Have a question on the excise tax. I know some people list it separate on the invoice and some hide it in the rod cost.

If you hide it in the rod cost aren't you making the customer pay a higher sales tax as well, because the amount is included with the product?

My thought was if you list it separate you shouldn't have to pay a sales tax on the extra amount. I know its not a huge difference as far as $$$ is concerned. Its just that lately I've had a few people question the extra charge (because I list it separate). Just looking for a reason to tell customers the reason why I do it that way is for their benefit.

I could be wrong in my thinking, but it seems to make sense. Anyone have any input?

If you bury it in the sales price and then charge state sales tax on that amount, you are indeed paying more sales tax than due.

Some rod builders don't like to show the FET because "tax" is a dirty word among most consumers. Some don't realize that they're paying the FET on every reel, lure, line, etc., that they buy. Thus, they see the FET listed on a rod builder's invoice and think that this particular builder is charging them a tax that no one else is.

Generally, I think you're better off explaining the tax, show them where it goes and what it's used for and point out that they're already paying it on all their fishing items.

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I have it as a line item on my invoice right under state sales tax. Then, on the bottom of the invoice, I have this familiar text:

*Flat rate of $10 for rods over $160. This figure is calculated for rods selling for less than $160. Although relatively unknown to most fishermen, every time they purchase fishing tackle or related gear, they're paying a 10% user tax on that equipment. The reason that most aren't aware of the tax is simply because it's buried in the price of the gear. It is collected and paid by the manufacturer at the first point of sale, which is usually to a sporting goods jobber or distributor. Once buried in the price, it is passed on through each point of sale until it finally reaches the consumer.



Edited 1 time(s). Last edit at 01/08/2010 07:50PM by Chuck Mills.

Good idea Chuck. Nothing wrong with telling them that. All retail stores pass this tax on, added to retail. customer does pay the sales tax on top of the excise tax.
Kyle Robinson

You might want to add that the money, 94% of it (6% is retained by the U.S. Fish and Wildlife Department for administrative purposes), is returned directly the states' fish and game departments for fisheries enhancement and restoration. This money does not go into the general tax fund.

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I believe, someone speak up if I have this wrong as still trying to sort this out, but I believe the FET is 10% of the cost of the rod and capped at $10 per rod. So, any rod over $100 would have a $10 tax. Believe the $160 cost cap for $10 FET is the old tax.

Page 7, Section II, second section (IRS No. 110)
[www.irs.gov]

Agree with Tom, I have it as a non-taxable line item on my invoices (since I recently found out about this tax) with a brief explanation in the notes.

You're forgetting that the "constructive sales price" for any item sold to the end user is 60% of the selling price. The tax on a rod that sells for $100 is $6.

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I list the FET as a separate item in below the subtotal and next to the State sales tax. IMO, it is a good idea to let folks know 1) that your actual build price (parts and labor) is the subtotal and not as high as the grand total and; 2) that a portion of the grand total is going back into the sport they love. Absorbing any tax into a total sale is counterproductive from a marketing standpoint, IMO.

Be sure to read the article in the library ... [www.rodbuilding.org].

One final note, the 6% figure is ONLY for end user purchases. IF you are selling to a reseller, upfront or on consignment - the 10% figure should be used. The $10 cap is good for all transactions.

The big trick is to register, report and remit the FET ... anything less isn't a good idea.

Ahh, got it. Thanks, Tom!

I admit, the last time we discussed this subject I skimmed over the first of the article in the library (referenced by Jim) and just started chasing the IRS notes and links. Totally missed the "constructive sales price" and how that works. Good information and understand the "$160" now. Makes sense. I am still going to get an accountant to help me a little.

Thanks all for the clarification.

Eddie

Apparently Pennsylvania has different sales tax requlations than some states. I posed the "should I be including federal excise tax into my selling price when charging sales tax?" to the PA Dept. of Revenue. The answer I got back was " As per Regulation 33.2, amounts included in the taxable portion of the purchase price include: (6) Amounts representing costs to vendor. Charges, whether or not separately stated, representing reimbursement to the vendor for expenses paid by the vendor, such as manufacturer’s excise tax, gross receipts tax, fuel adjustment charges, mercantile tax, insurance, meals, lodging, mileage or similar expenses."
It may be best to check your state's sales tax regulations before proceeding down the path recommended in the first few posts.

Good advice, thanks.

Because the tax is considered part of the first point of sale, some states may consider it taxable as well.

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