I am still in the dark on a couple things as a rod builder having to pay a fed. tax {yes I do quarterly}....I have a couple suppliers who show me paying a tax on my invoices while others do not...because...I am told that the tax they charge is hidden in the cost of the material...if this is so then the feds are double taxing the rod builder....am I correct on this and is this not considered double taxation and illegal but not in the feds eyes ???

Lastly is there a reason why gun repair people and rod builders are singled out as a sport and if so why are other sports suppliers and mfgs. not taxed accordingly ????

Sorry to have to add to this over forumed goings on but thats the way it seems to go when the feds. are milking us rodbuilders to death.

Once you assemble the parts into a rod, you have manufactured a NEW product and it is subject to a new tax. The FET on fishing tackle (since 1950) and sporting arms (since 1937) have been around for a long time and the reason no other sport equip is included id because the funds generated from these taxes are distributed back to the states to fund hunting fishing. [www.fws.gov]

Mike (Southgate, MI)
If I don't want to, I don't have to and nobody can make me (except my wife) cuz I'm RETIRED!!

Let me put the question another way. Has anyone ever heard of the IRS troubling someone over the matter of one or two rods? If the IRS is doing this, a congressional investigation into their waste of time and resources is called for. There is a lot more they can recover from some of these shady off-shore hedge fund dividend/share swaps . Of course one or two rods does have the possibility of becoming the slippery slope into a real business, and I have heard of people getting in trouble that way, but that's not my question.

Mike

Fred,

If you resell the parts, as they are, then there is no further tax liability. If you use them to create a new item - a fishing rod, then you are selling a new item that did not previously exist and the tax is due.

There is another problem in trying to deduct what you feel are previously paid taxes - you have no idea how much tax was paid on that item. That reel seat you bought for $15 has not had $1.50 in tax paid on it. The dealer you bought it from paid the tax at the first point of sale and he didn't pay $15 for it - he paid less than that but you don't know how much, thus there is no way you can figure any previously paid tax to begin with.

Finally, if you know you are not going to be selling parts, only rods, you can acquire a 637 exemption which allows you to buy parts without any previous tax being accessed. However, this only works if you buy direct from the manufacturer. When you buy from dealers, the tax has already been paid and included in the price. You should also be aware that a 637 exemption also opens you up for bi-yearly IRS audits.

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Mike,

I doubt the IRS would bother you over the sale of 1 or 2 rods, but that doesn't mean that they couldn't - selling 1 or 2 rods and not collecting the tax is not complying with the law. And, it's so simple to do that there really isn't any reason to put yourself in jeopardy. But if you feel lucky...


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Thinking about this, I'll off a couple of scenarios for amusement...

"Although the FBI pursued for years this notorious mobster, involved in extortion rackets, prostitution, drugs etc., they never succeeded in pinning any of it on him. However for amusement he did build and sell fishing rods and never filed a 720. With this they got him, and he's currently doing time for it."

A few months hence... "President McBama had to withdraw his nominee for Secretary of Interior. Although she was exquisitely qualified with an impeccable environmental record, opponents dug up the fact that she had once assembled a fly rod for a friend from components the friend supplied, and had not filed a 720."

Mike

Mike,

That is a really scarry scenario!

The sad part is, YOU NEVER KNOW!

Bill

Ohio Rod Builders

Canton, Ohio

This almost makes me want to stop building rods. It almost seems retarded if you are a hobbyist. So if I got this straight, if I build a rod for a friend, or friends, at NO charge what so ever it is illegal. If somone gives me a gift for building them a rod it is illegal. So there is NO way to just build rods cuz you like to do it for no profit unless you build a crap load of rods for yourself. I have way too many rods for myself already. So another question, if I sell a rod I have used for a while, to recover the costs of the components I used that is "illegal" too?? I really do not build enough rods a year to be hassled with filling out forms and such. Is there a way to just pay the freaking IRS this excise tax and not create a business?? I buy all my components retail, not wholesale if that makes a difference. It just seems very retarded. @#$%& sometimes I do not even wrap for a month or 2 or 3 just cuz I don't want too. I build rods at times for others cuz they have a good idea regarding components they want to use, some I even build the rod with them and let them do some of the work so they get the pleasure of saying they built the rod they caught their fish on. We just hang out, drink beer, and wrap away into the night. Is that also illegal? There has to be some catch or different law for hobbyist. There just has to be. I can understand the "hobbyist" that makes alot of rods and sells them with the intention to make profit being in violation. But to have to get a business started to build 6-12 rods a year?? Can I just send the IRS $100 and be done with it? If they came after me for building a few rods for some of my friends and locked me up, so be it. I will have lost faith in this country should that happen..... I save countless numbers of lives a year at work, do plenty of charity work and if that would be the way the government would pay me back? there is something severly wrong with that. If i build a rod to raffle off to raise money for a kid with cancer, whose family is on the verge of losing everything, I am "evading taxes" as a hobby rod builder.Please tell me it is not so. If it is I think I will have to give up rod building as it is too complicated to keep it as a hobby and something I enjoy to do. Just @#$%& that you cannot build someones kid a rod, or some close friends with out having to worry if you are breaking the law. I thought if you bought the components at wholesale the taxes were paid by the retailer, including sales tax, especially if I am not selling them.

Another example, a friend of mine gave me his pac bay rod wrapper because he was not using it anymore. He has seen my rods and wanted one. I am in the process of building him one, so this is also illegal? He could very well build one for himself, but wants one I made and crafted for his collection. And why did my post have words changed, one was "h-e-l-l sometimes I do not even wrap" I apologize if that is considered vulgarity or profanity here.

Giorgio,

We have many young readers here - their parents often tell me that they don't mind them reading our posts because they know we watch our language. And on occasion when we don't, I hear from them about that too. It shouldn't be too hard for you to get your point across without using bad languange.

Now, you also want to go back and read the information again - you have misinterpreted much of it, I think. The Federal Sportsfishing Excise Tax is not the same thing as your state's sales tax nor your income tax. These are different things.

You can build and give away all the rods you want and never incur any sort of tax liability. A hobbyist doesn't sell rods. Once you sell one, you leave the realm of hobbyist and become a businessman.

If you sell a rod, you are legally required to collect and pay the FET. You are also technically required to report it as income and to fulfill your state's sales tax requirement as well. It's as simple as that. There is nothing complicated or unfair about it.

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I have to jump in on this one...

The Federal Sportsfishing Excise Tax for custom rod builders is another way that Uncle Sam to get mine and your money; period. Yeah, I hear about "Oh, it goes to states for the improvment of this and that!" BULL! (And no, I'm not into the black helicopter conspiricy!)

I have asked many folks here in AK about the tax and the revunue generated by it and have YET to find anyone that is aware of it...I'm still looking though.

Bottom line, taxes hurt small business...No matter what side of the isle you are on.

Just my .02

The FET goes into the Sportfish Restoration program and it HAS done wonderful things over the course of time. It is one of the most fair ways to apply any form of taxation ... directly assessed to AND for the benefit of a specific group of users. In this case, we anglers.

Here's a link so you can study up - [wsfrprograms.fws.gov].

Sorry Tom about the language, I don't see it as foul, maybe a little heated. But no worries. As for the tax, well then I guess I am ok. I just want to make sure I have it straight. If my friend purchases the parts and I build the rod for him at no cost, all is well right. I know the excise tax is not the same as state tax, income tax or any other tax for that matter. I understand where the funds supposedly goto (even though in my state that is a whole other issue, not sure where our states "excise tax" money is going) But my other question has not been answered, should I decide to sell a few rods, do I HAVE to start a business or is there a way to just pay the tax for the occasional rod one might sell. Case in point, as this point I have built some rods for friends and they obviously have been using them on the local piers etc.... Also my rods get seen when I lend them to a friend or fish them myself. I have had request by many individuals to build them a rod, but have turned them down due to time constraints, lack of desire, or just plain didn't feel like doing it. Now should I decide to take on a build in order to sell someone a rod I build, parts being bought at retail not wholesale, can I somehow just pay the tax and not start a business venture. I mean the rods I build now are given away, or have gotten a friend show up with a set of guides and said " thought you might like these" after commenting on liking the guides I built their rod with. And that was after the fact. I would not mind building more rods in the future with the intent to maybe make a few dollars, but definetly not enough rods to justify getting a business license that would sit on the shelf collecting dust. I am not trying to be difficult, but have seen this question of excise tax, business vs hobby play itself out on many a forum and have yet to really get these questions answered.

Paul,

You are badly mistaken. In fact, the fishing tackle and boating industry asked that this tax be created. It wasn't cooked up by Uncle Sam and it doesn't go into the general tax fund. Attempts to raid the Sportsfishing tax have been successfully rebuffed at each and every opportunity.

The rod building, fishing, boating and hunting industries are fully behind this wonderful program that guarantees that our fish and game departments can continue to enhance and support fishing and hunting here in the U.S.

I can assure you that Alaska gets their fair share of excise tax money - in fact, your state received $19,996,886 from the fund last year. That's nearly 20 million dollars in 2007 alone. Since 1952, Alaska has received over 268 million dollars in sportsfish restoration funds all collected by the Sportsfishing Excise Tax.

You need to ask more knowledgeable anglers about this. The ones you're talking to simply aren't up to speed on what's going on with the fish and game department there in Alaska.

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Giorio,

As long as you aren't charging anything nor being compensated for the rods, you aren't liable for the FET.

Now if you decide to go into business, selling even just a few rods, then you are taking the plunge and will become a business/manufacturer as far as the IRS, your state and maybe your city/county are concerned. I'm afraid it's like being a little bit pregnant - you're either in the business or not.

At one of my excise tax seminars at the Expo in 2006, someone asked me about various little ways to get around the tax. I replied that the IRS sees things for what they are - they understand the tax laws and have seen every conceivable manner of fraud you can imagine. They know the difference between a guy who once upon a time swapped a rod build for a few beers and a ball game ticket (technically, that's liable) and a guy who is doing something to purposely get around paying the tax. Go talk to your local IRS agent and ask them about your situation - they're more than happy to help and answer your questions. And that way, you're getting the best possible information.

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

Guess it is time for a sit down with and IRS dude, cuz the curiousity is killing me.

Better off to pay now than five years down the road when Uncle Sam finds out you havent been meeting your obligations for the last five years and really smacks it to ya. I just set up my tax stuff thanks to this sight.

Mike

Mikes Custom Fly Rods

TOM,

Are you serious when you say ALASKA received over 19 million dollars last year? My jaw hit the floor Tom!!! You have got to be kidding me! Obviously I am not a tax guy. But, I have absolutly NO IDEA where that money goes! AKDFandG is so poor they can't pay attention.

The folks I did ask were at F & G, not everyday fishermen whom have absolutly NO IDEA about this tax.

You have my word, and I will eat CROW, that I will find out where that $$ goes and to what projects it has funded. I know you are a truthful man, but I will use all of my resources to find out where that 20 million dollars has gone! Where did you get that figure from?

That being said, I have seen many hatchery enhanced programs shutdown up here like the dot coms of 2000, the price of fishing licenses has sky rocketed, there are VERY FEW hunting programs here, and ADF&G stocks a handful of lakes with Kokanne and Rainbows. Nothing our oil-rich state cannot afford and The fish and game cops here are a division of the Alaska State Troopers. I find it hard to believe that 20 million $$$ has been sent to our Alaska Dept. of Fish and Game.

Thanks for the insight and I will keep you abreast as to what my findings are...

Paul

Paul -

I sent you the 08/09 fiscal year report for the programs funded in Alaska by the fund. The funds are disbursed ONLY by the state making a grant request with accompanying documentation. It is 100% guaranteed that someone up there does know about the program and how to apply for the matching funds.

Jim -

Jim,

Thnak you sir, MUCH appreciated and I will take a peek at them!

Respectfully,
Paul

Paul,

They're getting it. What they do with it I wouldn't know. But the Alaska Fish and Game Department gets more of these excise tax dollars than any other single state. I'm sure if you poke around enough someone can fill you in on exactly what your F&G people use it for.

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