In the first half of 2017 alone, companies paid almost $350 million in Firearms and Ammunition Excise Tax (“FAET”). That is a big number.
FAET applies to the manufacture, production, importation, and sale of firearms, shells, or cartidges. A taxpayer is liable for FAET if it manufactures or produces a taxable product in the United States or imports a taxable product into the United States from a foreign source.
FAET is calculated by multiplying the sale price of the taxable product by the applicable tax rates. The applicable tax rates are:
• 10% of the sale price of pistols and revolvers;
• 11% of the sale price shells, cartridges, and firearms other than pistols and revolvers.
The burden is on taxpayers to calculate, return, and pay FAET. As with IRS tax returns, the law and regulations provide taxpayers various routes to reduce liability. With proper planning and implementation of certain procedures, plus the development of appropriate business records to support their planning and procedures, taxpayers can reduce their liability.
We encourage FAET taxpayers to approach FAET as they do income taxes, by conducting tax planning and implementing legal tax minimization procedures to reduce their obligations.