Like many hobby builders I have accumulated too many rods. Would like to sell some of the older ones, more or less to recover part of the cost of components to build more. I think I an correct that any sale of a rod that one puts together requires payment of excise tax?

I don't really mind doing that, but have had some negative vibes about the tax from reading posts. One that bothered me was the statement "they audit everybody with a tax number every 2 years". Are we talking about a limited audit of the Pitman tax or are we taliking about triggering a full scale audit of personal taxes. I already have a rather complicated busisness on the side and just don't want any more scrunity from the IRS than I already have.

Is it a lot of trouble to keep up with the Pitman tax.? As I understand it, it is a tax on "value", not on sales price, so it seems like it would be fairly straight foward.

Any comments welcomed.

I was the one that said you get audited every two years but that is only if you have a federal excise tax number and are excise tax exempt from the manufactures. This is completly different than a state tax number. Jesse

Jessy,

I'm not sure exactly what you mean by "tax exempt" from the manufacturer!! Is that anyone that sells rods and files/pays the federal excise tax ob their sales??

Mike

The tax is on the selling price, not the "value," whatever that is supposed to be. Read the article in the online library for the full information.

No, they rarely audit anyone over the excise tax. However, if they find you selling rods, and then go check to see if you've been filing, and you haven't been - then you'd better believe you will be audited. If you're selling rods, or plan to do so, start filing right now. As long as you've been filing, you'll be okay. It's the guys who aren't filing and get caught, that are guaranteed to be audited.

Those with a 637 exemption do get audited frequently. Unless you are a large rod building operation, there is no reason to obtain a 637 exemption. You can't buy from the manufacturers anyway.

Also be advised that as of the end of September, the tax is capped at $10. So any rods you sell that are beyond that tax level only incur the $10 tax.

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Edited 1 time(s). Last edit at 08/10/2005 02:52PM by Tom Kirkman.

Gonna be a lot of rods sales in August dated October this year, lol.

Bill,
If you just keep reasonable records including the source documents (bills, receipts, sales slips etc.) and fill out the form 720 each quarter then you do not have to worry about whether you are audited or not. You only have to worry about being audited if you are trying to cut corners somewhere.

Whoever told you that you will be audited every two years if you have a federal EIN number is in error. I have had one and also a 637 and have for quite a few years and have only been audited once when I first started and when I was audited the IRS person was perfectly reasonable.

I look at it like this; on the one hand the IRS auditors have better things to do then screw around with a little guy like me, on the other hand they are experts at catching people that are trying to cut corners and I am just an amateur, so I play it very straight and avoid any problems.



Edited 1 time(s). Last edit at 08/10/2005 03:28PM by Emory Harry.

Hi Bill . It takes quite a lot to trigger an audit from the 720 people and if you are up to snuff chances are you man never see them again. I like Jesse was audited 2 years after getting my 637(probably about '85) Then two years later got a call from the same lady who said "are you still keeping records as before" then let me know it wasnt really worth her time to check me out because my records were imaculate in fact I gave them too much money. Since then not a peep.

Dont let the Big Scary Excise Tax scare you. Unless you have a 637 or order thousands of dollars in parts from suppliers your chances are you will not be audited. That said - Like Emory says keep records and if you are audited bring what they ask for and nothing else. These people arent like the boogyman IRS. The like Emory says are after bigger fish. In fact most people are picked up when they audit a supplier. Several years ago that is how one of out prominent tackle shops got nailed, after an audit at CalStar. Like many the shop thought paying the excise on the parts ment they didnt have to worry about the rod.

It is best of course to get legit but if you sell some old rods I dont think we will have to visit you in the pen. Tom is right too about the 637. It really isnt worth it unless you can buy direct like I have been fortunate enough to do with CalStar and Seeker. I find it to be more trouble than it is worth.

Maybe someone can answer a question for me. Do manufactures who go off shore or overseas manufactures pay ANTHING in the tackle industry ie rods lures etc? If not then why do we get the shaft. Just my opinion. It is kinda like getting a reward for running away from responsibility.

The tax is due at the first point of sale. When overseas manufactured fishing tackle item is returned and sold in this country, the tax is due at that first point of sale.

Nobody gets the shaft - remember, the custom builder does not pay this tax, he only collects it from the customer and turns it over to the IRS, who turns it over to the US Fish and Wildlife Service, who then turns it back over to the Game and Fish Departments of each of the 50 States.

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This might be a mute point Tom. But why do I pay the fine if I dont collect the tax from the customer. Shouldnt it be his responsibility since he is paying the tax. I know this is nit picky Tom but if it is my fine then it feels like My Tax. As for fish and game that is another issue entirely. Not exactly the most efficient outfit in the world, at least in Ca.

Dont get me wrong, I dont mind paying my fair share but some things dont feel as good ie taxing taxes and being one of very few crafts that has a special tax assigned to it. MHO

You pay the fine because as the seller it is your responsibility to collect it. Just as when you buy groceries or clothes or whatever - it is the merchant's responsibility to collect the sales tax and send it in. It would be a nightmare if if was left up to each individual customer to let the IRS know they had bought a rod and needed to send in the tax, or to contact their state revenue office each week after buying groceries and wanting to "settle up." The trail of paperwork and individual 720 accounts would increase by millions and millions.

It's also worth noting that the tax is figured and collected at the first point of sale and this passed on down the line to the consumer. Normally, the end consumer is not involved in that initial transaction - it takes place between the manufacturer and the jobber/distributor/wholesaler. This is why rod builders are allowed to figure a "constructive sales price" on their rods - they deal direct with the end user.

Many crafts, hobbies, endeavors, etc., have imposed user taxes on themselves. Not much money is ever going to come out of the general fund to support fish and game, so it's up to us sportsmen to fund the things that are important to them. No one else is going to do it for us, and we know that all this money gets returned to our fish and game departments - none of it can be taken by anyone in Congress and used for any other purpose.

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Edited 1 time(s). Last edit at 08/10/2005 07:19PM by Tom Kirkman.

Hi guys,

Tom's put together excellent info in his article and you should go over the whole article when you get the chance. Also, just want to let you know that IRS has Mr. Jack Brown dedicated to the fishing tackle industry to answer questions such as these. (June Rittscher has recently retired.) He has given seminars on the excise program at ICAST just this past month. I do not have the program for the fly fishing show in Denver, but I know that IRS has had a booth there for several years now.

If you are interested, his e-mail is Jack.R.Brown@irs.gov and, contrary to popular belief, asking questions does NOT make you a target!

Best wishes,

Bob Lee
Pacific Bay International, Inc.

Thanks for all the help. I went up and read Tom's article. Never had clicked on the library before. I had read Toms article in rodmaker seveal years ago. I emailed IRS and got an immediate, helpful answer. Seems like they have gone out of their way to make it as user friendly as a government tax can possibly be.