Tax Geek Stuff

[TailhookTom]

This is not an ad for my services. I just want to make everyone aware of the Federal Manufacturing Tax on Sportfishing equipment. One of my clients just received a patent and is manufacturing a new spreader bar -- made out of clear plastic.

Anyhow, I had to inform him that there is a 10% Federal excise tax on equipment like that. That is a GROSS tax on sales, does not matter if he makes a profit.

The form is filed quarterly on Form 720.

I am putting this on here, as my discussions with the general counsel for the American Sportfishing Association are that the IRS has significantly stepped up their efforts in enforcing/assessing this tax recently.

If you have any further interest, I can email you the applicable Rev Rule, etc.

I know a lot of us dabble in lure making, etc. I was amazed as to the items that the IRS considers taxable on this topic.

Tom

[In Memory Walter K]

I had an IRS guy haul in my fly shop guy for not paying a 10% excise tax on the flies he tied and had in inventory...not even the flies he had sold! The poor guy was in shock. I fed him to my lawyer who somehow saved his ass, but that was not without a lot of problems, estimating, negotiating, and finally paying. I think the 10% is on the cost of the parts to "manufacture" the item. On matters of a fly which is composed of one hook, a few feathers and/or a pinch of bucktail, a few feet of thread and some glue...and sells for under five dollars after parts and labor, it seems rediculous. One wonders if that doesn't hasten the making of fishing products in China, Japan and Korea. No wonder American companies have a hard time competing. The excise tax makes our U.S. made producta 10% more expensive even if all other things were equal.
In the world of Stupid-I just read that our new Governor of NY Elliot Spitzer has named a new head to the NY State DEC (a political job?) who has been an vocal advocate for Gun Control and has pushed for anti-hunting legislation in his recent past. Support a candidate that wins and get a job whether you're qualified for it or not! It seems to be the new American way! Walter

[Carl]

Yes Uncle Sam wants a piece of everything. I found that out years ago when I started making Bunker Spoons. Uncle Sam is my best partner, he is there for every little piece of income I make, funny when I need a bit of help or take a loss he is nowhere to be found...hmmm

[JGomber]

The 10% excise tax on fishing and hunting equipment (and boat fuels) is paid on the first US sale, regardless of where the item is manufactured. IRS has cracked down on imported goods that are brought in by brother A and sold to brother B for a lowball price to minimize and, in truth, evade the true excise payment. That activity spun off to include the tackle shop owners that snell hooks, make rigs, make lures and custom rods.
Latest data shows that tackle and boat fuel excise taxes are about $500 million per year. Hunting and shooting gear is about $233 million per year. These combined dollars make up some 65% of state natural resource agency budgets. To date...those taxes have contributed over $10 Billion for conservation and recreation projects in every state.
And we can't get a decent fluke reg from the appointees in the pockets of commercial interests!

[In Memory Walter K]

As Ronald Reagan aptly put it, the ten most dangerous words in the world are "I'm from the government and I'm here to help you". Walter

[In Memory of Vicroy]

I ran into this when my son began making a fish attractant. The tax does not apply to natural baits as there is a specific exemption in the law.. Put a worm on the fly??????

UV

[TailhookTom]

The worst part is, if you do not file a return, and they catch you, they can go back to the beginning of your company with estimates, plus penalty and interest.

Of course there are ways to fight that, and as Walter alluded to, fees for the professionals to defend you.

The interesting thing is that this tax can be imposed multiple times -- i.e. I make a hook and it is taxed at 10% of the retail price when I sell it -- let's say to UV and he takes my hook and puts it on a plug which he sells to Walter, the tax hits again.

And I wonder why I quit working as a tax auditor for the government 17 years ago and started defending taxpayers instead?

A tackle shop I know of does the following, if you want to buy a "rigged" offshore lure, they put all of the parts together and then have you pull the arm on the crimping tool -- they sold you all the parts and you "manufactured" the offshore lure.

Craziness.

[JGomber]

Theoretically, components sold to "registered" manufacturers are not taxed until they are assembled into a finished product. Then, the tax is applied to the value of the completed item when it is sold.
But you just gotta love the idea of customer-manufactured lures in the shop! That's great!

[Capt Dick Dean]

I frequent the big flea market held weekends in the Keys just south of Marathon (?) when I'm down there in February. Alot of fishing gear changes hands and I always come home with a bag full. This is part of the underground cash economy that is so rampant in New York and around the country. The taxes uncollected must be in the millions.

And what about the illegals sending money home to south of the border for their unreported income.

I gotta' get in on this ... need another source of income because of the high fuel costs coming this summer.

[clay]

Do you think this 10% tax will apply to the new "Ethanol Neutralizer" My brother and I have been concocting in our barn yard lab? So far we have found that a mixture of 32% cow dung, 12% horse manure, 7% liquid pig slop and 49% CX effectively removes 99% of all trace ethanol when mixed 50/50 with ethanol infected gasoline. We are now working on a filtering system to remove the black goo that is the by product of our Neutralizing process. We hope to market our product under the name of "Bushes Boaters Buddy". I will keep you informed as to our progress, however if the 10% tax applies we will have to seek federal grants to subsidze our "Clean the Green" efforts.

Clay