Gun Taxes, Revenues, and Taxpayer Compliance Burdens

Last week, NTUF reported that compliance with the Tax Code requires at least 6.1 billion hours of preparation and filing time. This opportunity cost of time spent complying with taxes instead of more productive pursuits, along with the out of pocket expenses for professional tax preparer services and software, costs $234 billion.

Taxpayers may be all too familiar with the Internal Revenue Service, but that is not the only federal tax-collecting entity. The Alcohol and Tobacco Tax and Trade Bureau (TTB) in the Treasury Department is the third largest tax-collecting agency government (Customs and Border Protection is second). The TTB enforces compliance and collects federal excise taxes on alcohol, tobacco, firearms, and ammunition.

Since a 1993 video surfaced of then-First Lady Hillary Clinton voicing support for a 25 percent tax on guns, the Firearms and Ammunition Excise Tax (FAET) has become part of the presidential election conversation. Similar tax hike legislation has been introduced in Congress in order, as one of its sponsors, Rep. Hakeem Jeffries (D-NY), declared, to wake gun law critics from their “Second Amendment addiction slumber.”

Currently, the tax rate is assessed at 11 percent on shotguns and rifles, archery equipment and ammunition, and a 10 percent on handguns. Due to the spike in gun sales over the past several years, revenues have reached record levels.

Because the funds are entirely dedicated to conservation and gun safety programs, there is no deficit reduction from to the increased revenues.


And of course, there is a complexity concern for taxpayers. TTB estimates that tax returns and claims for alcohol, tobacco, and firearm related documents combined imposes an annual time burden of nearly 504,000 hours. In addition, firearms and ammo merchants are required to file quarterly excise returns with an estimated annual paperwork burden of 18,200 hours. They are also required to maintain records proving the tax-exempt status for three years (total estimated annual burden of 52,500 hours) in order to “protect the revenue,” as the TTB writes.

In an attempt to clarify taxpayers’ obligations, TTB lists several FAQs regarding the firearms excise tax. However, the page also includes a disclaimer:

The Regulations and Rulings Division of the [TTB] attempts to keep answers to these questions current and accurate. However, TTB does not guarantee that this information is 100 percent accurate. In addition, the information may be modified, superseded, or made obsolete by recent changes in laws and regulations.

If you want to know about recent changes in the law and regulations, you may visit the following Web sites: THOMAS (The Library of Congress) and The Federal Register. If you are concerned with the accuracy of this information, please contact TTB or your legal advisor.

For the next budget year, TTB requests a transfer of 1,697 additional employees from the IRS, but the higher staff request emphasizes enforcement over services: “The FY 2017 request includes … [an expansion of] TTB tax enforcement and compliance initiatives through additional auditors, investigators, special agents, and data scientists, which together comprise a complete tax enforcement program.”

Taxpayers looking for accurate information from the agency responsible for administering this tax may be understandably dismayed that despite having 47,489 employees, the TTB can’t guarantee it has accurate information. Instead, citizens are referred to conduct their own legislative research or dig through The Federal Register. And, based on proposals on the campaign trail and in the halls of Congress, the regulatory and tax compliance burdens could grow more costly.