jsbass Posted February 4, 2011 Report Share Posted February 4, 2011 (edited) Hi Guys, I read in another post where Bob made comment to a 10% Government tax on Gross profits for lure manufactures. I was not aware of this. Can someone please explain how this works in detail? I am currently working on a website and it would be good information to have. Thanks, Jack Edited February 4, 2011 by jsbass Quote Link to comment Share on other sites More sharing options...
GB GONE Posted February 4, 2011 Report Share Posted February 4, 2011 (edited) Jack: Probably should do a search as this has been a topic many times on the forum. Including in the General section. Some folks have given very detailed info. Long story short, it is required. 10% tax.... Jim Edited February 4, 2011 by ghostbaits Quote Link to comment Share on other sites More sharing options...
Bass-Boys Posted February 4, 2011 Report Share Posted February 4, 2011 Jack: Probably should do a search as this has been a topic many times on the forum. Including in the General section. Some folks have given very detailed info. Long story short, it is required. 10% tax.... Jim you may "also" have to collect and pay your state sales taxes.!!! Quote Link to comment Share on other sites More sharing options...
powerworm Posted February 4, 2011 Report Share Posted February 4, 2011 the first monetary transaction on all sporting goods is excised at 10% i believe its either form 671 or 720 you can get through the IRS website and if you make any in state sales you are also to collect sales tax or pay it yourself Quote Link to comment Share on other sites More sharing options...
CNC Molds N Stuff Posted February 4, 2011 Report Share Posted February 4, 2011 the first monetary transaction on all sporting goods is excised at 10% i believe its either form 671 or 720 you can get through the IRS website and if you make any in state sales you are also to collect sales tax or pay it yourself I read the form a couple weeks ago and it sure looks like 10% of gross sales. Quote Link to comment Share on other sites More sharing options...
powerworm Posted February 5, 2011 Report Share Posted February 5, 2011 i believe you are right bob; but i had a situation this past year where i had swapped 3000.00 worth of baits for someother things; and the way my tax preparer explained it to me that since there wasnt a monetary exchange i wouldnt be responsible for the excise tax that the 1st monetary exchange would be. so there is a wholesaler out west thats probably not going to be very happy i imagine Quote Link to comment Share on other sites More sharing options...
FuzzyGrub Posted February 5, 2011 Report Share Posted February 5, 2011 I'm curious. Is there a 10% Fed tax for components and items to make lures, or just the final lure product? Quote Link to comment Share on other sites More sharing options...
Bass-Boys Posted February 5, 2011 Report Share Posted February 5, 2011 I'm curious. Is there a 10% Fed tax for components and items to make lures, or just the final lure product? I am pretty sure that when I buy supplies from Hagens even if its EWG hooks they charge me 10% my opinion would be, if you have pd the 10% on all the components then you would "not" have to pay it on the final product. Quote Link to comment Share on other sites More sharing options...
dannyp Posted February 5, 2011 Report Share Posted February 5, 2011 I am pretty sure that when I buy supplies from Hagens even if its EWG hooks they charge me 10% my opinion would be, if you have pd the 10% on all the components then you would "not" have to pay it on the final product. NOPE I GOT BIT ON THAT!! 10% ON THE COMPONENTS AND 10% ON THE FINAL PRODUCT UNLESS YOU HAVE AN EXEMPTION # THEN ITS 10% ON THE FINAL PRODUCT. Quote Link to comment Share on other sites More sharing options...
FuzzyGrub Posted February 5, 2011 Report Share Posted February 5, 2011 I'd expect that most would use an exemption number, so they don't double up. What a deal for the Feds. So molds would not have the tax? How about raw materials that have other uses? lead, powder paint, eyes, maybe even plastisol? Quote Link to comment Share on other sites More sharing options...
smallmouthaholic Posted February 5, 2011 Report Share Posted February 5, 2011 Manufacturers of sport fishing tackle that sell their product are required by law to file quarterly form #720 and pay a 10% tax on gross sales. You 1st apply to the I.R.S. for form #637( excise tax exemption form) which in turn you provide to your suppliers that saves you from paying the 10 % excise tax on your components. Many fly under the radar screen on this tax UNTILthe I.R.S. does an internet check of fishing tackle and lure manufacturers advertising their products and quickly checks to see if they have been filling their quarterly Form #720. Personally ,paying this 10% tax every quarter is a nice chunk of change but makes me sleep well @ night. I do not want an unexpected visit or notice from the I.R.S. Accountant fees for audits and possible penalties and interest from the I.R.S. can be financially crippling to the small manufacture. Quote Link to comment Share on other sites More sharing options...
dlaery Posted February 5, 2011 Report Share Posted February 5, 2011 I'd expect that most would use an exemption number, so they don't double up. What a deal for the Feds. So molds would not have the tax? How about raw materials that have other uses? lead, powder paint, eyes, maybe even plastisol? Any FET you pay to a vendor, you can deduct from what you owe so you don't double up. You just have to keep records of invoices showing that you paid it so you can deduct it. Quote Link to comment Share on other sites More sharing options...
Bass-Boys Posted February 5, 2011 Report Share Posted February 5, 2011 NOPE I GOT BIT ON THAT!! 10% ON THE COMPONENTS AND 10% ON THE FINAL PRODUCT UNLESS YOU HAVE AN EXEMPTION # THEN ITS 10% ON THE FINAL PRODUCT. wow,, double tax is just not rite !!! Quote Link to comment Share on other sites More sharing options...
JBE Posted February 8, 2011 Report Share Posted February 8, 2011 Sorry still confused! Do most of you just add the 10% Excise tax on to your wholesale orders? What about selling retail, should it be added to the customers total or should the manufacturer just swallow the tax fees? Doesn't seem to be much profit left for the working man by the time we pay a 10% excise fee up front and then pay an additional state and federal tax fee at the end of the year that adds up to probably at least 20% if not more. 30% plus in taxes, 33% in materials, along w/ a huge investment in equipment. Cool I think when its all said and done we can make about 3 dollars an hour w/ our operation. Any words of wisdom? LOL Quote Link to comment Share on other sites More sharing options...
Supertuner Posted February 8, 2011 Report Share Posted February 8, 2011 I googled this and found DIRECT reference to fishing lures on the IRS website. I think some people who didn't know before might now understand what so many people are talking about when they talk about over taxation, the handicap it creates to foriegn products and what small business is saying when asking the gov to get out of their way. Don't forget that if you CAN make a profit after the tax burden, you'll pay tax again when you spend it. And if it's gas you'll pay tax AGAIN to the fed gov. Quote Link to comment Share on other sites More sharing options...
dlaery Posted February 8, 2011 Report Share Posted February 8, 2011 If you are looking for more info on this, do a search on this forum for: excise or excise tax There are several links that explain this. Quote Link to comment Share on other sites More sharing options...
Bass-Boys Posted February 8, 2011 Report Share Posted February 8, 2011 (edited) Sorry still confused! Do most of you just add the 10% Excise tax on to your wholesale orders? What about selling retail, should it be added to the customers total or should the manufacturer just swallow the tax fees? Doesn't seem to be much profit left for the working man by the time we pay a 10% excise fee up front and then pay an additional state and federal tax fee at the end of the year that adds up to probably at least 20% if not more. 30% plus in taxes, 33% in materials, along w/ a huge investment in equipment. Cool I think when its all said and done we can make about 3 dollars an hour w/ our operation. Any words of wisdom? LOL You are correct, for the small guy, ( buying less than 55 gal drums ) there is not much money to be made after all the taxes, equipment,material,vent system,,electric,,, ebay ,,web site,,ect.. I have kept tract of every penny,, to the best I can,, electric & heat are hard to judge,, For us small guys you need to just enjoy the hobby. its a fun deal, make a living no way.. pay your pouring bills -- maybe ? Jeff Edited February 8, 2011 by Bass-Boys Quote Link to comment Share on other sites More sharing options...
Da big tuna Posted February 8, 2011 Report Share Posted February 8, 2011 Don't let it get you down. If every one threw in the towel after hearing bad stuff you wouldn't leave the couch after the morning news. Don't be afraid to take advantage of the flee markets,sportsman's rummage sales etc for tax saving. Its there and don't let anyone tell you different. The thing about America is, you might not get rich at this but you MIGHT! Go do it and have fun. You'll be the first to know if you are not paying enough taxes. Quote Link to comment Share on other sites More sharing options...
dlaery Posted February 8, 2011 Report Share Posted February 8, 2011 Sorry still confused! Do most of you just add the 10% Excise tax on to your wholesale orders? What about selling retail, should it be added to the customers total or should the manufacturer just swallow the tax fees? Doesn't seem to be much profit left for the working man by the time we pay a 10% excise fee up front and then pay an additional state and federal tax fee at the end of the year that adds up to probably at least 20% if not more. 30% plus in taxes, 33% in materials, along w/ a huge investment in equipment. Cool I think when its all said and done we can make about 3 dollars an hour w/ our operation. Any words of wisdom? LOL If you are a manufacturer of fishing lures or a Rod builder, you need to register with the IRS, Form 637. then you will pay quarterly by filing a Form 637 What I do is, most of my customers are wholesale, some are FET exempl, by furnishing me copy of their 637. some I send a finished product and I collect 10% of the sale, I don't collect tax on the shipping because I don't put the shipping in the price. If I buy components and pay FET that shows on the bill, I can deduct that amount that I owe. Example: I buy 1000 hooks for $50 and pay $5 FET, I can deduct $5 from what i owe. Pretty simple. Now retail sucks. If you keep good records and have an established wholesale price that you would sell for, then the way I read this link ,Field Directive, on retail items you should only have to pay 10% of the wholesale selling price. Example Wholesale price $6 times 10% = .60 Retail Price $10 I have talked to people in the fishing tackle industry that I believe they would turn someone in that they thought were not paying the FET. I know are not paying, because they are not aware of this, some don't think they will get caught. Thats up to them. I have bought stuff from China, there is no tax. I told him I had a form 637 and that I didn't pay FET and he said OK. I would assume that someone pays the FET on completed/Manufacturered tackle that comes out of China? Do they? The good thing about the tax, (did I just say that) is it is used to promote fishing. Quote Link to comment Share on other sites More sharing options...
toadfrog Posted February 8, 2011 Report Share Posted February 8, 2011 Now with all that being said. You can understand why guys like me only build stuff for friends and family. I quit the business a decade or more ago for all those reasons and more. The Feds will pull right up in your drive like an old gangster movie and hand cuff you like they did a freind of mine. Do your tackle hobby for fun and keeping alive the tradition. The tax hassel is nothing but a major head ache. Quote Link to comment Share on other sites More sharing options...
mikedatiger Posted February 8, 2011 Report Share Posted February 8, 2011 wow,, double tax is just not rite !!! components shouldn't factor into it as the tax is based on gross. If you apply for an exemption then you only submit the tax on the gross sale. However, if you don't have an exemption then you pay for each step along the way where the product is improved. For example, I have jig heads manufactured for me based on my design/molds, etc. I do not yet have an exemption form so the manufacturer charges me 10% of the final price and submits the tax on my behalf. Now, if I were to paint the jig heads, add a skirt, rattle, etc. (again, improve it) then I have to pay another 10% of my final sales price. If I had an exemption in place then I would just pay at point of sale. Quote Link to comment Share on other sites More sharing options...
jsbass Posted February 9, 2011 Author Report Share Posted February 9, 2011 Sorry still confused! Do most of you just add the 10% Excise tax on to your wholesale orders? What about selling retail, should it be added to the customers total or should the manufacturer just swallow the tax fees? Doesn't seem to be much profit left for the working man by the time we pay a 10% excise fee up front and then pay an additional state and federal tax fee at the end of the year that adds up to probably at least 20% if not more. 30% plus in taxes, 33% in materials, along w/ a huge investment in equipment. Cool I think when its all said and done we can make about 3 dollars an hour w/ our operation. Any words of wisdom? LOL Ok, Not sure if I understand everything correctly or not, but If I have a website and sell baits on it, there is a tax.... What about if I sell to a local bait shop? 10% on that too? I was under the impression that it was an internet sales tax......maybe I need to talk to a tax professional. Quote Link to comment Share on other sites More sharing options...
hollywood hooksett Posted February 9, 2011 Report Share Posted February 9, 2011 that's why you do cash only//////////// Quote Link to comment Share on other sites More sharing options...
smallmouthaholic Posted February 9, 2011 Report Share Posted February 9, 2011 Ok, Not sure if I understand everything correctly or not, but If I have a website and sell baits on it, there is a tax.... What about if I sell to a local bait shop? 10% on that too? I was under the impression that it was an internet sales tax......maybe I need to talk to a tax professional. As a manufacturer,you are required to pay a 10% excise tax every quarterly (form #720) on,gross sales.-retail or wholesale.The government isn't stupid for sure. they give you the 10% excise tax exemption on components (form #637) but collect the 10% on gross sales. Like I stated before, paying this 10% hurts deeply but it's cheaper then an audit and then penalties and interest levied by the I.R.S. Sooner or later,the boom drops on those who continue flying under the radar screen and ignore paying this tax. Quote Link to comment Share on other sites More sharing options...
Supertuner Posted February 9, 2011 Report Share Posted February 9, 2011 JS bass, I started several small businesses. I heard a lot of advice about hiring an attorney. Well my experience is do';t do that, hire an accountant. Lawyers are for when you're in trouble. Accountants will keep business' from needing a lawyer. And he'll have way more input for how to actually make money instead of spending it on lawyer fees. Quote Link to comment Share on other sites More sharing options...
