Selling Baits In Shell Knob

[dtrs5kprs]

A gentleman was recently kind enough to contact me with a concern related to federal taxes on baits. It is a subject I have become very familiar with but have not previously discussed on this forum.

Every tackle supplier must pay 10% Federal Excise Tax. This includes any product related to fishing. Of course, that cost is passed on to you, the consumer.

It may be hard to believe, but the federal government can also apply this tax to baits that are given away. In an oversimplified nutshell, if the IRS decides it is applicable, they require 10% of the value of the bait - supposedly. even if 100% of the money goes to a registered charity.

Two (2) separate CPA's I spoke with agree that the intent related to taxing free baits seems to be directed toward for-profit firms whose products are sometimes given away as promotional items. But the rule is not well defined (hard to believe that so many written words can shed so little light) and some believe it applies to all baits - period.

Based on expert advice, there are several ways to address this issue. Either the retailer or the wholesaler/manufacturer must pay the tax, but not both. I will be utilizing a tackle shop that already files quarterly. I have also incorporated the work into an existing charitable trust that we often use for our tithe. I am assured this keeps us on the pond and not in a cell.

I firmly believe "give unto Caesar what is Caesar's" also serves as solid tax advice.

Mike, it is definitely about as clear as mud. Have filed 720's quarterly for over a decade and still have not found anyone who can precisely say what is taxed, or when. Gets even worse if you start looking at 637 exempt purchasing. You make an excellent point about the tax not being paid twice, but think that is exactly what happens a lot of the time, at the small guy level. The FET on fishing tackle is frequently looked at as a boon to fisheries, but it is also tantamount to a value added tax, while also being in effect a national sales tax levied on specific items.

Never mind COE continuing to reduce access (and yes I am sure it is a different budget line, but at some point federal revenue is federal revenue, regardless of where it gets allocated). It would be much easier if we just went the national sales tax route, and scrapped the rest of the code.

[REDSOXWSCHAMP]

danger i'm glad that other people will get the opportunity to use your jigheads and other products, the wobble heads i got from you are working great, got one tied on now. good luck on your endeavor, and if there is anything I can do to help you get going, let me know

[jskutt04]

Do you know if they will put some in their Ozark store.

[Pepe]

Do you know if they will put some in their Ozark store.

I am sure they would if there was enough supply. I have everything needed to produce more, except time.

[fishingaddiction]

Great work Danger, and an great idea on putting your lures in local shops. I hope it goes well for you.

[longviewbasser]

What are all the kinds of high u make dangerclose

[Pepe]

What are all the kinds of high u make dangerclose

I'm not sure what to make of that. I do get a "high" from being on the lake, but I promise I am only making tackle in my shop, not growing Colorado Ragweed

[longviewbasser]

What kinds of jigs u make i mean stupid smart phone

[Quillback]

Never realized that small tackle manufacturers had to pay that 10% tax.

[dtrs5kprs]

Never realized that small tackle manufacturers had to pay that 10% tax.

Yes. It's a quagmire. IRS also audits companies like Lurecraft looking for folks who place large orders and are not filing.

To me it seems like it was designed to be paid (unknown of course) at the register when sold to the end user. As it works, it has the potential to be collected several times along the way, through accounting errors, or by folks who would rather overpay than risk being in a bad position if audited. Would say those are the same thing, but as Mike noted, there are lots of interpretations, and you can bet the one IRS uses will not be the one that favors your situation.