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Firearms and Taxes

Written by Dr. Sarah Anderson
Published on March 8, 2024
Research Highlights

There are no studies on whether changes in sales taxes impact firearm and ammunition purchases.

A larger portion of high-income households own firearms compared to low-income households.

Low-income individuals are more aware of sales taxes when purchasing goods than high-income individuals.

Firearms and ammunition are subject to two types of taxes.

The Firearm and Ammunitions Excise Tax is a federal tax to manufacturers and producers that charges 10% of the sale price of pistols and revolvers and 11% of the sales price of other firearms, shells and cartridges. The federal government distributes the tax revenue to the states to fund wildlife conservation and hunter education and safety courses (CRS 2023).

At the register, all goods, including firearms and ammunition, are subject to the state and local sales tax which is 4.225% in MO.

  • With this tax, a $20 box of ammunition would cost the consumer $20.84, and a $500 firearm would cost the consumer $521.13.

The impact of cost on firearm ownership is unknown.

There is limited data on the impact of the cost of firearms and ammunition on firearm ownership. A national survey of 4,000 people found that the demographics of who are most interested in purchasing their first firearm include:

  • Millennials
  • Women
  • Individuals with an income below $50k
  • Individuals with a high school but not a college degree
  • Individuals who live in the South.

The survey data shows that first time gun buyers are more conscious of firearm cost compared to current gun owners, but cost is not a strong influencing factor when considering purchasing a firearm (Moshary 2023).

There have been no studies on whether cost is a barrier to firearm ownership. Wealthier households have higher firearm ownership compared to lower-income households. However, information such as eligibility to own a firearm was not reported (Figure 1; NORC 2015).

Figure 1. Percentage of households with a firearm based on income. Households with a higher annual income have higher rates of gun ownership than those with lower annual incomes. Data from NORC 2015.

Sales taxes can influence spending habits generally.

There is no data about how changes in sales tax impacts firearm and ammunition sales. Very few states and counties have implemented extra taxes, and none have removed the sales tax on firearms and ammunition (RAND 2021). DE, MT, NH, and OR do not have any local or state sales taxes and AK does not have a state sales tax (Tax Foundation 2023). As a result, there is limited variation in taxes on firearms and ammunition, and the impact of changes in sales taxes has not been studied (RAND 2021). Additionally, there is limited data on firearm sales and ammunition in the U.S. Therefore, studying the impact of sales tax on these products is difficult.

However, the relationship between general goods and sales taxes has been studied extensively. One study of grocery store shoppers found that consumers buy less personal hygiene products when they know beforehand how much the sales tax adds to the cost. As this change is only seen when the price tag includes the sales tax, this suggests that consumers usually do not account for sales tax in their purchases (Chetty 2009). However, low-income individuals are more likely to account for a sales tax when purchasing cigarettes before paying at the register. When sales taxes were higher low-income individuals bought fewer cigarettes. Researchers concluded that awareness of sales tax is income dependent, and awareness is higher in lower income populations (Goldin 2013).

On sales tax holidays, people spend more on tax-exempt goods compared to goods that are not exempt. Specifically, households with children will buy more children’s clothes during this holiday compared to other goods. They also buy more children’s clothes during the sales tax holiday compared to when the exemption is not occurring. However, this increase is likely due to the temporary nature of the holiday (Agarwal 2013).

 

Works Cited

Agarwal, Sumit and Marwell, Nathan and McGranahan, Leslie, Consumption Responses to Temporary Tax Incentives: Evidence from State Sales Holidays (May 1, 2013). Available at SSRN: https://ssrn.com/abstract=2178753 or https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2178753

Chetty, R., Looney, A., & Kroft, K. (2009). Salience and Taxation: Theory and Evidence. American Economic Review, 1145-1177. Retrieved from https://are.berkeley.edu/SGDC/Chetty_Looney_Kroft_AER_2010.pdf

Congressional Research Service. (2023, June 26). Firearms and Ammunition Excise Tax (FAET). Retrieved from CRS Reports: https://crsreports.congress.gov/product/pdf/IF/IF12173

Fritts, J. (2023, February 7). State and Local Sales Tax Rates. Retrieved from Tax Foundation: https://taxfoundation.org/data/all/state/2023-sales-taxes/

Goldin, J., & Homonoff, T. (2013). Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity. American Economic Journal: Economic Policy, 302-336. Retrieved from https://law.stanford.edu/wp-content/uploads/2016/06/Goldin-and-Homonoff-2013-Smoke-Gets-in-Your-Eyes.pdf

Moshary, S., Shapiro, B., & Drango, S. (2023, February). Preferences for Firearms and their Implications for Regulations. Retrieved from National Burearu of Economic Research: https://www.nber.org/system/files/working_papers/w30934/w30934.pdf

NORC at the University of Chicago. (2015, March). Trends in Gun Ownership in the United States, 1972-2014. Retrieved from NORC: https://www.norc.org/content/dam/norc-org/documents/standard-projects-pdf/GSS_Trends%20in%20Gun%20Ownership_US_1972-2014.pdf

Smart, R. (2021, April 15). Firearm and Ammunition Tax. Retrieved from RAND: https://www.rand.org/research/gun-policy/analysis/essays/firearm-and-ammunition-taxes.html

 

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