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Posts: 162
Location: Bemidji, MN | Ok, I already file a 720 form, and state sales tax for my rod building/bucktail business. Now Hedron Inc tells me I need to file a 763 form in order to buy flashabou in bulk. well I went on the IRS website, and the it says something about the irs coming and inspecting my business location. Which is ok, but my whole operation consists of my kitchen table, a desk, and sevral pieces of movable equipment. What can you guys tell me about the 763? is the irs really going to come out and inspect me before i can get this paper? |
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| They could, but they won't. They just want the form filed. |
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Posts: 786
Location: Minnesota | Just curious. I own a few small businesses and all I have ever needed to buy in bulk or from wholesalers was my tax id number... Just curious why they need this as well.
TIA,
James |
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Posts: 129
Location: Milwaukee Wi | They are makeing sure you are not buying in bulk just not to pay taxes on it like if you buy it and sell it without paying tax on it if you know what i mean!!!! i have one
Mostly because you are buying out of state!!!!!
Edited by Bayboo_baits 1/25/2007 7:28 PM
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Posts: 169
| Do you mean form 637 the Federal Excise Tax Exemption Form? There was a big discussion on this site last year, if you do a search, I started the discussion. My "business" consists of some pliers and a work bench, but they came over to my house and inspected.
There is a 10% excise tax on all fishing tackle. If your suppliers do not have a copy of your form 637, they have to charge you the tax. If you have form 637, your suppliers do not need to collect the tax from you, but, you have to collect (pay to the IRS) the tax with each rod/lure you sell.
Anyone can buy in bulk from suppliers, but if your supplies are tackle related they are suppose to charge you the tax, unless you have an approved form 637.
I found it - http://muskie.outdoorsfirst.com/board/forums/thread-view.asp?tid=26...
Edited by Brad 1/25/2007 7:40 PM
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| I reread the post that was up on the last post.
I make some lures, but I'm not in business. I buy all my stuff from a local shop, and he charges me tax on everything. He asked me if I had a tax number because he wouldn't charge me sales tax and give me a discount.
He asked if I filed any forms with the IRS showing what I pay for components and then claim losses.
I told him no, hell I'm just making jigs and bucktails. I don't write off anything on taxes as business losses, so he told me that I would still have to pay him taxes at his shop and I told him that was alright with me.
Sounds like that hobbyist title that I was reading about.
There was one post about e-bay. I read last month that if you sold items every month on e-bay, that the IRS is going to consider you a business. I have sold many used lures on e-bay. Does that mean I'm a business because I sell used lures and some bucktails on e-bay once in a while? I think that there should be a certain dollar amount of lures that you have to sell before you are considered a business, or is it just the act of writing off your lure parts as losses against your profit that makes you a business? |
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Posts: 786
Location: Minnesota | Even if you pay taxes just keep track and you can write them off at the end of hte year if you are filling on your small business. I love TurboTax! It asks all the questions the CPAs don't. Maybe I just had the wrong CPAs in teh past though...lol
James |
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Posts: 432
Location: mpls | You can't write off anything for the excise tax. It is a 10% tax on GROSS not net. |
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| In other words if you make a bait and sell it for $40 regardless of how much money you have into making it you pay 10% of $40. Ok you say, but I have 5 bucks into making it so really I should only have to pay 10% of 35. Wrong! it's a flat 10 percent tax on the gross amount you sold it for. Which in this case would be $4. An excise tax has nothing to do with income, an excise tax is a mandatory manufacturing tax put on certain products and fishing lures just so happen to be one of these products. Make sure you baitmakers are paying this tax. I know people that have been caught not paying this tax and ended up owing the IRS thousands of dollars just in penalties for not filing. |
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Posts: 2378
| uptown - 1/25/2007 11:30 PM
You can't write off anything for the excise tax. It is a 10% tax on GROSS not net.
But you can write off the actual amount of the taxes you paid. At least, that is what my accountant tells me |
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Posts: 169
| Hypothetically, what if the bait maker started another business as a distributor. For example, the bait maker sells his lures to the distibutor for $10 each & pays his 10% tax on that $10. Then the distibutor turns around and sells that lure for $20 to Joe Public. Would that be legal? Food for thought. |
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Posts: 162
Location: Bemidji, MN | the distributor is responsible for collecting 10% as well. The distributor can file the 637 to be exempt from paying the 10% to the manufacturer. If you read the rules for filing the 720 form where you file and collect the excise tax, it is ALL fishing tackle. I think alot of this just gets built into the cost of goods to tackle shops. I have filed the 720 form all along with my rod building business, as I know a suppier of rod parts who got audited, and because of it, everyone who was buying from him at wholesale who was not filing the 720 got hit. So be careful, and file your forms if you are selling stuff that you buy at wholesale.
The reason of my original question about the 637 form was to find out if the rest of the very small manufacturers were being inspected when they filed for it. I pretty much have shown a small loss the last few years, so it seems like a waste of time for an irs guy to come out and inspect my wire bender and rod wrapper, but if they must, oh well.
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Posts: 1106
Location: Muskegon Michigan | The excise tax has to be paid once. By the OEM. Original equipment manufacturer. If you make it and sell it you owe it. The retailer does not charge the 10% . he has sales taxes. The federal excise tax applies to ony the O.E.M. If you buy spinner blades from a place like Hagens they will ask if you have the form. They will not charge you the 10% if you are manufacturing a finished product and file the form with them. savvy? Who ever touches it last before it goes to retail has to pay the tax. Many guys buy components and pay the 10% then retail the stuff. You are good to go there. as the component maker pays the tax. If you build a fishing lure and no excise tax has been payed on your components then you are liable for the 10%. Used lures and stuff dont count as long as you dont go over the yardsale limit . I think its 750.00 per year. You can sell off your used stuff every year. Thats all loss as you never get more than you payed for it. New stuff is different though as all stuff you manufacture is subject to the 10% because you are the O.E.M. Kingfisher |
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