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Legally Armed: V20N8

By Teresa G. Ficaretta, Esq. & Johanna Reeves, Esq.

Firearms and Ammunition Excise Tax:

The Basics-Part II

In Vol. 20, No. 7 of Small Arms Review, we published an article on firearms and ammunition excise tax summarizing the articles subject to tax, definitions of “manufacturer” and “importer,” and exemptions from tax. This article builds on the information in Part I and will address how to determine the taxable sale price for firearms and ammunition subject to tax, exclusions from the sale price, and tax-free sales.

I. Statutory and Regulatory Background

Section 4181, Title 26, U.S.C., imposes a tax on the sale by the manufacturer, producer, or importer of pistols, revolvers, firearms, shells, and cartridges. The tax is 10 percent of the sale price for pistols and revolvers and 11 percent of the sale price for all other firearms and shells and cartridges. The Internal Revenue Code (IRC) also imposes excise tax on the lease of a taxable article by a manufacturer or importer (26 U.S.C. 4217) and use of a taxable article by a manufacturer or importer (26 U.S.C. 4218).

II. Filing of Returns and Payment of Tax

When a manufacturer or importer sells a taxable article, tax liability is incurred, and the taxpayer must file a quarterly return with the Tax and Trade Bureau (TTB), Department of the Treasury. Returns must be filed on TTB Form 5300.26, Firearms and Ammunition Excise Tax Return. No return is required for tax periods in which no tax liability is incurred. Payment of tax may be accomplished by sending a check or money order with the return or through electronic funds transfer (EFT). Information on payment via EFT is available on TTB’s website, www.ttb.gov.

III. Tax on Use

In addition to imposing a tax on the sale of firearms and ammunition, the IRC imposes tax on the use of taxable articles by manufacturers and importers. A good example of a taxable use of firearms would be a manufacturer who arms its plant security guards with firearms that it manufactures. ATF issued a ruling in 1994 (ATF Rul. 94-6, available on TTB’s website) holding that a manufacturer who loans firearms to...

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