Where your Money Goes!

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01-31-2018, 09:49 AM
wicklundrh

Where your Money Goes!

With the advantages of the internet, public forums, private messages, and online credit card services, it has become easier than ever for anyone to purchase a mold, get some wheel weight lead, buy some hooks and paint, and start selling fishing equipment. Being an entrepreneur is what made America great. The problem however is when these businesses do not do the overall research on what they are getting in to. Many of them don’t have a DBA (doing business as), an FEIN (federal identification number), a state sales tax license, or pay IRS 720 federal excise taxes. The first three are pretty self-explanatory and most people understand what they are. The fourth however is something that every person “should” be aware of as it effects all of us in this great State of Michigan.

Although I am not an expert on congressional acts, I have done my due research over the years to understand the two most important federal acts that effect the outdoorsmen and women within the State of Michigan. The two acts I am referring to are: The Pittman-Robertson Act of 1937 and the Dingell-Johnson Act of 1950.

The Pittman-Robertson Act:

The Pittman-Robertson act was started by two congressmen (Pitman and Robertson) in order to increase revenue for states within the US to receive federally funded dollars for natural resource improvements within their states. It is one of the key reasons that white-tailed deer thrive today. Without the dollars collected and disseminated, states would not have had the funds necessary to reintroduce declining numbers. These funds are generated through excise taxes put on certain hunting equipment. The last time I checked, the tax was 11% on firearms and ammunition, 10% on handguns and revolvers, and 11% on archery tackle. These are taxes that are normally built in to the sales prices you see on tags. These taxes are paid to the federal government by the seller or dealer on a quarterly basis. Originally, archery tackle was not included in this act. Do not quote me on the dates, but in the early 80’S, Fred Bear was instrumental in getting these taxes added. He wanted to ensure the archery hunters (Michigan hunters in general) were contributing funds so that Michigan could get a return. Dick Lattimer was instrumental in getting these taxes added.

So how do we get paid?

Payments on the excise tax is derived based on the number of licenses sold within the state. On average, Michigan ranks 5th on return dollars for the entire United States (for Pittman-Robertson funds)! This equates to more than $20 million per year. Ever wonder why the State of Michigan changed their license structure? Although it was said to “simplify” the process, it actually generated revenue from the excise taxes received. I have not been able to find the adjusted numbers since everyone was required to purchase a general hunting license, but I’ll bet our return dollars went up significantly. This would also explain why, when you purchase a combination license, it is actually sold as two individual tags. More licenses sold means more return dollars. It is as simple as that. The rules are very specific on what the moneys can be used for.

The Sport Fishing Act

The Dingell-Johnson Act of 1950 (also known as the sport fishing act) was put in place to mirror the Pittman-Robertson act. There is a percentage added to the manufacturing and sales of each piece of tackle, fishing rod, net, and tackle box you purchase. These dollars are then returned to the states based on the number of fishing licenses sold. Michigan usually ranks 7th out of all states and collects an average of $11 to $13 million dollars per year. On jigs alone, the percentage paid to the federal government is 10%. That is a built in cost to the listed price per item.

What this means:

A legal established business that pays their federal excise taxes, charges .80 cents for a jig. Ten percent of that (or 8 cents) is paid directly to the federal government. A fly by night business charges .75 cents for the same jig. Although it appears to be a great deal to the consumer, the business in question is NOT paying their federal excise taxes. In turn he is robbing the sportsmen and women in the great state of Michigan while making a profit by selling products at a reduced rate without the need to pay the same taxes that legitimate businesses are paying.

These people need to be aware that the penalty for doing business without paying the federal excise tax is a $10,000 dollar fine!

Taxation isn’t always a bad thing. Yes, it seems we get taxed to death at times. In many instances there are hidden taxes and fees that the consumer doesn’t know about. These taxes are put in place in order to provide great things for the state in the form of boat launch improvements, shooting ranges, the purchasing of new wildlife habitat, land restoration and reclamation, and waterway improvements.

So that fly by night guys selling products with his PayPal account doesn’t think he is hurting anyone? He isn’t hurting the legitimate business guy. He is taking away from every person within the State of Michigan that purchases a hunting or fishing license!
01-31-2018, 01:49 PM
fishhunter775

These people need to be aware that the penalty for doing business without paying the federal excise tax is a $10,000 dollar fine!
Plus penalties and late fees and possible jail time. I have posted similar before and yet no one seems to care or do anything to get legal so guess when they do get caught it is nobodies fault but theres
01-31-2018, 08:28 PM
snake River

I’ve been paying federal excise tax for many years .
02-01-2018, 07:36 AM
addictedangler

You are right however when I first got into my guiding business I sent all required forms and got all required permits and licenses. My wife has worked as business manager for company's for 30 plus years and said either we do it right or not at all. When we filled the forms and sent the checks the first year these payment checks for state and federal were mainly a few dollars. Not long after sending them we got phone calls from 2 agencies. They wanted us to review our forms and send the correct amount of taxes due. I explained we were new in the business and only made a very small profit and the information was correct. Both times the person told me do not even fill out these forms unless you make x amount with a check to us for x amount of dollars. There explanation was these small claims are assumed to be incorrect by the computer and come to the attention of someone who has to investigate what is wrong. Bottom line is it cost more money for the work done then the check you send.
02-01-2018, 09:48 AM
deathb4disco

Quote:

Originally Posted by addictedangler

Both times the person told me do not even fill out these forms unless you make x amount with a check to us for x amount of dollars.

This is called the "de minimis" amount and is exactly what I would have expected for something like this. (In other words, people who tie and sell a small amount of flies/jigs would be exempt from filing the form and paying the tax. For example, you don't have to file a 1040 unless you make the minimum amount of income.)

I checked the instructions for Form 720, though, and there is no mention of a "de minimis" amount. They should clearly state this in the instructions and save themselves the trouble of responding every time the computer kicks out a return as an error.
02-01-2018, 09:50 AM
wicklundrh

Quote:

Originally Posted by addictedangler

You are right however when I first got into my guiding business I sent all required forms and got all required permits and licenses. My wife has worked as business manager for company's for 30 plus years and said either we do it right or not at all. When we filled the forms and sent the checks the first year these payment checks for state and federal were mainly a few dollars. Not long after sending them we got phone calls from 2 agencies. They wanted us to review our forms and send the correct amount of taxes due. I explained we were new in the business and only made a very small profit and the information was correct. Both times the person told me do not even fill out these forms unless you make x amount with a check to us for x amount of dollars. There explanation was these small claims are assumed to be incorrect by the computer and come to the attention of someone who has to investigate what is wrong. Bottom line is it cost more money for the work done then the check you send.

Good on you guys for doing the right thing, regardless of the original outcome. I could see where someone could constrew the information as being incorrect and send up a red flag. On the flip side, I guess if you are doing the right thing, you have nothing to worry about.

The key information when I wrote this was what all the money actually was supposed to be for. Many people didn't know about either act and the information was well received. It was actually aimed at one particular business that was illegally operating and making huge returns. It served two purposes and people quickly learned that by purchasing stuff from said business, they were cheating themselves and others.