Question about taxes

[ibock99]

I am thinking about opening a business selling flies, and tying supplies, and I went and talked to my tax guy, and he told me that I would need to charge sales tax, no matter where the buyer lived. I was under the assumption that sales tax was only charged if the buyer lived in your state. Normally that is the advantage of buying through the mail, because you do not have to pay tax.

What am I actually supposed to do here. Still just trying to get information, so fill me in please.

Thanks,

[dannyp]

I am thinking about opening a business selling flies, and tying supplies, and I went and talked to my tax guy, and he told me that I would need to charge sales tax, no matter where the buyer lived. I was under the assumption that sales tax was only charged if the buyer lived in your state. Normally that is the advantage of buying through the mail, because you do not have to pay tax.

What am I actually supposed to do here. Still just trying to get information, so fill me in please.

Thanks,

Check with your State Tax revenue department. Here in Ga If you sale /ship to a Ga resident/Address you collect sales tax, Ship out of state, no sales tax> Believe the law says if you have a physical place of business and sale to a resident in the same state as your business, then you collect sales tax. Hope this helps you

Dannyp

[ibock99]

Thats what I thought... I am in Mississippi, and believe it is the same here.

[reel doctor]

If you sell in state collect sales tax , out of state - no tax. If you plan on making and selling lures check on a excise tax on the lures.

A friend of mine had a tackle shop and made wire baits and sold in his store , in Arkansas, was checked by the state on the excise tax

not paid on his lures . I'm not sure of his outcome on that, was none of my business but wish I had just in case I decide to do something.

David

[JSC]

Fellas I think.... that on sales tax that the law varies from state to state ...

FET applies to all in that the one making the product pays 10% of what he sells it for ... that is basic .. there are some nitty gritty stuff if you are selling retail ... best check this out with the IRS.

Pull a search on the different threads on this very subject and has been covered fairly well in depth.

Hope that helps

My

JSC

[HybridMX6]

I've searched on here and found 1 thread, but was still left wondering how I get set up to do the tax thing, FET. I sell jigs, mostly out of state, and don't charge tax. Last year was insane for me, and now I'm worried about oweing IRS FET. How do I get set up with that? I understand how it works, 10% of the sale price, but just not how to get started.

[Zib]

I don't know of ANY state that requires a business to pay sales tax on products that are sold & shipped out-of-state. I'm a tax compliance auditor with the State of Michigan & I audit sales tax, use tax, & business tax. There have been some States that have been trying for years to get a "Streamline" Sales tax agreement passed with other states but because 5 States don't have sales tax they can't come to an agreement.

Also be aware that there is a Federal Excise Tax of 10% on lure manufactures that require you to pay on the selling price.

[JSC]

I've searched on here and found 1 thread, but was still left wondering how I get set up to do the tax thing, FET. I sell jigs, mostly out of state, and don't charge tax. Last year was insane for me, and now I'm worried about oweing IRS FET. How do I get set up with that? I understand how it works, 10% of the sale price, but just not how to get started.

Department Of The Treasury

Internal Revenue Service

Washington, D.C. 20224

Give them a note that you want to get on the FET program.

(been along time since I first applied .. had to look it up .. each area has represenitives that work with you) ..

Good Luck

JSC

[dannyp]

My Question on FET.

If I pay FET on my components to make the tackle,,, do I have to pay it again on the finished product that I sell to my dealer???? If so sounds like double taxation to me.

[Zib]

My Question on FET.

If I pay FET on my components to make the tackle,,, do I have to pay it again on the finished product that I sell to my dealer???? If so sounds like double taxation to me.

When you pay FET on the parts then you will just adjust it on the form when you send it in. You will still have to pay FET on the selling price.

[dannyp]

Thanks Zip

But its kinda like getting shot in the face with a poo poo gun:cry: if you get my drift

[WiTackleGuy]

When you pay FET on the parts then you will just adjust it on the form when you send it in. You will still have to pay FET on the selling price.

I'm not so sure about this...

You paid the FET on components because you bought "retail" without an exemption.

If you sell your finished product (components, FET and value added services) as a "wholesale" product to be retailed by someone else then they, the retailer are obligated to collect the FET on the purchase.

However if you sell as the retailer to the end user/consumer...

That is where I get confused? Since the components were already sold as retail once and the FET was collected and paid by whom you purchased from: are you then obligated to collect FET on the retail of your finished product as well? Or can you claim that the FET was paid on the retail sale of the products components?

And I'd imagine if you file for an exemption you had better keep very good records on your inventory. Any discrepancies will be seen as sales without collection of the FET by an audit.

I'm just getting started on all of this myself. And until I understand all of the ins and outs of this, I'm just going to pay the FET on my components and pass that on as an expense on my wholesale cost.

I'd retail it myself too but until I have a firm grip on the above scenario I'm going to have to wait.

[dlaery]

You paid the FET on components because you bought "retail" without an exemption.

If you sell your finished product (components, FET and value added services) as a "wholesale" product to be retailed by someone else then they, the retailer are obligated to collect the FET on the purchase.

FET is a manufactures tax. It does not make any difference what you paid for your components, (e.g. sales tax and/or FET) you still need to collect/owe 10% of the sale at the manufactures/wholesale level. In order to deduct FET already paid, you need a way to prove this, like an invoice with the FET stated on the invoice. I sell at the wholesale level and I add the FET at the bottom of the invoice, just like you would sales tax. Hagens, Worth Company, Shorty Hook Sales all invoice the same way. Shortys is not a manufacturer but can sell without FET providing that you have a Form 637 on file with them. It is not to be collected at the retail level and thats a whole different discusion.

[Zib]

I'm not so sure about this...

You paid the FET on components because you bought "retail" without an exemption.

If you sell your finished product (components, FET and value added services) as a "wholesale" product to be retailed by someone else then they, the retailer are obligated to collect the FET on the purchase.

However if you sell as the retailer to the end user/consumer...

That is where I get confused? Since the components were already sold as retail once and the FET was collected and paid by whom you purchased from: are you then obligated to collect FET on the retail of your finished product as well? Or can you claim that the FET was paid on the retail sale of the products components?

And I'd imagine if you file for an exemption you had better keep very good records on your inventory. Any discrepancies will be seen as sales without collection of the FET by an audit.

I'm just getting started on all of this myself. And until I understand all of the ins and outs of this, I'm just going to pay the FET on my components and pass that on as an expense on my wholesale cost.

I'd retail it myself too but until I have a firm grip on the above scenario I'm going to have to wait.

The manufacturer is liable for the payment of FET on the sale price of the product. The manufacturer adds 10% to the sales price that he charges the retailer or direct consumer. The 10% is included in the price but the purchaser usually doesn't know that 10% is included the price. They only see $8.99 for a Spro Little John & end up paying sales tax on top of that FET so the product is double taxed.

Here's a little more of the IRS website:

Who is Liable for the Federal Excise Tax (FET)?

IRC 4161 imposes an excise tax on the sale of sport fishing equipment, bows, archery equipment and arrow shafts (exception for certain wooden arrows designed for children effective October 4, 2008). This tax is imposed on the manufacturers (a term which includes producers and importers) of these products. In order to determine the proper taxpayer we must understand how the code defines these terms.

Manufacturer:

Regulation Section 48.0-2(a)(4)(i) defines a “manufacturer” to include any person who produces a taxable article from scrap, salvage, or junk material, or from new or raw material, by processing, manipulating, or changing the form of an article or by combining or assembling two or more articles. The term also includes a “producer” and an “importer.”

Regulation Section 48.0-2(a)(4)(ii) states that under certain circumstances, as where a person manufactures or produces a taxable article for another person who furnishes materials under an agreement whereby the person who furnished the materials retains title thereto and to the finished article, the person for whom the taxable article is manufactured or produced, and not the person who actually manufactures or produces it, will be considered the manufacturer.

Here's the link for more info:

http://www.irs.gov/businesses/small/article/0,,id=203117,00.html' rel="external nofollow">

With regard to sales tax the

SELLER

is responsible to pay the tax to the State government. The Seller has the right to collect the sales tax.

Edited February 6, 2009 by Zib

[Wayupnorth36]

You can go to the IRS website and get all the info you need, including getting your EMPLOYER IDENTIFICATION NUMBER which you will need to pay your FET. Even if you are sole proprietor, this is the number that you need. It takes about five minutes to apply for online, and is free.

[EironBreaker]

Here's what I needed here in Missouri:

Employer Identification Number,

637 exemption number - use this so you don't pay exise tax twice on materials you buy,

State business license

I'm registered with the State and IRS. The State sends me the tax form to submit sales taxes collected from in-state sales on a quarterly basis. If you sell more or less determines how often you need to submit your collected State taxes. They also tell me the tax rate and if any changes occur to the rate.

The excise tax is paid quarterly. The IRS sends me Form 720 to submit 10% of my quarterly sales with. The 10% is part of the sale price, just have to figure it in your price and out of your pocket. Not on top as a State sales tax would be.

Once you get set up, it is pretty easy. I had a local IRS representative come to my production facilities (garage, LOL) and see how my manufacturing process worked. If you have questions, someone will be able to help you out within the Department.

I'd recommend getting set up the right way, having the IRS working you over because you sold some lures isn't worth it in my opinion. Plus the FET goes towards our resources (at least I hope it does). I don't like to write the tax checks every quarter but yet it does give me a little satisifaction knowing I'm doing my part.

[ibock99]

Aight... so I have filed for sales tax in Mississippi, I have my EIN, and I have filled out the form 637 and I am fixing to send it in.. is that all I need?

[dlaery]

I think that is it. Send it in and then they will send you a questionnaire for you to fill out and send back in before they approve.

.

Edited February 10, 2009 by dlaery