I was told there is a lot of good info on the Federal Excise Tax (FET) on this forum. I tried the search typing in FET and Federal Excise Tax and came up empty. Can someone help me out?

Captain Mike

As you wish...

[www.rodbuilding.org]

You can also do a search for TAXES or TAX

Chuck



Edited 1 time(s). Last edit at 08/26/2009 03:21PM by Chuck Mills.

Thanks Chuck, I found the info. What a great forum.

Captain Mike

Its really simple. Look at the profit that you have made in building rods over the quarter and take half of that and give it to the feds.

Unless you build a rod or two for a friend at cost of parts and there is 0 profit. The taxes are still due...

Thad
Dutchman's Creek Tackle

Tongue in cheek aside, you do not pay anything to the IRS - you simply forward your customer's tax to the IRS. He pays the tax - not you.

The amount was capped at $10 a few years back. So if you're selling to the end user, you'll charge either 6% or $10, whichever is less. If you sell to a reseller (sporting goods shop, etc.,) then you charge 10% or $10, whichever is less and the reseller passes this on the retail customer.

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

Thad,

If a sale is made, even at the cost of parts, the tax is due. Whether you make a profit or even if you lose money on the transaction, if a sale is made, the tax is due on the selling price.

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

Thad,

If a sale is made, even at the cost of parts, the tax is due. Whether you make a profit or even if you lose money on the transaction, if a sale is made, the tax is due on the selling price.

So if you build a rod for a friend, and sell it for the cost of the parts, you must charge him 6% of the selling price or $10, whichever is less.

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

Tom Kirkman Wrote:
-------------------------------------------------------
> Thad,
>
> If a sale is made, even at the cost of parts, the
> tax is due. Whether you make a profit or even if
> you lose money on the transaction, if a sale is
> made, the tax is due on the selling price.
>
> So if you build a rod for a friend, and sell it
> for the cost of the parts, you must charge him 6%
> of the selling price or $10, whichever is less.
>
> ...............


AND ... if your friend gives you a gift card to a restaurant OR anything of the sort, that is "bartering" and taxes are due on the value of the barter at typical income based rates.

The one thing the Gov can do on time is get me my 720 every quarter.

Does this include hobbycrafters who do not have a tax ID number?
steve

IF you build a rod for sale (whether for profit OR for component cost) or barter, the tax is due. The ONLY "hobbyists" are ones building for themselves or an occasional gift to a friend or family member. There is not a "gray area" ... unless you are talking about the color of the paint on the cell walls.

Here's a very nice article that Tom wrote quite awhile back ... [www.rodbuilding.org].

BTW, it is very easy to obtain a FEIN and it can all be done online and at no charge. It is possible to file the 720 Excise the first quarter with your own SSN, but after that it is mandatory to have an actual FEIN. Honestly, since it takes minutes to obtain your FEIN - it makes sense to get it prior to the initial filing.

[www.irs.gov]

[www.irs.gov]

If I order the components needed to build rods for myself and friends, they then pay me for their share of the components ( much like we do when we order anything related to the outdoors, one person orders for all and then is repaid) and I then agree to put the rods together for them at no cost because I enjoy doing it, there should be no tax if I read Toms story correctly. Right?, Because the tax has been collected already and there was no re-sale no barter, just one person doing the work of putting rods together for a group of friends who bought components. I am not trying to argue, I just want to be sure I understand.

I began this hobby this winter with no intention of making money, just enjoying myself by putting rods together for friends and family and jokingly I told my wife I was trying to stimulate the economy too.

Steve

Steven,

The IRS would tend to frown on what you're doing because others have done it in the past in order to try and evade paying the tax. The fact is, fishing rods are being manufactured and you'll have to do some work to convince the IRS that nothing fishy is going on. You'll be okay, but they'll still wonder why you're doing this. Their take is going to be that guys are having fishing rods made and no tax is being pad. This is why the excise tax applies to rod kits as well as rods. However, if no money changes hands with regard to the rod itself, then no tax is due.

The best way to go about this is not to allow any money to change hands between theirs and yours - have them buy the components from the component supplier and then bring them to you for free assembly. This way you are not involved in any way in anything that might look suspicious to the IRS.

I'm not saying that you're doing anything wrong, but in talks I've had with the IRS Excise Tax people, it's amazing the amount of fraud involved when it comes to collecting and paying the tax. You've got guys building a rod and leaving the tiptop and butt cap off, and selling it as an incomplete rod (won't pass muster - the tax is still due) or a guy selling it to a buddy for $1, paying a 6 cent tax (the tax is only due at the first point of sale) and then having his buddy mark it up and sell it to the actual customer for the regular price. That won't fly either - it's called "within arm's reach transaction." It's fraud.

At one point, I had argued with an IRS agent about whether or not any tax is due if you give a rod away for free - no barter, no compensation of any kind whatsoever. His take was that a tax was due on an estimated price of the rod - a rod mad been manufactured and therefore somebody owed something. My argument was that since the tax is due at the first point of sale, and there was no sale, no tax was due. We went all the way to D.C. on that and I won. No sale (no compensation of any kind) = no tax due.

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

Tom Kirkman Wrote:
-------------------------------------------------------
> The best way to go about this is not to allow any
> money to change hands between theirs and yours -
> have them buy the components from the component
> supplier and then bring them to you for free
> assembly. This way you are not involved in any way
> in anything that might look suspicious to the IRS.


This is FABULOUS advice. I would be willing to bet that a great number of sponsor vendors would be more than happy to accept EACH of your friends' individual payments for THEIR respective components and then combine them into a single shipment.

Keep your hands clean ... remember the gray paint. The IRS doesn't play and the sting lasts.

Thanks Tom,
I am not doing anything fishy. The first rod I built for a friend I did have them buy the components and I then put it together. It just seemed easier for me to go ahead and get everything. Guess I better stick with having them buy the stuff. I am running out of friends who want a rod built anyway, just be the grand kids and family. I have felt pretty good about buying stuff and supporting the sponsors to the left. Boy! with all the things going on in this world...This just bums me out..
steve

If you are not a business then no worries. If you dont sell your product to the public then you have no worries unless your friends turn you in to the IRS. I go around with them all the time and they have no want to infringe on a hobby that yeilds no profit. Start a rod building company and pay your tax or build your rods and give em to whom ever and dont worry about it.

Jason Kesckes. Aint no fish'n like bass fish'n

Kevin,

Were you serious in what you stated? If so, where on God's green earth did you get that info from?

thx....
Paul

I think Kevin was making a joke.

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

I know he was making a joke. Because there is NO profit in rod building ... at least not if you do it right.

Whatever "gross profit" that you make, divide it as follows: 1) Take 1/3 and buy yourself some new blanks to test AND a few new reels to pair with them. Sell one or two, but keep most of them since you are so attached; 2) Take another 1/3 and buy yourself some new tools ... nothing like a fresh blister or two, maybe even a serious friction burn off a new lathe; 3) Take the last 1/3 and head off to High Point for some "education", camaraderie and a few seriously needed new gadgets.

So ... according to my "formula", the IRS won't be doing much collecting since there is nothing left but great memories and a serious need to do it all over again.