IRS Revenue Ruling
1998-5

Code Sec. 4161

<<FULL TEXT>>

26 CFR 48.4161(b)-1: Imposition and rates of tax; bows and arrows.

BOWS AND ARROWS; TAXABLE AND NONTAXABLE ARTICLES. An illustrative list
of taxable and nontaxable articles is provided for use by manufacturers,
producers, and importers in determining their liability for the
manufacturers tax on archery equipment imposed by section 4161 of the
Code. The list reflects changes to the tax on archery equipment made by
the Taxpayer Relief Act of 1997. Rev. Rul 75-17 supplemented and
superseded.


REV. RUL. 98-5

This revenue ruling updates Rev. Rul. 75-17, 1975-1 C.B. 344, by
revising the illustrative list of taxable and nontaxable archery articles
in that ruling. This revenue ruling provides guidance to manufacturers,
producers, and importers in determining their liability for the
manufacturers excise tax on bows and arrows imposed by section 4161(b) of
the Internal Revenue Code.


BACKGROUND

For sales prior to October 1, 1997, section 4161(b) imposed an 11
percent tax on the sale by the manufacturer, producer, or importer of any
bow that had a draw weight of 10 pounds or more, any arrow that measured
18 inches or more in overall length, or any arrow sold after September 30,
1984, that measured less than 18 inches in overall length but was suitable
for use with a taxable bow, any part or accessory suitable for inclusion
in or attachment to a taxable bow or arrow, and any quiver suitable for
use with taxable arrows.

For sales after September 30, 1997, section 4161(b), as amended by
section 1433(a) of the Taxpayer Relief Act of 1997 (TRA-97), provides for
the continued taxation of bows, bow parts and accessories, and quivers in
the same manner and at the same rate as before amendment. However, section
4161(b), as amended, replaces the prior tax on arrows and arrow parts and
accessories with an excise tax on arrow components. The new tax is imposed
at the rate of 12.4 percent on the sale by the manufacturer, producer, or
importer of arrow components. For this purpose, an arrow component is any
shaft, point, nock, or vane of the type used in the manufacture of any
arrow which after its assembly (A) measures 18 inches or more in overall
length, or (B) measures less than 18 inches in overall length, but is
suitable for use with a taxable bow.

No tax is imposed under the former or amended section 4161(b) with
respect to any article taxable under section 4161(a) as sport fishing
equipment, for example, bow fishing rods and reels.

Section 48.4161(b)-2(a)(1) of the Manufacturers and Retailers Excise
Tax Regulations defines the term "bows" as including all articles made of
flexible materials that are designed to be equipped with a string and used
for the propelling of arrows in the sport of archery (target shooting), or
in hunting or fishing.

Section 48.4161(b)-2(a)(2) defines the term "arrows" as including all
articles designed or constructed to be propelled by a bow in the sport of
archery (target shooting), or in hunting or fishing. The overall length of
the arrow is to be measured from the point of the tip or arrowhead to the
end of the arrow nock. In the case of arrows sold by the manufacturer
without heads, tips, or nocks, the overall length is to include the length
of the shaft plus the length of the nock and head or tip that is normally
used with the particular type of arrow shaft.

(The following provisions of the regulations do not reflect the
amendments made to section 4161(b) by the TRA-97.)

Section 48.4161(b)-2(b)(1) defines the term "parts and accessories" for
bows and arrows as including all articles (other than fishing reels)
suitable for inclusion in or attachment to a taxable bow or arrow.
Examples of parts and accessories for bows are bow handles, bow limbs,
bowstrings, bowstring silencers, bow stabilizers, arrow rests, bow slings,
bow sights, bow levels, bow tip protectors, brush buttons, camouflaged bow
covers, and all other articles designed to be attached to or included in a
bow to assist in aiming or propelling an arrow, or to protect the bow
while in use. Examples of parts and accessories for arrows are arrow
shafts, nocks, tips, heads, head adapters, and feathers.

Under the provisions of section 48.4161(b)-2(b)(2), general purpose
materials and articles that are not specifically designed to directly
improve the performance or appearance of bows or arrows, or to protect
them while in use, are not considered to be parts and accessories for bows
or arrows, even though such materials may be intended, after further
processing, to be included in or attached to bows or arrows. An example of
a nontaxable article that is designed for use with a bow, but is neither
attached to a bow, nor serves a purpose directly related to the efficient
use of a bow, is a carrying case for a bow. Examples of nontaxable general
purpose materials or articles are glues and cements, feathers before they
are prepared for use with arrows, and bowstring thread before it is
processed into bowstrings. Arrow shaft material is considered to be a
taxable part for an arrow unless the manufacturer, producer, or importer
can establish that the particular material is unsuitable for use in the
manufacture of taxable arrows. In addition, the term parts and accessories
does not include articles in the nature of expendable supplies, even
though such articles are designed to be applied to, or used with, bows or
arrows. Examples of such supply materials are bowstring wax and archery
powder.

Section 48.4161(b)-2(c) defines the term "quivers" as including all
articles, of whatever material made, that are designed to contain, and to
provide ready access to, taxable arrows during the time an archer is
engaged in target shooting, hunting, or fishing. The term does not include
any article designed solely for storing or transporting arrows during
times when the arrows are not in use.


ILLUSTRATIVE LISTS

The Internal Revenue Service has determined that the articles listed
below are bows, arrows, arrow components, or parts or accessories subject
to the tax imposed by section 4161(b). The parts or accessories subject to
the tax include replacement parts or accessories. A separate list of the
articles that the Service has determined not to be subject to the tax
imposed by that section is also provided. The lists are illustrative and
not all-inclusive.


ARTICLES SUBJECT TO TAX

BOWS

All bows that have a draw weight of 10 pounds or more, including
laminated composite bows; solid glass, wood, steel, etc., bows; and
crossbows.


ARROWS (PRIOR TO OCTOBER 1, 1997)

All arrows (including bow fishing arrows), regardless of shaft material
or the type of head, that measure 18 inches or more in overall length
(including the tip or head, and nock), and all arrows sold after September
30, 1984, that measure less than 18 inches in overall length but are
suitable for use with a taxable bow.


ARROW COMPONENTS (AFTER SEPTEMBER 30, 1997)

All shafts, points, nocks, or vanes of the type used in the manufacture
of any arrow which after its assembly (A) measures 18 inches or more
overall in length, or (B) measures less than 18 inches overall in length,
but is suitable for use with a taxable bow.


BOW AND ARROW SETS

Bow and arrow sets that contain any taxable article. When a set also
contains nontaxable articles, the tax applies only to that portion of the
combination sale price properly attributable to the taxable articles. See
Rev. Rul. 75-18, 1975-1 C.B. 345, which provides a method of determining
the manufacturer's tax base and computing the tax where taxable and
nontaxable articles are sold as a unit at a single price.


BOW PARTS AND ACCESSORIES AND QUIVERS

Arrow holders (all items to be affixed to a bow to hold an arrow in
ready position)

Arrow plates (whether fixed, adjustable, spring loaded, etc.)

Arrow rests (whether bow shelf or auxiliary type)

Bow handles

Bow handle sections

Bow levels

Bow limbs

Bow saddles (including interchangeable or replaceable bow grips) Bow
sights and bow sight extensions (including parts and attachments therefor)

Bow silencing pads

Bow slings

Bow stabilizers (all attachments and weights for use on bows to affect
stabilization, counterbalancing, or modification of weight distribution)

Bowstrings

Bowstring silencers

Bow tip protectors

Brush buttons

Cable guards

Cable guard slides

Camouflaged bow covers (slip-over cloth, self-adhesive tape type, etc.)

Cushion nocks

Draw checks (spring loaded clickers, mirrors, or any other device
attached to a bow or string to insure consistent draw length)

Draw stops

Finger protectors attached to a bowstring

Grip formers

Kisser buttons (all items attached to a bowstring to establish a
consistent anchor point)

Nocking points (all items attached to a bowstring to establish arrow
positioning)

Quivers designed to provide ready access to taxable arrows while an
archer is engaged in target shooting, hunting, or fishing, regardless of
material from which constructed (including bow quivers designed to be
attached to a bow and ground quivers)

Release draw bars

String peeps (all items attached to a bowstring for use in sighting)


ARROW PARTS AND ACCESSORIES (PRIOR TO OCTOBER 1, 1997)

Arrow fletching (natural feathers processed for application to arrows
or synthetic feather substitutes)

Arrow nocks and inserts

Arrow points, tips, heads, adapters, and inserts

Arrow shafts

Arrow shaft material

Broadhead guide rings

Broadhead rings

Feather tracers


ARTICLES NOT SUBJECT TO TAX

Accessory belts

Archery armguards

Archery powder

Archery shooting finger tabs

Archery shooting gloves

Arrow clips for tackle boxes and display racks

Arrow cresting machines and replacement parts therefor

Arrow cut-off and fabricating tools (and replacement parts therefor)

Arrow fletching jigs and tools

Arrow lubes

Arrow pullers

Arrow shaft dip tanks

Arrow spine meters (and replacement parts therefor)

Arrow straighteners

Arrow tapering tools

Bow and arrow racks designed solely for the storage of bows and/or
arrows

Bow and arrow cases designed for the transportation or storage of bows,
arrows, and related equipment

Bowfishing line

Bow squares

Bow stringers

Bowstring jigs

Bowstring thread

Bowstring wax

Bow supports including ground bow holders and stands

Broadhead wrenches

Electronic trackers

Feather burners and feather burner kits (and replacement parts
therefor)

Feathers not prepared for use with arrows

Feather waterproofing

Finger slings

Glues and cements

Nocking point tools

Powder pouches

Score card holder

Shirt and blouse protectors

String holders and keepers

String releases

String servers

Targets and target accessories


EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 75-17 is supplemented and superseded.


DRAFTING INFORMATION

The principal author of this revenue ruling is Theodore N. Margopulos
of the Office of the Assistant Chief Counsel (Passthroughs and Special
Industries). For further information regarding this revenue ruling contact
Mr. Margopulos on (202) 622-3130 (not a toll-free call).

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