Below is an article I wrote for another site. Many people commented on their lack of knowledge in this particular area. Hopefully this sheds some light on a few things and allows people to be aware of how some things work!!

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 employment 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 fund necessary to reintroduce declining numbers. These funds are generated through excise taxes put on certain hunting tackle. 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 Do not quote me on the dates, but in the early 80’S, Fred Bear was instrumental in getting these taxes added.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!