Government Affairs
Federal Manufacturers’ Excise Tax—2006 IRS Director’s Directive
Update
On July 10, 2006, the IRS released its “Industry Director’s Directive.” In December 2006, the IRS combined the July 2006 cover memo from Bill Conlin, director, Specialty Taxes, IRS; the Quick Reference Guide and the scenarios document into one document called the Field Directive–Federal Excise Tax on the importation and manufacture of fishing and archery products.
If you pay the excise tax, or believe you should be paying the federal manufacturers’ excise tax on sportfishing equipment, we urge your careful review and consideration of this document.
Field Directive–Federal Excise Tax on the importation and manufacture of fishing and archery products—This document contains a cover memo from Bill Conlon, director, Specialty Taxes, IRS; a Quick Reference Guide containing a glossary of terms associated with the federal excise tax and a list of factors that define who should pay the tax; and a scenarios document that illustrates various business models used in the industry and who is responsible for paying the excise tax under the listed scenarios.
For more information, contact ASA President and CEO Mike Nussman, x233, or ASA VP Gordon Robertson, x237.
The Issue
In early 2000, the Internal Revenue Service stepped-up
its compliance activities related to payment of the manufacturers’ excise tax on sportfishing
equipment. As a part of its compliance activities, the IRS appeared
to have revised its interpretations of essential terms such as “who
is the manufacturer” and “who is the importer” in
the payment of excise taxes. In the late 1990s and again in 2004,
the archery industry, which also pays an excise tax, passed legislation
that highlighted the import issue. Apparently this focused the
IRS’s attention on imported products.
This change by the IRS has placed a number of sportfishing industry
companies in a difficult position. As the IRS stepped-up its
compliance activities, it became clear the law was not being uniformly
applied. Depending on which IRS territory and which IRS agent
reviewed a company’s practices, interpretation of essential terms,
such as “who is the manufacturer” and “who is the
importer” were being applied differently. The result of
these differing interpretations is audit findings against companies
who, in many cases, were previously told by the IRS that they were
in compliance.
Background
Since February 2005 the Internal Revenue
Service (IRS) has teken steps to assure ASA and the sportfishing
industry that the federal tax laws that govern the payment of the federal
manufacturers’ excise
tax laws is applied evenly and fairly to in all regions of the United
States. In March of that same year, ASA established an Excise Tax Committee
comprised of member companies to discuss and review IRS actions for
fair and consistent application of tax law. A primary goal of the Excise
Tax Committee was to establish fair and consistent application of the
laws regarding the excise tax.
During a January 31, 2006, meeting with ASA’s Excise Tax Committee,
the IRS provided a list of actions it had took to address the
issue of fair and consistent application of the federal manufacturers’ excise
tax:
- Establishing better communications within IRS—from field agents
to policy staff in the Washington, D.C. office—with a continuous
training program;
- Establishing better coordination by designating lead staff in the
areas of policy management;
- Establishing a policy contact representative for industry and IRS
agents; and;
- Designating a single legal counsel for federal excise tax issues.
In early 2006, the IRS released the "Industry Director's Directive" that addresses the industry's concerns.
