairs, fishing outriggers, and fishing downriggers.
See Revenue Ruling 88-52 in Cumulative Bulle- tin 1988-1 for a more complete description of the items of taxable equipment.
Fishing rods and fishing poles. The tax on fishing rods and fishing poles (and component parts) is 10% of the sales price not to exceed $10 per article. The tax is paid by the manufac- turer, producer, or importer.
Fishing tackle boxes. The tax on fishing tackle boxes is 3% of the sales price. The tax is paid by the manufacturer, producer, or importer.
Electric outboard boat motors. A tax of 3% of the sale price is imposed on the sale by the
Chapter 5 Manufacturers Taxes Page 31manufacturer of electric outboard motors. This includes any parts or accessories sold on or in connection with the sale of those articles.
Certain equipment resale. The tax on the sale of sport fishing equipment is imposed a second time under the following circumstances. If the manufacturer sells a taxable article to any person, the manufacturer is liable for the tax. If the purchaser or any other person then sells it to a person who is related (discussed next) to the manufacturer, that related person is liable for a second tax on any subsequent sale of the article. The second tax, however, is not im- posed if the constructive sale price rules under section 4216(b) apply to the sale by the manu- facturer.
If the second tax is imposed, a credit for tax previously paid by the manufacturer is available provided the related person can document the tax paid. The documentation requirement is generally satisfied only through submission of copies of actual records of the person that pre- viously paid the tax.
Related person. For the tax on sport fish- ing equipment, a person is a related person of the manufacturer if that person and the manu- facturer have a relationship described in section 465(b)(3)(C).
Bows, Quivers, Broadheads, and Points
The tax on bows is 11% (.11) of the sales price. The tax is paid by the manufacturer, producer, or importer. It applies to bows having a peak draw weight of 30 pounds or more. The tax is also imposed on the sale of any part or acces- sory suitable for inclusion in or attachment to a taxable bow and any quiver, broadhead, or point suitable for use with arrows described be- low.
Pay this tax with Form 720. No tax deposits are required.
Arrow Shafts
The tax on arrow shafts is listed on Form 720. The tax is paid by the manufacturer, producer, or importer of any arrow shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow that after its assembly meets either of the following conditions.
It measures 18 inches or more in overall length. It measures less than 18 inches in overall length but is suitable for use with a taxable bow, described earlier.
Exemption for certain wooden arrows.
After October 3, 2008, the tax does not apply to any shaft made of all natural wood with no lami- nations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished
product) and used in the manufacture of any ar- row that after its assembly meets both of the fol- lowing conditions.
It measures 5 16 of an inch or less in diame- ter. It is not suitable for use with a taxable bow, described earlier.
Pay this tax with Form 720. No tax deposits are required.
Coal
A tax is imposed on the first sale of coal mined in the United States. The producer of the coal is liable for the tax. The producer is the person who has vested ownership of the coal under state law immediately after the coal is severed from the ground. Determine vested ownership without regard to any contractual arrangement for the sale or other disposition of the coal or the payment of any royalties between the pro- ducer and third parties. A producer includes any person who extracts coal from coal waste refuse piles (or from the silt waste product that results from the wet washing of coal).
The tax is not imposed on coal extracted from a riverbed by dredging if it can be shown that the coal has been taxed previously.
Tax rates. The tax on underground-mined coal is the lower of:
sell the coal for a delivered price. The f.o.b. mine or f.o.b. cleaning plant is the point at which you figure the number of tons sold for ap- plying the applicable tonnage rate, and the point at which you figure the sale price for ap- plying the 4.4% rate.
The tax applies to the full amount of coal sold. However, the IRS allows a calculated re- duction of the taxable weight of the coal for the weight of the moisture in excess of the coal's in- herent moisture content. Include in the sale price any additional charge for a freeze-condi- tioning additive in figuring the tax.
Do not include in the sales price the excise tax imposed on coal.
Coal used by the producer. The tax on coal applies if the coal is used by the producer in other than a mining process. A mining process means the same for this purpose as for percent- age depletion. For example, the tax does not apply if, before selling the coal, you break it, clean it, size it, or apply any other process con- sidered mining under the rules for depletion. In this case, the tax applies only when you sell the coal. The tax does not apply to coal used as fuel in the coal drying process since it is consid- ered to be used in a mining process. However, the tax does apply when you use the coal as fuel or as an ingredient in making coke since the coal is not used in a mining process.
You must use a constructive sale price to figure the tax under the 4.4% rate if you use the coal in other than a mining process. Base your constructive sale price on sales of a like kind and grade of coal by you or other producers made f.o.b. mine or cleaning plant. Normally, you use the same constructive price used to fig- ure your percentage depletion deduction.
Blending. If you blend surface-mined coal with underground-mined coal during the cleaning process, you must figure the excise tax on the sale of the blended, cleaned coal. Figure the tax separately for each type of coal in the blend. Base the tax on the amount of each type in the blend if you can determine the proportion of each type of coal contained in the final blend. Base the tax on the ratio of each type originally put into the cleaning process if you cannot de- termine the proportion of each type of coal in the blend. However, the tax is limited to 4.4% of the sale price per ton of the blended coal.
Exemption from tax. The tax does not apply to sales of lignite and imported coal. The only other exemption from the tax on the sale of coal is for coal exported as discussed next.
Exported. The tax does not apply to the sale of coal if the coal is in the stream of export when sold by the producer and the coal is ac- tually exported.
Coal is in the stream of export when sold by the producer if the sale is a step in the exporta- tion of the coal to its ultimate destination in a foreign country. For example, coal is in the stream of export when:
1. The coal is loaded on an export vessel and title is transferred from the producer to a foreign purchaser, or
2. The producer sells the coal to an export broker in the United States under terms of
Page 32
Chapter 5
Manufacturers Taxes
of:
$1.10 a ton, or 4.4% of the sale price.
The tax on surface-mined coal is the lower
55 cents a ton, or 4.4% of the sale price.
Coal will be taxed at the 4.4% rate if the sell- ing price is less than $25 a ton for under- ground-mined coal and less than $12.50 a ton for surface-mined coal. Apply the tax propor- tionately if a sale or use includes a portion of a ton.
Example. If you sell 21,000 pounds (10.5 tons) of coal from an underground mine for $525, the price per ton is $50. The tax is $1.10 × 10.5 tons ($11.55).
Coal production. Coal is produced from sur- face mines if all geological matter (trees, earth, rock) above the coal is removed before the coal is mined. Treat coal removed by auger and coal reclaimed from coal waste refuse piles as pro- duced from a surface mine.
Treat coal as produced from an under- ground mine when the coal is not produced from a surface mine. In some cases, a single mine may yield coal from both surface mining and underground mining. Determine if the coal is from a surface mine or an underground mine for each ton of coal produced and not on a mine-by-mine basis.
Determining tonnage or selling price. The producer pays the tax on coal at the time of sale or use. In figuring the selling price for applying the tax, the point of sale is f.o.b. (free on board) mine or f.o.b. cleaning plant if you clean the coal before selling it. This applies even if you
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