One of the more interesting and important things in tax research is learning about the imposition of new fees and taxes on specific and somewhat unexpected items. These taxes allow us to keep our research skills sharp as well as point us in the right direction of exciting new client possibilities. Recently, we are seeing the start of a new trend, extending special taxes or fees to the sale of firearms and ammunition.
In August 2015, the Seattle City Council unanimously passed Ordinance 124833. This ordinance imposed a tax on the sale of firearms and ammunition sold within the city as a method to generate revenue to help fund gun violence prevention programs, research, and to defray medical costs of treating injuries stemming from gun violence.
Reaction to Seattle Gun Tax Ordinance
Almost immediately, a lawsuit was filed, claiming the tax violated the state’s preemption statute on firearm regulations. In December 2015, a judge ruled in favor of the city’s ordinance. Effective January 1, 2016, each firearm sold is subject to an additional $25.00 tax. Ammunition is now subject to a tax of: $0.02 per round of ammunition that is .22 caliber or less and $0.05 per round for all other larger calibers.
The Seattle Firearm Tax is similar to a tax imposed in Cook County, Illinois in 2013. On April 1, 2013, the county began imposing a $25.00 tax on each firearm sold at retail. The tax was put in place to offset the high costs the county faced due to rising gun violence. At the time the firearm tax was first proposed, a bullet tax was also proposed, but later dropped due to lack of support.
Illinois Resurrects Its Bullet Tax and Other Conflicting Firearm Tax Measures
In 2015, the concept of the bullet tax was resurrected as part of the 2016 budget, which was approved on November 18, 2015. As passed, the Firearm Ammunition Tax imposes a $0.01 per cartridge rate on rimfire ammunition and a $0.05 per cartridge rate on centerfire ammunition. Rimfire ammunition generally refers to smaller calibers such as .17 or .22. Centerfire ammunition generally refers to larger calibers. This tax imposed on firearm cartridges is set to go into effect on June 1, 2016.
Similar to the Seattle firearm tax, the Cook County bullet tax quickly faced opposition. Gun rights groups and supporters filed suit against the county alleging the tax on the retail sale of ammunition is unconstitutional.
In addition, in early December 2015, House Bill 4348 was filed. The bill would amend the Illinois Firearm Owners Identification Card Act to prevent municipalities from imposing any taxes or fees, other than the standard sales tax rate, on sales of firearms or ammunition. It would also prevent the creation of new taxes and make any existing additional taxes or fees on those items null and void. Such opposition could greatly affect the impending ammunition tax and the existing firearms tax.
We have also learned that the state legislature is considering a proposal to change the standard state sales tax rate on firearms and firearm component parts from 6.25% to 10%. This increase, if enacted, would not take effect until January 2017. We are closely monitoring the lawsuit and status of the proposed bills to keep abreast of any changes.
Is Los Angeles Next When It Comes to Taxing Firearms?
Following the examples set by Cook County and Seattle, the Los Angeles City Council is contemplating a motion to consider enacting an additional tax on firearms and ammunition sales. The motion calls for a study and report exploring the potential revenue from the tax and the impact on local businesses. The study would also involve researching other municipalities that have imposed similar measures to gain insight on the effects on gun violence. The motion is currently pending in committee.
