Congress Revises Arrow Tax; Nocks and Vanes Escape

The American Jobs Creation Act of 2004, enacted on October 22, 2004, included a new excise tax on completed arrows, in addition to the now familiar excise tax on the shafts, points, nocks and vanes necessary to make a good arrow that has been with us since the Taxpayer Relief Act of 1997. In order to avoid a potential double tax, the Jobs Act also provided that arrow manufacturers, producers, and importers could reduce the excise tax on an arrow to the extent that the arrow included shafts, points, nocks and vanes that had already been subject to excise tax. Unbeknownst to Congress, this provision, effective as of November 21, 2004, had the effect of forcing retailers to pay the excise tax since, apparently in a change since whole arrows were last taxed from 1975 to 1997, it is now retailers who are assembling whole arrows from the shafts, points, nocks and vanes.

In a rapid response to this unintended consequence of the Jobs Act, Congress on December 8, 2004, passed H.R. 5394. H.R. 5394 retroactively repeals the excise tax on whole arrows enacted as part of the Jobs Act. H.R. 5394 also replaces, effective after March 31, 2005, the 12.4 percent excise tax on shafts, points, nocks and vanes with an excise tax on shafts alone at a rate of 39 cents per shaft, subject to inflation adjustments after 2005 in increments of whole cents. Nocks and vanes appear to escape tax, but points are not so lucky. Points have been added to quivers and broadheads subject, along with bows with a draw weight of 30 pounds for more, to the 11 percent excise tax on archery equipment. H.R. 5394 now moves to the President, where it is expected to receive his immediate attention.