Millions of federal excise taxes are lost annually through online marketplaces, where non-U.S. companies sell products directly to U.S. consumers. Because the online process doesn’t recognize internet marketplace facilitators as importers that would otherwise be responsible for paying the federal excise taxes on these transactions, these funds are slipping through the cracks. Unfortunately, that oversight puts American archery manufacturers at an 11% tax disadvantage and hurts state wildlife agencies that rely on FET dollars to conduct necessary habitat restoration, hunter education, wildlife research and other conservation projects.

FET slippage affects the archery industry, the entire conservation community, and individual manufacturers, dealers and consumers, which is why the ATA addresses the issue. The ATA is working closely with the American Sportfishing Association because it shares the same problem with federal excise taxes not being collected on taxable fishing equipment sold from foreign manufacturers through internet marketplace facilitators.

ATA’s Efforts, Member Reactions

Dan Forster, ATA’s vice president and chief conservation officer, is tracking the issue, working with legislators to correct the problem, and educating members about FET slippage pitfalls and implications.

In April 2022, he authored a letter, with support from 53 other conservation organizations, to the leadership of the Senate Finance Committee and House Ways and Means Committee that encouraged them to take corrective action against federal excise tax slippage. In September 2022, the Association of Fish & Wildlife Agencies passed a resolution in support of ATA, pledging assistance for rectifying the issue.

In early August 2023, he met with members of the Government Accountability Office, who are currently working on a Congress-initiated study regarding FET slippage. Forster shared the archery industry’s perspective and explained how damaging the outdated collection policies are to ATA members and the industry.

“FET slippage is unacceptable,” Forster said. “It’s not a sustainable practice that we’re going to live with. We’ll continue to press into this issue with the full benefit of community support until Congress creates a viable solution.”

ATA member Steve Greenwood, sporting goods division director for Victory Archery, is grateful for the ATA’s work on behalf of its members.

“I want to compliment Dan and the ATA,” Greenwood said. “Finally, someone is listening and doing something for it, which I very much appreciate.”

Greenwood has been in the arrow business since 1980 and started addressing FET slippage 8 years ago. As online shopping grows in popularity, so does the issue and corresponding uncollected revenues. While Greenwood welcomes competition, he despises individuals who exploit the unfair system.

“Slippage is inaccurate; this is way more than FET slippage,” Greenwood said. “It’s thousands and thousands of dollars. An American company trying to do business legally in the U.S. is at an unfair playing field, and I don’t think people realize how much money is coming into the U.S. that (foreign companies) are not paying FET on.”

FET Slippage Consequences

A March 2022 Southwick & Associates study estimated that about $17 million worth of federal excise taxes are lost yearly through online marketplaces selling archery and fishing equipment to U.S. consumers. That’s big money that state wildlife agencies should have for much-needed conservation projects and a lot of business taken away from American companies.

To fully understand the magnitude of financial loss for American manufacturers and dealers, Greenwood points to basic math. He analyzed a Chinese company bringing arrows into the U.S. in 2020 and found the following.

Sales and Operating Equation

One dozen carbon arrows listed on Amazon for …………………………..  $29.99

Amazon commission, 15% of selling price ……………………………………. -$4.49

Estimated freight cost ………………… ………………………………………………. -$10.00 

Manufacturer proceeds from Amazon for one dozen arrows…….. =$15.50 

Manufacturing cost ($1/per arrow, $12/dozen) ……………………………. -$12.00

Manufacturer profit after operating expense ……………………………… $3.50

2020 FET arrow shaft rate ($0.57/arrow, $6.84/dozen) …………………-$6.84

Actual manufacturer profit after paying FET……………………..………… -$3.34 

That’s a loss of $3.34 if FET were paid. 

“No one in their right mind would be selling on Amazon at a loss, so the only assumption was that these Chinese vendors weren’t paying the FET tax,” he said. 

Greenwood also said American dealers couldn’t buy a dozen arrows from American manufacturers at $29.99 in 2020, putting them at more of a disadvantage. In 2023, the FET arrow shaft rate was $0.59 per arrow. Factor in inflation and the price gap is even greater.

American manufacturers and retailers are “getting hosed,” as Greenwood puts it. Arrows are just one of the many products sold online at unattainable prices for American companies. “I feel bad for dealers, they’re trying to keep their lights on and just survive, and they’re not on an even remotely close playing field,” Greenwood said. “That’s what bothers me the most.”  

To make matters worse, the issue threatens human safety, which is far more fragile and important than business profits.

Many products shipped to the U.S. from foreign companies are inferior to their American counterparts. “People are getting injured,” Greenwood said. “People are blowing up their bows because the arrows are counterfeit or bad quality. It’s a huge safety concern.”

What’s Next

Greenwood believes most industry members don’t realize the detriment and severity of FET slippage and said it’s unreasonable to expect the end consumer to understand, especially when many of them don’t know what federal excise taxes are. As such, he hopes ATA members start to educate themselves and consumers about federal excise taxes and how they work. Then, retailers can encourage customers to buy locally to support American businesses and generate funds that benefit the industry. 

“I want it to be a fair playing field. I want dealers to be protected. I want customers to have a positive experience in archery,” Greenwood said. “This is not a good scenario at all. I’m glad the ATA is focusing on it and trying to make a difference here.”  

A fix will take time because Congress must update legislation to ensure the FET collection process aligns with current global markets and consumer buying practices. In the meantime, the ATA will continue to fight for U.S.-based members paying taxes that fuel conservation efforts across the country and will not put this issue to rest until the loophole in the FET system is closed. 

If you have questions, please contact Dan Forster, ATA’s vice president and chief conservation officer, at (507) 233-8143 or danforster@archerytrade.org.