Sign in to follow this  
Followers 0
Growler

Making money

51 posts in this topic

Thats 10% of the cost you sell them for...if you sell a lure wholesale for 10.00 it's 1.00 if you sell it direct to a customer it for 12.00...it's a 1.20

Share this post


Link to post
Share on other sites

Does this apply to anyone selling baits or is there an amount money or quantity you have to sale to fall into this category :?:

Share this post


Link to post
Share on other sites

This is a manufacture's excise tax - stemming from the use of raw materials. If you make a lure and sell it, you are responsible for the tax.

But, there's two loopholes in the tax:

1) if you bought your supplies and don't have a tax number on file with your supplier - you paid the tax. Your supplier is now responsible to file for it, not you. Now, if you purchased with a # on file - you received a 10% discount from your supplier, which is the excise tax that you are now responsible for.

2) In order to file for the tax, you fill out Form 720. You must have an EIN# (Employee Identification Number), this means you have employees for this form. As a sole proprietor you don't have employees, which means you don't need an EIN, therfore can't fill out a Form 720. See the catch?

It's easier to let your suppliers charge you the 10% - it's less hassle for you, and a wash when it comes to net $$$.

Share this post


Link to post
Share on other sites

Edit - bad info.

Made a call to the IRS to get my facts straight - I was off.

The 10% excise tax is the responsibility of the manufacture of the raw material, the seller of the raw material, and the seller of the end product made with the raw material. In other words, if you are selling something with a hook on it you you need to be filing for the excise tax - no matter where the supplies came from.

You file Form 637 to get an exemption for this tax from your supplier.

As far as being a sole proprietor, it's a mess. What I thought was a loophole has closed - You must file a Form 720 if you are selling fishing equipment. Since this form requires an EIN#, you must apply for an EIN# even though you have no employees. Then since you have a # on file under Form 720, you can file Form 637 for an exemption. Monthly statements need to be filed, etc.

Clear as mud?

Sorry if I caused any confusion from earlier posts, this information was straight from the source.

Share this post


Link to post
Share on other sites

This is making me dizzy! WOW! now this is get-in intresting! Someone might add this all to the site as too "how to go into small business from a hobby stand point". Ready to take notes!!!

Share this post


Link to post
Share on other sites

Hey Guy's, When paying excise taxes, be careful not to overpay. The tax is 10% of the sale price, BUT, if you have paid excise tax on the components you purchased to make your lures, that amount can be deducted from what you owe. The excise taxes are paid quarterly by filing the form 720. There are several components purchased for making lures that do not have excise taxes tacked on , such as beads and feathers. There are other items as well. If you have a bait that sells for $12.95, you do not pay 10% of that amount. What you do, is divide $12.95 by 1.1. This gives you a base amount to start from. Take the base amount and multiply it by.1 to come up with the tax owed. $12.95Divided bt 1.1 is $11.77 This is the base amount.Multiply $11.77 times .1 and the tax owed on a bait that is sold for $12.95 is $1.18 If you do it by a flat 10% , you are paying tax on the tax. If you paid $1.00 for the components to make a bait and paid tax on that amount and sold the bait for $2.00 , all you owe is the difference. Just be sure to keep good records,because at some point being audited is a given. Joe

Share this post


Link to post
Share on other sites

If you are not the manufacturer or importer you dont have to pay as much. For instance if your brother is the manufacturer and sells you a lure for $1 and you sell it to the costomers or stores you become the distributor. so say you sell the bait for $10. Instead of you having to pay $1 in exise tax your brother is responsible for paying the tax on $1 witch is a dime. So if you get two business liscenses and have a partner (or brother) own the manufacturing co. and you become the distrubutor you can save a lot of money if you sell a lot of baits. If this is just a hobby than its probably not worth the trouble.

Share this post


Link to post
Share on other sites

Wow! Thanks for all the great info. I learned a lot and aside from the headache, :D I think I'm too ignorant of tax laws let alone how to run a business so it is probably a good thing lure making (for now) is just a hobby.

If I ever were able to get to the point of going into business, I think I would try to also reach those "wal mart" and "BPS/Cabela" shoppers too by approaching those big boys with my wares and negotiate some agreement in which I would get a residual percentage of the profits made and they would produce and market my lures. Anyway, just an amateur's thoughts. Thanks!

--IslandBass

Share this post


Link to post
Share on other sites

RIVERMAN! about what you said> If its not important for such Items like registration of a product such as a logo or product name > Then isen't true that if you are a hobby making lure person ,selling X number of lures a year unprotected or un reported to the state as a business > that I (lets say I am a registerd lure maker/mfc) could take your lure or lure styles and mfc. them and claim them as mine and turn around and " S U E " you! for using my design or selling my product under the table ? even thow we know its wrong but we also know some people will do anything to make a buck. What about someone who says they are injured due to your lure ? The list can go on and on. I'm just courious how many realize just how tough it can be! I'm hearing it all now on this site. This is why I never have gone beyond making and testing.

Share this post


Link to post
Share on other sites

Hi Boatnik,

You do bring up some good questions. I have my business registered with the State but see no reason to "copyright" my logo or lure designs. I'm a biologist, not an accountant but this is how I see it.

As far as someone "stealing" my designs, they can do that anytime they want to anyway. None of the lures I am making are "unique" therefore I see no reason to copyright them...yes they are my design but they are simply modifications to approaches that have been used for decades and longer. Now if someone were to take my logo and I felt strongly enough about protecting it I could show that I was using that "logo" at a date prior to when they were which will give me some protection. If someone were to hurt themselves on my bait, well they could do that whether or not I have my logo and designs copyrighted and not only that but if they were to seek legal compensation from my business for that injury they would find there is nothing to sue for....other than a few wood bodies, some paint and an airbrush that clogs alot. It may be that I could also be held "personally responsible" but I have been advised that this is not possible so long as I am selling the baits under my business name.

jed

Share this post


Link to post
Share on other sites

Good thinking riverman. I got a few more questions for you but I'll contact you insted of wasting all this B.B. space. Thanks for the speedy response> looks like someone else isen't fishing today besides myself.

Share this post


Link to post
Share on other sites

Riverman, I think you got some bad advice unless your company is incorporated. The name you sell under has nothing to do with your liability. I carry a seperate liability insurance rider, and its pretty cheap. You should double check.

Share this post


Link to post
Share on other sites

ok someone enlighten me here, The manufacturer pays an excise tax on the product (lure) minus the components that were secured from sources that had already paid the excise tax (ie ordered from Janns, or Stamina, etc) those secondary and third party marketed items like hooks have had tax paid already thats why they are expensive, unless you find a source that requires you to file your FET number, and then you assume the resopnsibility for the tax on that said component. Components that come from outside tackle industry(ie wood, wire) are not deductable off the marketed value, and you absorb the costs.

Ok here is where I really need to understand... PACKAGING !

NO way that packaging is taxed under FET is it? its not a part of the intent of taxing the lure manufactured, and a lot of packaging is even done by outside sources making that not even truly a part of the tackle munufacturers business. SO is the packaging aspect of the costs to the business also able to be deducted off the top of the actual value of product? and if this is so, heres my thought, I make a lure and have records showing costs to manufacture. I claim a market value of "X" per unit for the lure I have manufactured. I then package and sell the lure with a Tips and Techniques sheet included in the package, clearly marked 10.00 on the document. Is there any FET tax on providing such information to the consumer? If there was I would figure every form of media viewed by fishermen where the seller is profiting my be taxed by FET?

Any comments?

Share this post


Link to post
Share on other sites

This should set a record for the most intresting and longest post on the B.B. I'm learning something new every hour! The info may or may not be correct but has a point! Anyone taking notes for when this becomes final? .

Share this post


Link to post
Share on other sites

You may be right Boatnik, the guy that advised me has no legal training himself but has sold fishing and hunting related items for a long time....I will have to quiz him further.

If what you are saying is true tho, that we lure builders could be held "personally liable", then it seems any of us could be held liable in the event a lure we build leads to an injury, whether we sell it or not. What about a guy that builds a few baits and decides to sell them or give them to an acquaintance? On another forum of this site we have been discussing "donating" items to charity. What if one of those items leads to the injury of a child? For that matter, what about a guy that builds a chair and sells it to someone? The possibility for liability would go on forever wouldn't it? I don't know, it's a stretch but I'm sure you are correct in assuming there is the possibility for some "sue happy" person to pursue legal action.

When I was a kid, I used to watch my dad sit at a desk working on his business records. I can vividly remember him saying "the government makes liars of everyone".

Jed

Share this post


Link to post
Share on other sites

I still think this is the most intresting subject yet! I bet many of us are or were thinking of starting a business selling quality lures VS the plastic junk of discount stores. Looking into my small city phone book> we got a dozen pages of free lawyers! Just waiting for a freeloader case. This is why people become Inc. in business so you can't have the pants sued off you. This is why the custom lure that took $3 to build cost $19.99 on retail side. This takes me back to my other coments! You make a thousand wood lures and made sure they don't steal a trademark name and you sell them to pro's and on line to clubs ect.ect. I (I can copy any lure made today in a matter of hours) copy your lure > add my trade mark and use your lure name and sell the lures as if they were my Idea and at the same time sue you for making your lures that use your name because they invade my space and I'm registerd to sell them and sue for your sharp hooks that puntured someones inflatable raft and cuaed them to loose all the fishing equipment and almost died all Ifbecause of over sharp hooks and a heavy lure that sails way out in the lake. and now I feel I can no longer handle fishing lures the rest of my life so I got to take you out of business and then they find out you haven't paid a mfc.tax in your state for producing lures and my company goes on selling your lure reproduced by me. Hey! its just a thought ! I would never consider! Hey! if you have your own design and a hobby person> take time to send it to yourself so it gets post marked and never open it till someday someone would try this copy cat Idea and then you can prove you had the Idea and design since that date F I R S T! Take that!

Share this post


Link to post
Share on other sites

Definition: "Progress"

Man's ability to complicate the uncomplicated.

You poor guys and your taxes. Up here if you buy retail you pay 15%(some Provinces are a little less); if you have a GST number and you buy wholesale you pay 7%.

With a business you keep track of the taxes you collect and the taxes you pay. You then subtract one from the other and if you owe you pay if they owe you they pay.(every 3 months)

We don't pay your 10% tax or duty. I do pay 7% when it comes across the border.

Share this post


Link to post
Share on other sites

Hey now Nova our taxes make perfect sense if you happen to make more than a million dollars a year and/or own a huge corporation! lol. For the all the rest of us snails in the sand...........too bad!!

Jed

Share this post


Link to post
Share on other sites

Hey Guy's, This does seem to be one of the most drawn out post, but everything said here is very important. The only way to protecy your personal holdings is to have your lure business incorporated. This is also the most complicated way to go for the small businesses we have. The attorny I spoke to had me register my company as an LLC. This gives much the same protection as the incorporated business with out a lot of the extra paper work and hastle big companies must deal with. The cost was around$75.00 which is not much concidering the protection it provides. I am still looking for a good deal on finished product liability insurance and have not found a good co. I have a rider tacked onto my personal insurance and it's higher than I would like to pay. Joe

Share this post


Link to post
Share on other sites
Thats 10% of the cost you sell them for...if you sell a lure wholesale for 10.00 it's 1.00 if you sell it direct to a customer it for 12.00...it's a 1.20

Holy #$%! That's outrageous!!! :huh:

Maybe if the IRS was repping my products but... Wow.

Share this post


Link to post
Share on other sites

Dang, I've got a lot of learning to do.

And all I wanted to do was make money with my airbrush painting custom fishing products instead of working in corporate indentured servitude.

Time to go fishin'. :|

FF

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now
Sign in to follow this  
Followers 0