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Posts: 786
Location: Minnesota | I have seen a few posts on the high cost of baits and just wanted to give my two cents....
This federal excise tax sucks for one thing from a manufacturer/producer/importer point of view!
Lets look at this.
Fed excise tax is 10% of the sales price. So, you sell a bait for $20 that cost you $10 to make.
1) Fed excise tax hits you for $2
2) If you use a credit card processor like PayPal they hit you for about 5% in fees and credit card processing fees on that $20 which is $1
3) If you sell on eBay you get hit with another ~$2 or more.
4) You are left with $10 cost + $5 in fees and taxes which leave you with $5.
5) Your not done yet! Tax time comes and lets say you are in the 25% tax bracket, you just got hit with another $1
6) This leave you with $4 for the 30-45 hands on minutes/time you made the bait.
7) I didn't even add in fees for checking accounts, LLC fees, legal, websites, equipment, etc...(I could write a book! Hey, I would not have to pay the fed excise tax!)
Hence the next time you put out a bait you charge $30 or more to make $15/hour for your work...
Did I miss any fees and taxes guys? 
Now you know why a Weagle cost $25 or a Cowgirl still cost in the mid to low $20s, etc. etc....
A guy told me I would not make much money making baits when I started and I thought, how hard can it be! LOL at myself!
James
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Posts: 1504
Location: Oregon | Now you know why so many manufacturers take their work overseas.
If you can make a lure from start to finish...cut the blank, shape/sand, weight, seal, prime, paint, 3 coats of clear, attach hardware in 45 minutes you are a better man than I am.
Don't forget the time it takes in email correspondence, packaging, trip to the post office, etc. Then there is the time securing materials, lumber, hardware, paint, etc.
It's definitely a labor of love and it will never pencil out. It's alot like hunting....try to justify your cost to hunt a deer......could have bought the whole thing in beef before you even pull out of driveway!!
RM
Edited by RiverMan 4/6/2007 10:29 PM
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Posts: 786
Location: Minnesota | RiverMan,
That is why I have a company make my blanks for me out of WV. He does good work and I am sure a lot of guys know who he is... Cost me a little more but save me HUGE time. Twice I have also about lost a finger (for real) making my Grunts. Not sure if they are worth a finger!
Forgot about the other time burglers. USPS and packaging is a big one for me. I get all my stuff from the USPS but you have to put it all together. As for getting supplies I am not sure I count going to Home Depot and the likes every week a pain in the ass
I do like the write offs though! My Canada trip this year will be a nice deduction and so will two new rods and Shimano reels! Not sure if I can do the boat write off yet.
James |
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Posts: 1504
Location: Oregon | I used to have him cut blanks for me too but with so little money to made per bait I started doing all the work myself some time ago. I am also very picky and couldn't find someone to make a blank that I was satisfied with.
RM
Edited by RiverMan 4/6/2007 11:36 PM
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| grunt,
think your right on. We tend to forget the little things we buy or use. |
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Posts: 1529
| a labor of love for sure gang. many dont see the work. when we started years ago we knew this was a long term investment.. doing larger volumes forces a seperate building that has to be heated year round. the biggest problemn is hooks and hardware which is still costly by buying in the thousands. if we were doing plastic products our niche markets would be gone offshore. thank the big guy asia has very little lumber |
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Posts: 786
Location: Minnesota | woodieb8
You said ti about Asia has no wood! (No pun intended). I have been contacted by a few and when I tell them I am making a 16 inch wood bait and it would have to be identical to my specs....I do not get any replies! LOL I want to stay with wood myself. I think it adds to the custom feeling of the bait, I love the way wood baits run vs many of my plastic, and I also want to keep "Made in the USA!" on my website! I know I could make a plastic in the USA but, I could not compete in price vs. the China baits.
Well, the whole China price difference is another thread! LOL $10 US baits made for $5 or a lot less! Quality vs quantity vs turning the entire muskie bait market into a commodity market and I think it is half way there already.
JMO,
James
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Posts: 1453
Location: Kronenwetter, WI | Grunt---
Yeah---that's depressing...that's why I only sat down one time and figured it all out...afterwards...well, I pretended I didn't.
Makin' baits is somethin' to do anyhow. |
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| When I lost my job over 2 years ago because of back problems, I thought that making lures would be a good way to make some cash....until I went to The Dept. of Workforce Development with a cooler full of lures. They were impressed with the product, but after we went through how much time and cost went into each lure, they agreed that unless I could produce at least 1,000 per year or make enough to go retail....(where I would make less money because each time that lure changes hands someone has to make money, so I'm expected to charge 10% less).......that it was not worth my time or effort to persue it as a business.
It's a hobby for me, and soon I won't be making any. If I make 100 this year, I'll wind up keeping 20 of them and sell the rest to friends or guys who bought lures from me in the past. It's just not worth it, unless you make it a full-time job and enjoy not making any money doing it.
If I were healthy, and really tried to make as many lures as I could, I still wouldn't be satisfied with the money that I would make. You guys are right when you say that guys just don't get it. Not all guys, but most. I know several guys who I make lures for who never once question the price, because they think that the price that I'm charging is fair for the lure that they get.
From the drilling, weighting, balancing, filling, sanding, sealing, priming, painting, clear coating.........if you don't think that a lure that takes that much effort to make isn't worth 25-30 bucks, then come on over and do it yourself, and I'll just charge you for all of the materials that it takes to make the lure, and you'll still have about $15+ into the lure. I'm serious. It would be a do-it-yourself-glider-making facility. So, I'm going to finish up the 10 inchers that I have and the Perka bodies, and then I'm hanging it up. I'm going to have a heck of a collection for my daughter to sell when I croak.
I'll save enough supplies to make a few for myself or friends and sell the rest of my paint and supplies to some aspiring lure-maker who loves to do it, and they can try their luck. I'll go back to making bucktails that don't require a fraction of the work to produce. I know, because I make all of my own bucktails and have been for 30 years.
I'm not lying when I say that it's just not worth it. I make the best lures that I possibly can, but when I have to charge $30 for a lure and still don't make a profit on it, it's time to hang it up. I have some regular "customers" who I consider friends more than customers, who I will make some 10 inchers for, and I will make some for MUSKIEFIRST outings and as usual will donate some to any charity event that we have here. It'll never be a business venture for me. Hobby? I guess so, since I quit golfing and hunting, and those were both costly hobbies. Custom painting was an option, until I found out that the lure makers that I dealt with thought that $2 was a fair price to pay me to paint their lures.......with me supplying the paint!
I make more money re-painting Rapalas in custom colors for walleye fishermen than making what I think are quality gliders for muskie fishermen.
Beav |
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Posts: 15
Location: Scranton Pa. | You guys are on the ball!!!
The only reason I got into building my own, outside of catching on a my own creativity, was to keep from having to buy the cheap stuff. I could never afford to have an arsenal of big baits, in wood at those price tags. So I started working my own. Then I got them turned and drilled and slotted, and went to TRY and seal and paint them, and realized I don't have the patience to wait for the laqcuer to dry.
What I did was get together with one of my good friends from the salt, who's meticulous {anal}, and have him do the detailing after I got them turned and drilled. What I'm getting at is that I've found, to even remotely produce enough product {which we're not their yet, this our 2nd year on the "project"}, and have a 40+hr\week day job, a division of labor was necessary. So instead of me bouncing from step to step, I can focus on the blank, and my friend on the details, and then once we get a somewhat unique product, focus there. From what I found that would be the only way to make enough product, be expedient without sacrificing quality, and the best we could hope for is to subsidize this addiction by means of it.
The other problem encountered is that fishing in general is a niche market, and then musky fishing is a niche in a niche. Let's face it, the world of the musky takes a special breed of angler. Not every angler has that determination to put their time in to just see a musky follow, no less hit trophies, and there's even less anglers that can even imagine shelling out $20-$50 per bait. Hell, I know people who are afraid of those fish!!!
It really is a shame that this can't be more lucrative, because one will be hard pressed to find home grown products that exhibit the attention to detail, over quality in workmanship, and pride on the part of the builder, that are found in the basement world.
I will say that even if a builder could repeatedly get $150.00 per bait, it still doesn't get them back for the amount of heart and soul they put into their work!!!
Cool thread!!!
Tightlines!!! |
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Posts: 351
| Interesting discussion.
You might want to add depreciation of equipment, replacement of supples, and a few other things to the list of actual realized costs to build. For example, sandpaper, drill bits, beltsander belts, bandsaw blades, and dozens of other small items can really add up fast, and it seems like you always need something because your current supply is depleted.
If I were to build for money, I would not do so without a general liability policy which includes products coverage. That would also add to the expense.
I don't build for cash and probably never will, although it is always a temptation because it would at least defray the costs to a degree, and I will be the first to admit how flattering it is to have someone say, "Are those for sale? I'd love to buy one." Not going to happen for me, for a long time at least. Maybe after I retire, who knows?
For me, its the satisfaction of seeing the look in someone's eyes when I say, "Here, you have these, if you like." Recently I gave an old friend about 6 baits and he was ecstatic, and I mean that literally. I get the biggest kick out of that and the funny thing is most guys give something back, in one way or another, that is worth more than what I gave them. They buy supplies for me and spontaneously drop them off at the house, or they give me a pile of hardwoods, or they just stop by and have coffee with me and my wife, Cyndy. In the end, we all are smiling and better off.
I have a guy that lets me hunt his property. He fishes and occasionally targest musky, so naturally I gave him a few baits. You would think I gave him a sack of gold coin. He took them to work and showed all his friends. He tells everyone and shows them to everyone and refuses to get them wet, for fear of losing them. Lol, and it only makes me want to give him more.
I've already given away most of what I've built in the last two years, and I'm looking forward to doing it again this year...so I can go build more and hopefully better baits. I wish I could build enough to give everyone on these boards who admires my baits a free sample to try out and enjoy; if only I had the time.
Musky guys are a niche within a niche, but in my opinion, nobody appreciates a fine bait better than the musky freaks (like me), whether or not they can see their way clear to fork over what the bait is "worth." There is a mania about musky baits that borders on pathology.
I spend a pile of money on this building stuff, but I enjoy every minute of it. I don't measure my appreciation or success at this in dollars, but I fully understand anyone who does.
Someday, this basement art will be appreciated in high-dollar ways and sought after by various "collectors." Unfortunately it willl probably be like other hand-crafted stuff from days gone by...and we'll probably all be looooooong gone by then.
In the meantime, I try to not take it all too awfully seriously. At the end of the day, we're just grown-up kids playing with our toys.
Enjoy the ride.
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Posts: 15
Location: Scranton Pa. | Fat Fingers, great point about the luxury of being able to give baits away. I think the only thing that rivals catching on my own work, is a friend catching on my work.
Your attitude is commendable, your wife and friends are lucky{albeit from the sounds of it, the skies are in for it when your around!!! ;D}
Tightlines!!!
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Posts: 910
Location: Hastings, mn, 55033 | "In the meantime, I try to not take it all too awfully seriously. At the end of the day, we're just grown-up kids playing with our toys."
VERY well said!! |
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Posts: 190
| castmaster - 4/7/2007 1:48 PM
"In the meantime, I try to not take it all too awfully seriously. At the end of the day, we're just grown-up kids playing with our toys."
VERY well said!!
I love toys!!!!!!!!!!!!!
By the way Castmaster, final coats of clear going on your new TOYS tonight !!
Doug Bradley |
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Posts: 1270
| Grunt, Is the exise tax on the finished price or the wholesale price? |
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Posts: 786
Location: Minnesota | reelman,
I would not answer that question reliably. For me it is my sales price. So, I sell a bait on eBay for $20 and then I sell a bait to ABC retail store for $15. My tax is on the $35 total. As for ABC retail store, I am not sure if they again have to pay but the way I read it I am responsible as they are not the manufacturer/Producer/Importer. I only had to pay a small amount the last quarter but, this next quarter I hope to pay a lot more Done a lot of research on the subject and it really is a slam to the lure makers because it is not a 10% tax! It is more like a 20%-30% tax on your profits and then you still have to pay more tax on the left over profits. If I make a little more thsi year on baits I plan on having my taxes done once by a CPA to make sure I am not killing myself by not understanding this tax correctly and how it rolls into the rest of my personal taxes. I hope this helps but, I would suggest asking a CPA if you have some real money coming in.
James |
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Posts: 786
Location: Minnesota | Here are the actual forms and tax law crap from teh IRS:
Note: these are 2006 but as far as I know they have not changed
Excise taxes
http://www.irs.gov/pub/irs-pdf/p510.pdf
http://www.irs.gov/businesses/small/article/0,,id=99517,00.html
Actual From 720:
http://www.irs.gov/pub/irs-pdf/f720.pdf
Instruction for form 720:
http://www.irs.gov/pub/irs-pdf/i720.pdf
I have called the IRS and will call again soon on this issue for my own piece of mind. If I find anything specific out or need to correct my information posted here I will. I woudl suggest in addition to calling a CPA with questions you just call the IRS direct. They are not that bad of people if you contact them with questions before they contact you with some
IRS Telephone Assistance for Businesses
Toll-Free, 1-800-829-4933.
Have fun! It is true, the IRS takes all the fun out of anything. LOL
James
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| Reading through those forms is even more incentive for me to not make any lures.
I buy screw eyes, hooks and split rings as well as bodies and pay tax on every piece of the lure that I buy. So I assemble the lure after I paint it with paint that I paid tax on and coat it with Envirotex that I paid tax on and then I'm supposed to pay tax on top of that because I assembled all of the parts. I already paid a boatload of taxes to the gov't, why do I have to pay more?
I'll go underground. I'll be the guy at the boatlanding with the trench coat on who has lures hanging all over the inside.
I'll have to get a book of receipts. My friends will feel weird when I'm writing them out receipts.....received for 2 fishing lures, 1 case of Budweiser.
I've never issued a receipt or kept any record of any sales. I also never kept track of all of my expenses that I most likely could claim as deductions against my profits....which are non-existant.
I make maybe 50 lures a year and sell half of them, mostly to friends, and keep the rest.
Do you have to pay on used lures? I didn't see any language that said that you didn't have to pay excise tax on lures that you sold if they were used.
In the basement is where I belong.
Now I'm afraid to come up. |
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Posts: 786
Location: Minnesota | Small Time
Yes, my days are numbered as well. Too much BS to just make a little money to support my habit which in the end cost me money and time and now I don't get to go fishing becasue I am too busy doing taxes! LOL what was I thinking
James |
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| It's funny that some guys call it a labor of love.
I do love making lures and catching fish on them and seeing people catch fish on them, but if I have to pay taxes because my friends offer to pay me for my time and materials, I don't love it anymore. It's just another example of Uncle Sam squeezing the little guy hard enough that it doesn't pay for him to even try to be a contributing member of society. |
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Posts: 786
Location: Minnesota | I think I am up to being taxed 4 or 5 times on my baits I make. I thought we were supposed to only be taxed once in the US??? |
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Posts: 941
Location: Freedom, WI | James - You got the tax thing right, I am legal and it does take all the fun out of it. It is a good screwing. Small time - you pay 10% of what you sell the lure for, wholesale or retail. It was a law passed many years ago and includes any fishing equipment, rods, reels, line, ect. We all could save a bundle if it was repealed. We need to talk to our legislators, as if that would do any good. |
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| Ignorance is bliss.
I was unaware of the excise tax thing until I read a post here.
I was told by a small business guy that if I didn't claim any business losses and paid sales tax on all of the items that I bought to make my lures, that I didn't have to worry about anything else. I often wondered why the guy that I bought my paint and Envirotex from asked if I had a tax number, because if I did, he wouldn't charge me sales tax....or something like that.
All I know is that any aspirations that I had about making this more than a hobby....and I've been asked to.....are out the window. Like the rest of you guys, I would be working for free or for a loss actually, because there is always that intangible of "time" that we never get paid for.
I just know that I'm going to have one heck of a lure collection in a year or so. |
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Posts: 1529
| like its been stated repeatedly a labour of love. i make lures everyday. our days do consist of starting early morn. through the cycles its no hard to imagine us assembling baits thru the evening hours. machine breakdowns can be costly also. example my compresser pump just seized. another cost factor. when under the gun on orders you pay a service man to come in. why because you cannot afford to lose 3 days mucking around. so a few hundred here a few hundred there can definately dictate the cut of hot dog your having for dinner. you will also have many new friends once you start painting or making baits. that part grows old when you ask the new friends if the would go to work for a day without pay.. would we do it again by choice.
you betcha. |
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Posts: 786
Location: Minnesota | Small Time,
Believe me, I WILL NOT MAKE A PROFIT for a few years! I have a lot of stuff to still buy for my business that is directly related to it and needed. I still need a new Lowrance, about 100 more "example" lures, a new Lakewoods box, two new St. Croix rods, two new Shimano 400b or TE reels and the list goes on for what it will take for me to "understand" the lure/muskie market and test new ideas out AND test my current product line. Did I mention I may need a new boat to test my lures from and take out potential retail buyers? Yes, the IRS can have their 10% plus 3%, plus 25% of my profits, etc. but, to make my business a success I will need a lot of tools and these tools cost money and will take many years of profit away from my business and thus most likely cause me a loss for a few years on my personal taxes.
As I tell my boss at work, "I don't make the rules, I just follow them to the LETTER sir!" You just need to look at the tax law and make sure you follow it to the letter of the law.
Have a good one and keep those reciepts!!!! You will need them
James |
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Posts: 1270
| I am not a tax expert by any stretch of the imagination but I would think that you would either be able to right off the sales tax you pay on items like screw eyes, paint, etc. You might even be able to use your tax number and not have to pay tax on them at the time of purchase.
As fisherman we do not want the 10% excise tax replealed. This is the Dingle/Johnson tax and those moneys are ear marked for fish and water issues in the same way that the Pitman/Robertson tax is for guns, ammo, bows, etc.
Several years ago the IRS went after a bunch of archery shops that were fletching arrows (like most shos do) The manufactures of the knocks, inserts, feathers, etc. were not paying the excise tax because it was not a finished item, only a part. THe IRS claimed that the shop was responsable to pay the excise tax on all the parts of the arrow they assembled and the labor they charged to assemble it. The manufactures set out to change the law so that THEY paid the excise tax and got the dealers off the hook. Kind of! The dealer is still responsable to pay the excise tax on the labor they charge which I doubt many of them do. |
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Posts: 786
Location: Minnesota | reelman,
I am happy (well sort of) to pay IF I know the money goes back to fishing. I doubt a lot does though.... In any event, I will write off anythign and everything I can for my business to help not pay more taxes down the road. I doubt a lot of manufactuers or importers even know about this tax. I wish I didn't
James |
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Posts: 2112
Location: The Sportsman, home, or out on the water | yeah, that is why I'm gratefull Gerry Carrol requested custom paint work. WAAAAAAAY more cost efective. Gerry , K-bob, and ShaneW will always get there stuff done for free, because they are always do good to me. |
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Posts: 910
Location: Hastings, mn, 55033 | "I doubt a lot of manufactuers or importers even know about this tax."
i'd say your dead wrong there Grunt. if your at the level of major manufacturing or importing YOU KNOW THE APPLICABLE LAWS!!!
read the first page or two of any of the supply catalogs (moores, stamina etc) and it tells you about the 10% excise tax right there. anybody who takes more than a few seconds to research whats required of them when making baits will learn of this tax. |
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Posts: 1504
Location: Oregon | As a kid I can remember my dad saying "the government makes liars out of everyone".....I better understand now why he said this.
RM |
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