Mike Schoonveld: Some foreign fishing companies dodging excise taxes

Ask an angler the question, “Who pays for fisheries programs?” and he’s likely to say, “I do.” If you follow-up this question, asking “How do you pay?” The answer will be, “I buy a fishing license.”

He would be right, to a degree. The Michigan DNR sells well over a million fishing licenses each year, collecting almost $30 million this year. That’s a lot of money dedicated to fish management, surveys, stocking, and plenty of other “fishy” things.

That’s certainly not the only money spent on behalf of Michigan’s fish population and state anglers. The U.S. Fish and Wildlife Service chips in almost another $12 million for the benefit of Michigan fish, anglers, boaters and the general public via the Sportfishing Restoration Program.

Why not? The federal government tosses millions or billions of dollars to everything from national defense to funding research into the viscosity of ketchup or mustard. It’s no surprise there are tax dollars allocated to fish.

Tax dollars, sure but not your income tax dollars. The tax money you pay to the federal government to fund fishing and boating money comes from special excise taxes assessed to the makers of fishing tackle and the portion of federal gasoline taxes on fuel that is bought for power boats.

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The gasoline taxes are paid directly to the U.S. Treasury by gasoline refiners, you reimburse BP, Exxon, and the other oil companies. In the case of fishing gear, manufacturers pay the tax up front as well. The price you pay at the cash register reflects the amount of tax the landing net company, the lure maker, or others has already sent to the IRS.

Anglers and boaters pay these as “hidden” taxes, but for the most part there’s not much pushback from anglers and boaters since they know the money can’t be siphoned off to buy jet fuel for Air Force One or to build bridges to nowhere.

The U.S. Fish and Wildlife Service has teams of money trackers auditing how Michigan or other states spend the sportfishing funds sent to the states. Penalties for non-compliance is severe.

At worst, if state legislators or bureaucracies were to tap into the millions being sent to their state, the USFWS would pull all of that state’s allocation and send that money to other states. It would be bad enough for a political money grab to cause federal funds to be withheld.

It would be even worse for politicians if voters found out the lost money they caused would be reapportioned to neighboring states. That concern keeps the political efforts mostly at bay, but there’s a new threat emerging to fisheries funding.

When representatives Dingell and Johnson wrote the legislation that created and funded the Sportfishing Restoration Program in 1950 most of the fishing tackle used in the United States was manufactured in the USA. This is important for many reasons but for the purpose of this article the importance comes from how easy it is for the IRS to collect the excise taxes on fishing gear that’s due from American manufacturers.

These days, finding rods, reels, lures or other fishing gear that bears the “Made in USA” label is tough. While the huge foreign tackle companies, like Shimano, Daiwa, and others are pretty good about paying the taxes due on rods, reels and other goods they sell in the USA, there are thousands of other foreign companies that aren’t paying some or any of the required excise taxes.

This information appeared in a recent report from the U.S. Government Accountability Office on excise taxes and the action needed to improve compliance for collecting the taxes from foreign-made fishing tackle.

Part of the problem is the complexity of IRS and Treasury department regulations. A foreign company may make great lures, fishing line or other taxable products, but understanding the applicable tax laws, reporting and paying requirements – mostly written in English – is often perplexing. A large number of foreign manufacturers sell direct to consumers online, which is hard to track, easy to overlook. 

More often, some of these foreign businesses simply choose to not pay their taxes. The U.S. GAO made some recommendations to Congress and to the IRS to improve collection of these taxes – recommendations that may or may not be heeded.

In the meantime, the noncompliance is hurting the budgets of fisheries agencies across the country. One thing America’s fishermen can do to help is to buy products carrying the Made in the USA label.