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FET nuances
Posted by: Michael Ward (162.191.124.---)
Date: April 29, 2022 08:59AM

Anyone have a good contact that can provide clarity on some of the nuances around the Federal Excise Tax, specifically when it comes to transforming parts which have already been imported and FET paid, but then transformed & sold to other rod builders....

I've set now for like 2 hours on hold with the IRS waiting to get through on their FET line to only get the call returned to the top of the queue... trying to find someone either within the IRS I can reach out to directly, or a tax atty that has specific understanding of this domain...

This is not just the normal "building a rod & selling" case - that is pretty clear and taken care of - but rather related to the colored anodized guides I am doing and what additional tax must be paid on those due to any transformation & resell process.

TIA!



Edited 1 time(s). Last edit at 04/29/2022 09:03AM by Michael Ward.

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Re: FET nuances
Posted by: Tom Kirkman (Moderator)
Date: April 29, 2022 12:25PM

If you are only reselling parts that you have already paid the FET on, there is no further tax liability. However, if you are using parts on which you have paid the FET, but using those parts on a rod you are reselling, the previous FET paid cannot be deducted from the FET required on the final selling price of the rod. The rod is a "new" item and is taxed in full.

I spent several days with the IRS FET people DC some years ago. This is the article which I wrote and which they signed off on- [www.rodbuilding.org]

.........

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Re: FET nuances
Posted by: Jeffrey D Rennert (---)
Date: April 29, 2022 01:31PM

Great article Tom! Thank you so much.

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Re: FET nuances
Posted by: Alex Dziengielewski (---.sc.cpe.atlanticbb.net)
Date: April 29, 2022 04:50PM

You are responsible for FET. You are remanufacturing the guide by adding the anodized coating.

Bait makers have the same issue. If they purchase an unpainted head and paint it, it's a new product and is liable for FET.

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Re: FET nuances
Posted by: Tom Kirkman (Moderator)
Date: April 29, 2022 06:34PM

Alex Dziengielewski Wrote:
-------------------------------------------------------
> You are responsible for FET. You are
> remanufacturing the guide by adding the anodized
> coating.
>
> Bait makers have the same issue. If they purchase
> an unpainted head and paint it, it's a new product
> and is liable for FET.

This is correct. As above regarding custom rods, anytime you build an item that did not previously exist, you have a new item and the FET is due in full. For resale, you'll figure the tax on 60% of your wholesale price (Constructive Sale Price). For retail, you figure the tax on the full selling price. The tax is 10% or $10, whichever is lower.

It is possible to get a #637 exemption from paying the tax at the time of purchase and may be something you wish to pursue. That is also covered in the article.

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

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Re: FET nuances
Posted by: Michael Ward (162.191.124.---)
Date: May 01, 2022 07:26PM

thanks all - I've read that article numerous times - just wasn't totally clear on how it applies in this case - and still honestly not totally clear on the 60% constructive sale price thing.... Have a lead on a current contact at the IRS thanks to someone here - hoping they get back and I can provide any feedback if I get it.... until then taking a conservative approach :)

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Re: FET nuances
Posted by: Tom Kirkman (Moderator)
Date: May 02, 2022 12:59PM

Generally the tax is intended to be paid at the first point of sale, which is at the wholesale or jobber level, not the retail level. So the "Constructive Sales Price" was developed so that manufacturers who sell direct to the public would not be taxed on 100% of the retail price. In effect, it creates a "wholesale" price upon which the tax is levied.

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

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