Excise tax

I was reading that anyone who makes and sells jigs or sinkers was required to pay a 10% excise tax, That seems crazy but I guess it's true. Any thoughts? Did a search and came up with this:







Yes, hobbyists who produce and sell fishing jigs are generally required to pay federal excise tax (FET) in the United States, as the IRS considers them manufacturers.

Under IRC Section 4161(a)(1), a 10% excise tax is imposed on the sale of sport fishing equipment—including artificial lures and jigs—by the manufacturer, producer, or importer.

Here is a breakdown of the requirements for hobby jig makers:

• Who is a Manufacturer? If you create jigs from raw materials (hooks, lead, paint, skirts) and sell them, you are considered a manufacturer, even if it is a small, part-time hobby business.
• Tax Calculation: The 10% tax applies to the sale price of the jigs. If you sell at retail, you may be able to use a special, lower constructive sale price formula, often 60% of the actual retail price, according to IRS guidance.
• How to Pay: Manufacturers must file Form 720, Quarterly Federal Excise Tax Return, and pay the tax quarterly.

I could understand for a business but a small part-time hobby business seems excessive. I would give them away and just require the person pay "shipping" cost. :biggrin

Yeh...seems crazy. I like your idea.

If you make lure and sell it you owe 10% of the sale price in Federal Excise Tax. No minimum. If you put a piece of plastic on a jig head you just made a lure. You can apply for 637 series federal tax number that allows you to buy the components to make lures without paying FET. The IRS is not playing. Believe me.

Quarterly too, and dont be late

Yes, I pay Excise tax each and every quarter. Trust, they don't care about you being small at all. Excise tax is one of the oldest taxes in our country.

I pay the excise tax every Quarter we’ve been paying it for quite some time, . not many people know that are selling on the Internet . don’t get caught .

One thing has confused me about the tax. If you pay the tax on everything you buy to make the item to sell does the tax have to be paid again? I have gotten conflicting information from what I would think were reliable sources.

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Originally Posted by fish_4_any

One thing has confused me about the tax. If you pay the tax on everything you buy to make the item to sell does the tax have to be paid again? I have gotten conflicting information from what I would think were reliable sources.

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Yes. Any alteration of a lure and resold requires tax. Only exception is if you are selling to a place that is going to sell them again without alterations, ie you selling to a bait shop. The final sale is taxed in that case.

Now you know how the government makes money. They tax the same dollar two, three even four times.

also if you donate a box of flies to a show for a raffle. you are liable for the cost of the item too.

Yup. If trade or barter with someone, e.g., lures for a fishing reel. That too.

It's very simple If you "produce, manufacture or import" a lure you owe FET. The tax is only paid once. Bait shops don't pay FET unless they make or import the lure.

Well, Excise tax is paid once, put you still gotta pay sales and use tax after that, then personal income tax after that. You spent one dollar, but by the end of the year that dollar was taxes about three times.

Thanks for the information. I'm not planning on getting rich and anything I make is just play money but I want to do it legally. Too old to go to the slammer. :hatchet:
It don't look that hard...I already have a Fed ID and know how you do sales tax. Just need to get a Venders liecene and file a Form 720 ever 3 months on anything I sale. Don't make enought to pay Fed taxes anyways. Customers pay the sales tax and will just cost me $.10 on the $1.00 extra for the excise tax. So if I would have made $10 profit...I will make $9. And at least the $1 is helping our waterways.

They have a worksheet and use to have training at the ASA Show now I-Cast. When you use their sheet it works out to 9% not 10 I I remember right, but 10% is the advertised rate. It is on the first domestic sale. I used a expediter for importing my rods from China and I paid the excise tax on their sale to me. The Expediter also stands in the shoes of the manufacturer in liability concerns although you should still carry product liability insurance.

I'm not going to be exporting or anything..just some ebay or fasebook sales and to locals. Just going to fill out the 720 and pay the 10% to be safe. May not sell anything but want be legal either way. I'm 70 and just going to fool around and maybe make a little cash. not too worried and getting all crazy or anything.

Sales divided by 1.1= FET

you guys that may be interested in getting into selling jigs and plastics believe me it's not worth it right now . There are too many people selling illegally is that you're not paying excise or anything else and so is guys that are going by the law or suffering not because of that only because of the economy is terrible right now.

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Originally Posted by popeye guy

Sales divided by 1.1= FET

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I thought it was 10%

Yes, it is 10%. If you sold $389 worth of jig. $389 x 10% = $389 x .10 = $38.90 in taxes owed.

So, yes 1.1 would be multiplying 110%, lol! A True patriot!

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Originally Posted by snake River

you guys that may be interested in getting into selling jigs and plastics believe me it's not worth it right now . There are too many people selling illegally is that you're not paying excise or anything else and so is guys that are going by the law or suffering not because of that only because of the economy is terrible right now.

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That's why I started making handline reels. I'd rather sell one reel for $100 to $340 than hundreds of dozens of jigs. If you can make your baseline sale $100, it's much easier to amass a little cash.

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Originally Posted by funbun

That's why I started making handline reels. I'd rather sell one reel for $100 to $340 than hundreds of dozens of jigs. If you can make your baseline sale $100, it's much easier to amass a little cash.

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But you still have to pay the tax!

Yes, I never said I didn't.

$389 in sales would include the 10% FET. you don't pay tax on tax. The FET on $389 sales is 35.3 rounded to the nearest dollar. According to my CPA

Right. Thanks for the correction. To be precise it's based on the sales price. IRS form 720 part II states: https://www.irs.gov/pub/irs-pdf/f720.pdf

41 | Sport fishing equipment (other than fishing rods and fishing poles) | 10% of sales price
110 | Fishing rods and fishing poles (limits apply, see instructions) | 10% of sales price
42 | Electric outboard motors | 3% of sales price
114 Fishing tackle boxes | 3% of sales price
44 | Bows, quivers, broadheads, and points | 11% of sales price
106 | Arrow shafts | $.63 per shaft
140 | Indoor tanning services | 10% of amount paid

https://www.irs.gov/pub/irs-pdf/f720.pdf

Therefore, if the sales price of one of my reels is $100, then I have to pay $10 in FET on each reel.

Honestly, this kind of thing needs to be discussed with a tax professional instead of an open forum. Don't take any of this as legal advice. See the IRS instructions for part II of form 720: Instructions for Form 720 (12/2025) | Internal Revenue Service

Not 100% true. Once you add in material cost, shipping costs, labor costs, energy costs, advertisement, material consumption and testing loss (have to test each jig style in the "lab"), and storage fees you'll not show a profit for at least 3 - 5 years so you're tax exempt at this point. :biggrin

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Originally Posted by Kevind62

Not 100% true. Once you add in material cost, shipping costs, labor costs, energy costs, advertisement, material consumption and testing loss (have to test each jig style in the "lab"), and storage fees you'll not show a profit for at least 3 - 5 years so you're tax exempt at this point. :biggrin

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Well the 720 form says 10% of sales.....not profit so I think I'll pay it.

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Originally Posted by Kevind62

Not 100% true. Once you add in material cost, shipping costs, labor costs, energy costs, advertisement, material consumption and testing loss (have to test each jig style in the "lab"), and storage fees you'll not show a profit for at least 3 - 5 years so you're tax exempt at this point. :biggrin

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Theres no writeoffs for 720, and its on sales

The form says 10% on the sales price paid every quarter. It doesn't matter if you're profitable. This is why you need professional tax advice, not opinions from a public forum.