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The federal excise tax ???
Posted by: Bill Sidney (---.gci.net)
Date: April 06, 2018 11:12AM

The tax on sporing equipment  is that a % of the cost or is it a FLAT $10.00 per rod [ BLANK ] 
  any input ???

William Sidney
AK

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Re: The federal excise tax ???
Posted by: Matthew Paul (---.lightspeed.milwwi.sbcglobal.net)
Date: April 06, 2018 11:41AM

10 % of the sale price
[taxmap.irs.gov]

The best day to be alive is always tomorrow !!
Think out side the box when all else fails !!!
Wi.



Edited 1 time(s). Last edit at 04/06/2018 11:47AM by Matthew Paul.

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Re: The federal excise tax ???
Posted by: Douglas Warren (---.cpe.cableone.net)
Date: April 06, 2018 12:06PM

William, don't mean to hijack topic. Where are you in AK, I spend a fair amount of time up there with friends all over. I will grab your email address from your profile if possible.

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Re: The federal excise tax ???
Posted by: Seth Johnson (---.williams.com)
Date: April 06, 2018 02:24PM

Matthew Paul Wrote:
-------------------------------------------------------
> 10 % of the sale price
> [taxmap.irs.gov]

Not to exceed $10
"The tax on fishing rods and fishing poles (and component parts) is 10% of the sales price not to exceed $10 per article. The tax is paid by the manufacturer, producer, or importer."
There's an article in the library on this, but it's dated. [www.rodbuilding.org]

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 06, 2018 04:51PM

Constructive sale price is considered 60% of the selling price, therefore, you are liable for either 10% or $10 of the constructive sale price of any rod you sell. This is how it works. Take it to the bank.

The article in the library remains up to date.

.............

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Re: The federal excise tax ???
Posted by: Travis Thompson (---.hsd1.il.comcast.net)
Date: April 06, 2018 05:03PM

what do you mean by the constructive sale price 60%? I dont sell rods im just curious of the terminology

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 06, 2018 06:16PM

Because the tax is normally levied at the first point of sale, which is not retail, those who sell direct to the end user are allowed to use what is essentially a wholesale price, which is considered 60% of the final selling price. So if you are going to sell a rod to a customer for $150, your tax is figured on $90 (constructive sale price) which is going to be $9.

Now if you were selling to a wholesaler, jobber, tackle shop, etc. then the tax is figured on the actual amount you charge them.

In any event, the tax is capped at $10.

..............

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Re: The federal excise tax ???
Posted by: Bill Sidney (---.gci.net)
Date: April 06, 2018 07:33PM

Thank you for the input never knew about the $10.00 max , always through it was a flat 10% , as I under stand now if you sell 1000 guides at $10 each [$ 10,0000 total ], would it
$ 1000. 00 tax or would it be only $10.00 Tax ? because it is on the same purchase order, I don't want to give to much to the IRS , when I sell them as a single purchase,
I am cheep, but want to be Fair to Uncle Sam , [ IRS ] don't want them chasing after me , want to be legal ,

William Sidney
AK

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 06, 2018 08:10PM

The tax is per item. So you don't pay tax on 1000 guides. You would be paying the tax on each individual guide. If the guides are $10 each you owe 60 cents per guide.

...................

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Re: The federal excise tax ???
Posted by: Mike Lawson (---.nycap.res.rr.com)
Date: April 06, 2018 10:05PM

Do rod manufacturers that don't make their own blanks pay excise on components then on complete rods? I attended a seminar by a well known blank manufacturer who assured us all that their corporate lawyers said custom rodbuilders did not owe excise since they paid it on components. I get the better safe than sorry thought where the feds are concerned, just curious what others have heard on this.

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 06, 2018 11:25PM

That lawyer is 100% wrong. The tax is on the rod, not the components, unless you are just selling components. Once you use the components to build a rod you have a new item that did not previously exist - a fishing rod. The tax is owned on the price of the rod. You may not deduct any tax previously paid on components unless you have a #637 exemption certificate. Please read the article in the library.

............

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 06, 2018 11:28PM

One last thing - the article concerning the tax found in the online library here, was signed off on by the IRS Excise Tax Department head. As I said before, take it to the bank.

..........

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Re: The federal excise tax ???
Posted by: Bill Sidney (---.gci.net)
Date: April 06, 2018 11:32PM

Tom I am a little mixed up , if I sold them for $10.00 each [ in my case ] you said I would owe $0.60 per guide I don't under stand , == 6% Tax ????? I am dumb need a little more info
there Tom

William Sidney
AK

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Re: The federal excise tax ???
Posted by: Jim Marshall (---.zoominternet.net)
Date: April 07, 2018 07:45AM

Bill Sidney Wrote:
-------------------------------------------------------
> Tom I am a little mixed up , if I sold them for
> $10.00 each [ in my case ] you said I would owe
> $0.60 per guide I don't under stand , == 6% Tax
> ????? I am dumb need a little more info
> there Tom

See posts by Tom 8-6-18 4:51 PM, Travis at 5:03, and Tom at 6:16 pm.

Constructive sale price. Since the tax is generally levied at the first point of sale from manufacturer to wholesaler, manufacturers selling direct to end user are allowed to tax based on “constructive sale price” or 60% of end sale price.

It is assumed that that 40% is the difference in wholesale cost to retail.



Edited 1 time(s). Last edit at 04/07/2018 07:52AM by Jim Marshall.

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 07, 2018 08:18AM

Yes, what Jim said is correct. The constructive sales price, and the documentation for it, is covered in the article from the online library here.

..............

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Re: The federal excise tax ???
Posted by: Bill Sidney (---.gci.net)
Date: April 07, 2018 11:55AM

Thanks for the try I am still lost but thanks for the try ,I did read the Library , it did not help, but that is life but thanks anyway

William Sidney
AK

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 07, 2018 01:14PM

From the article:

FIGURING, COLLECTING AND PAYING THE TAX

The custom rod builder finds him or herself in a somewhat odd situation with regards to the excise tax. Most manufacturers do not sell direct to the end user, instead they sell to a jobber or distributor. Thus, the selling price at that point is considerable lower than it will ultimately be at the retail level. When a custom rod builder sells to the end user, however, the selling price is immediately at the retail level and the tax is considerably higher, dollar wise, than it would be had the rod been sold at what is considered a wholesale or jobber price.

Thus, the Internal Revenue Service has made an allowance in the amount of the selling price which the custom builder and his customer is liable for. This is intended to more closely approximate what the price and the tax would be if sold at the wholesale or jobber level. Such a price adjustment is known as a "Constructive Sale Price" and can be found under IRS ruling 26 CFR 48.4216(9)-2:Constructive Sales Price, basic rules. There is also a revision under: Rul. 81-226. Among custom builders, this is often referred to as the "60% rule."

Here's how it works - lets say you sell a custom rod to your customer for $300. Instead of figuring a 10% tax of $30, you would create a Constructive Sale Price by multiplying $300 by 60% (300 x .60), which is $180. The tax (10%) is now due on that amount ($180). Your customer would be charged $300 for the rod, $18 for the excise tax, and any applicable sales taxes your state or county impose.

You may only take advantage of a Constructive Sale Price when selling to the end user. If you sell a rod to a reseller, someone who then sells the rod to another reseller or the end user, you must pay the 10% tax on your full selling price. Let's take a rod that you sell to a fishing tackle store for $150 and which they intend to sell to one of their customers. Your tax liability would be 10% of the full $150 (.10 x 150) which is $15. (The shop or store has now fulfilled their tax obligation and no further collection or payment by them upon selling the rod to a customer is required.)

...............

At which point you are back to which is less, the 10% or $10. You owe whichever is less. In both scenarios above. the tax would be $10

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Re: The federal excise tax ???
Posted by: Bill Sidney (---.gci.net)
Date: April 07, 2018 05:41PM

Thanks I under stand that a lot better, it would be better to give the rod away, an ask for a tip as I see it , could get in trouble but that is life ,

William Sidney
AK

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Re: The federal excise tax ???
Posted by: Tom Kirkman (Moderator)
Date: April 07, 2018 06:26PM

Even then you have to be careful... There was a time when some folks were selling "incomplete" rods. Say a rod minus a butt cap and claiming they weren't actually selling a complete rod and therefore owed no tax. But the IRS knows fraud when they see it. There is the letter of the law, and then there is the spirit of the law. You need to comply with both. Giving a rod away and then asking for a $200 tip would not fool anybody at the IRS.

The tax isn't that big of a deal. You pay it every time you buy fishing line, a new lure, a reel, etc. For end sales to the consumer, just figure 6% and charge that or $10, whichever is less.

..........

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Re: The federal excise tax ???
Posted by: David Fowler (---.lightspeed.mdsnwi.sbcglobal.net)
Date: April 07, 2018 06:26PM

How does the tax work if you are building a rod and donating it to a charitable organization (such as a TU fundraiser)? Or if you are holding a rod building class, where the students essentially pay for the cost of the components and build the rod for themselves?

Dave Fowler

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