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Sales Tax your not going to be happy with this

Started by just_sawing, June 05, 2015, 08:59:01 PM

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just_sawing

We have posted before about splitting rails and are in the middle of doing so with success. We were told that since it was a finished product we may need to collect Sales
Tax in TN. We checked and checked with different views finally getting out Tax man that is very good involved.
Here is the bottom line if your lumber is used as a fungible (Dunage, cribbing, Ties etc) it does not have to have tax collected but if your lumber is used to build it increases the value therefore you have to collect Sales Tax. This is different than the rules 20 years ago when if it came off your property you did not have to collect, that has changed.
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Sixacresand

My observation:  In Georgia, farmers and people claiming to be farmers, can apply for a GATE (Georgia Agriculture Tax Exemption).  With this they can buy ag equipment and nice tractors with no sales tax.  And I can go the farmers Market through out the state and buy produce and not pay sales tax.  If you buy it in the Grocery store, you have pay sales tax. 
Sawmill purchases, for processing lumber from a tree farm, does not qualify for the GATE sales tax exemptions and you pay 7% sales tax on your $30K new mill.  A lot of the support equipment qualifies for exemption because it can be used in maintaining the tree farm.  As far as I know, customers who have logs cut into lumber do not pay sales tax.  At least I don't collect any and pass it on to the State.  I might be doing it illegally.  Don't know. 
"Sometimes you can make more hay with less equipment if you just use your head."  Tom, Forestry Forum.  Tenth year with a LT40 Woodmizer,

WDH

Quote from: Sixacresand on June 05, 2015, 09:27:36 PM
Sawmill purchases, for processing lumber from a tree farm, does not qualify for the GATE sales tax exemptions and you pay 7% sales tax on your $30K new mill. 

I thought that if your farm qualified for the GATE sales tax exemption, i.e. met the income requirements for a farm, the sawmill to saw lumber from the trees that you are growing does qualify.  This is a pretty important point for me, so please share any info that you can.  Looks like I might just be about to break the law  :).
Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

Sixacresand

Quote from: WDH on June 05, 2015, 09:47:34 PM
Quote from: Sixacresand on June 05, 2015, 09:27:36 PM
Sawmill purchases, for processing lumber from a tree farm, does not qualify for the GATE sales tax exemptions and you pay 7% sales tax on your $30K new mill. 

I thought that if your farm qualified for the GATE sales tax exemption, i.e. met the income requirements for a farm, the sawmill to saw lumber from the trees that you are growing does qualify.  This is a pretty important point for me, so please share any info that you can.  Looks like I might just be about to break the law  :).
I hope that works for you, Danny.  The GATE rules on web site says specifically no to sawmills.  When I applied for GATE for a sawmill tractor, I had to not mention the mill and concentrate on tree farming.  See you at the "Big House"  :D
"Sometimes you can make more hay with less equipment if you just use your head."  Tom, Forestry Forum.  Tenth year with a LT40 Woodmizer,

POSTON WIDEHEAD

Anything that was grown on your farm, trees, Maters, etc. does not have to be sale taxed.
South Carolina.
The older I get I wish my body could Re-Gen.

redprospector

New Mexico doesn't miss a beat. Trees aren't considered agriculture here (funny how the "public" land around us is called US Department of Agriculture, Forest Service  :D)
If you sell it here, the Governor wants her cut, with exception of a few chili farmers, and any groceries have no "sales tax" (but that's another story all together). They don't call it a "sales tax" here either, it's called a "gross receipts tax". It's charged to the business, or person selling something, or performing labor, then we are "allowed" to pass it on to our customers. It also allows the government to refuse to pay you the "gross receipts tax" if you do work for them, or sell them something.  :D
1996 Timber King B-20 with 14' extension, Morgan Mini Scragg Mill, Fastline Band Scragg Mill (project), 1973 JD 440-b skidder, 2008 Bobcat T-320 with buckets, grapple, auger, Tushogg mulching head, etc., 2006 Fecon FTX-90L with Bull Hog 74SS head, 1994 Vermeer 1250 BC Chipper. A bunch of chainsaws.

starmac

Unless they have changed in the last few years, New Mexico even charges GROSS reciept taxes on labor. Pretty much any penny you can spend is taxed.
They do have pretty low property taxes though.
Old LT40HD, old log truck, old MM forklift, and several huskies.

redprospector

Yep, property taxes are low. That's how they lure you in, then they make up for it everywhere else.
In New Mexico, if you've got 2 nickels...the state wants 7 1/2 cents of it.  :o
1996 Timber King B-20 with 14' extension, Morgan Mini Scragg Mill, Fastline Band Scragg Mill (project), 1973 JD 440-b skidder, 2008 Bobcat T-320 with buckets, grapple, auger, Tushogg mulching head, etc., 2006 Fecon FTX-90L with Bull Hog 74SS head, 1994 Vermeer 1250 BC Chipper. A bunch of chainsaws.

addysdaddy

You folks don't want to come north of the border... :snowball: 15 cents on every dollar for pretty much everything... >:( Gas has 3 separate tax's. they charge you provincial tax, gas tax, add that together and then federal tax on the total so they're even taxing the tax you pay.. :o :o :o
Trying to think of something Cool to say kinda defeats the purpose.
LT10
Kioti with winch.
Husqvarna fan

Ron Wenrich

In PA, if you are selling business to business, there isn't a tax.  They're supposed to have a tax number.  You're supposed to collect it if you are going to an end user in a retail situation.  There are a ton of exemptions.  There is no tax on firewood, but there is on mulch.  I imagine you're supposed to charge for tax on sawdust, except if you're selling for agriculture or manufacturing.  Lumber would fit in that mold.  In the case cited of split rail fencing, if it goes to a farmer, no tax.  If it goes to a residential household, then you need to tax. 

Since our operation was mainly selling to commercial users, we didn't have to worry too much about sales tax.  There were the occasional sale to a retail customer.   
Never under estimate the power of stupid people in large groups.

Bruno of NH

Live free or die
In NH we have no sales tax !
We get it on the property tax .
Jim/Bruno
Lt 40 wide with 38hp gas and command controls , F350 4x4 dump and lot of contracting tools

WV Sawmiller

When I got interested in sawming lumber I checked with WV tax people. I thought because I was just providing a service I was exempt. Wrong! WV wants her 6% on just about everything.
Howard Green
WM LT35HDG25(2015) , 2011 4WD F150 Ford Lariat PU, Kawasaki 650 ATV, Stihl 440 Chainsaw, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once

red oaks lumber

here we have to charge tax even when we saw a customers logs or plane his lumber ;)it seems we spend more and more money with the accountant just to try to comply.
wisconsin is one of the highest taxed state for everything
the experts think i do things wrong
over 18 million b.f. processed and 7341 happy customers i disagree

SwampDonkey

There is an exemption here based on income. No GST (goods and services) tax if your below $30,000. Many do charge anyway, so they can get the GST rebate on business expenses. And now they charge income tax on any claimed on a GST 380 rebate form, the following year. How a tax rebate is income is anyone's guess.
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

Tom the Sawyer

Although we are certainly making the news with our tax  and budget issues, in so far as milling goes, Kansas takes this approach:

Trees are "real property", whereas logs are "tangible personal property".  Once the material is severed from the real estate, it becomes tangible personal property.  So if you hire someone to cut trees down (or prune them), it is not taxable.  If you hire someone to split firewood, or mill logs into lumber, it is taxable.  Mowing grass is not taxable, raking the grass is taxable.  Makes sense... right?  Milling, setup, other labor, kiln drying and planing are taxable.  Travel Fees (based on mileage), blade damage fees, not taxable.
07 TK B-20, Custom log arch, 20' trailer w/log loading arch, F350 flatbed dually dump.  Piggy-back forklift.  LS tractor w/FEL, Bobcat S250 w/grapple, Stihl 025C 16", Husky 372XP 24/30" bars, Grizzly 20" planer, Nyle L200M DH kiln.
If you call and my wife says, "He's sawin logs", I ain't snoring.

Brad_bb

Quote from: just_sawing on June 05, 2015, 08:59:01 PM
... but if your lumber is used to build it increases the value therefore you have to collect Sales Tax. This is different than the rules 20 years ago when if it came off your property you did not have to collect, that has changed.

This is the definition of a VAT tax - a Value Added Tax.  That is what Europe has and what the us has been adopting more and more.  VAT is bad.  It makes US products cost more than imported products which do not have taxes on them like those from China.  It's a misconception that cheaper labor is the sole reason for Chinese (and mexico and others) costing so much less than US products.  Taxes can be an even bigger factor.  The US is killing its own competitiveness through the way it taxes goods.  This is a big part of the FAIRTAX proposal (supported by Huckabee and many others), to make the US more competitive.  What I'm saying is that the problem is far larger than just the lumber issue.  It's just creeping it's way into every crevice of our lives and killing competition.
Anything someone can design, I can sure figure out how to fix!
If I say it\\\\\\\'s going to take so long, multiply that by at least 3!

starmac

One of the things I love about Alaska, no sales tax except in certain towns. Even at that some have a limit, I think the town of Wassilla has a 12 dollar limit, no matter how big the purchase is. No state income tax, and no property tax on any land owned outside of the borough limits.

The only problem is the state has expanded it's programs since the price of oil has been up the last few years, and is now hurting because of cheap oil, so I'm willing to bet an overhaul on taxes is coming down the road.
Old LT40HD, old log truck, old MM forklift, and several huskies.

WV Sawmiller

Brad,

    I disagree VAT in and of itself is bad. None of us like any taxes but I'd always prefer to pay VAT vs income taxes because I am only paying VAT on items I purchase and use plus everyone who buys something pays it. I.e. I help control what I pay taxes on by what I choose to buy or not to buy. With an income tax only the people working reported jobs pay taxes . (Did you ever hear of a drug dealer paying income taxes - if he had to pay on his purchases even people with illegal income would be paying taxes on their purchases.) I don't mind high alcohol and tobacco taxes - because I don't use them. Taxes on gas are use taxes paid by those driving and using it (I do keep a record of gas I use in my mill and my accountant reports it to recover road taxes since it is used of off an road purpose.) and gas taxes are earmarked for road maintenance.

   I think most of us agree we need taxes to support our roads, military,  police and other essential services. The problem I and most of us on this forum (I suspect) have is seeing our taxes wasted on over-priced, poor quality items we don't need or want.
Howard Green
WM LT35HDG25(2015) , 2011 4WD F150 Ford Lariat PU, Kawasaki 650 ATV, Stihl 440 Chainsaw, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once

Brucer

A true Value Added Tax will not favour (or penalize) the goods from another country.

Canada's 5% GST is a federal value-added tax. Here's how it works.

When I buy a load of logs (for $7000) I have to pay my supplier 5% GST ($350), which he is collecting on behalf of the goverment.

When I sell the timbers and lumber I cut from those logs (for $15,000), I have to collect 5% GST ($750) from my customers. However, when I submit the taxes I collected to the government, I can claim as a credit the $350 in taxes that I paid to my supplier. That means I pay the government $750 - $350 = $400.

This same principle works up and down the supply chain. Consider a timber-frame carport ...

Log owner sells raw logs to my supplier for $4000, collects $200 in taxes. Government receives $200.

My supplier sells me select logs for $7000, collects $350 from me in taxes. Government receives $350 - $200 = $150.

I sell timbers and lumber to a contractor for $15,000 and collect $750 in taxes. Government receives $750 - $350 = $400.

The contractor sells a timber-frame carport to the customer for $40,000 and collects $2000 in taxes. Government receives $2000 - $750 = $1250.

At the end of all this, the customer has paid $2000 in taxes and the government has received $200 + $150 + $400 + $1250 = $2000. All of us in the middle of the transaction recover all the taxes we had to pay, but only after we sell a product.

Suppose the customer instead wants to buy a pre-packaged carport from (say) the US for $40,000 (in Canadian dollars). When the package crosses the border, the border agency will collect 5% GST, or $2000. Exactly the same as if the customer had bought a Canadian made product.

A true Value Added Tax is a retail tax that applies to any goods sold in the country, regardless of where they originate. What distinguishes it from a plain old sales tax is that the government is collecting a portion of the tax at each stage of the manufacture.

At the end of the day, no one in the supply chain is out of pocket for the VAT once they've sold the goods on. Only the end customer is on the hook for the full amount.
Bruce    LT40HDG28 bandsaw
"Complex problems have simple, easy to understand wrong answers."

Magicman

I don't even want to ask any questions!!   ::)  :o
Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

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Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

Ron Wenrich

Brucer

I think the argument against the VAT is there is too much bureaucracy involved.  If the end user is going to pay the tax, why are all the middlemen also paying taxes and doing all the additional paperwork.  I see how it works, and it isn't anything other than a 5% sales tax.  But, it's collected at various points along the process.

Our sales tax in PA is a little higher, but we only charge the end user. 
Never under estimate the power of stupid people in large groups.

Ianab

Fair comment, but the book keeping is relatively simple.

You know everything your business buys has tax paid on it. Everything your business sells has tax included in the price. Same price if you are selling to an end user, or a tax registered business. End user can't claim that tax back, a business user can offset it against the tax they collect.

The tax doesn't need to be worked out on each individual sale, although it's automatically calculated and shown on the invoice. Then at the end of the month your accounting system spits out a report, how much stuff you bought vs how much you sold. Pay tax on the difference.
Weekend warrior, Peterson JP test pilot, Dolmar 7900 and Stihl MS310 saws and  the usual collection of power tools :)

Ljohnsaw

Well, California has done one better.  We now have a lumber FEE.  It is small (1½% IIRC).  The problem is, it is a fee, not a tax.  When you buy a bunch of lumber, you pay both sales tax and the lumber fee.  If you don't use it all and return some, you get your sales tax on the returned items but not the lumber fee.

Now get this, I bought some Hardi Plank to fix a wall.  There was a lumber fee on it!  I said, this isn't wood! Its concrete! :-[  The register person said, it has wood in it - that's a stretch, it has paper layers. ::)
John Sawicky

Just North-East of Sacramento...

SkyTrak 9038, Ford 545D FEL, Davis Little Monster backhoe, Case 16+4 Trencher, Home Built 42" capacity/36" cut Bandmill up to 54' long - using it all to build a timber frame cabin.

Brucer

Don't get me wrong. I'm not in favour of any form of sales tax. But I gotta follow the rules.

The bureaucracy isn't that involved.

I keep a file for all my sales (which I have to do for income tax purposes anyway). I just have an extra column to enter the GST I collected.

I keep another file for all my expenses (which I have to do for income tax purposes anyway). I just have an extra column to enter the GST I paid.

I keep a third file or all my material purchase (which I have to do for income tax purposes anyway). I just have an extra column to enter the GST I paid.

The computer totals all of these for me when it comes time to pay my taxes. I file my taxes on-line every quarter -- takes about 15 minutes. The only thing I have to send the government is a cheque. They don't want any other paperwork (but I sure better have all my receipts on file if they ask).

As so why they do it this way instead of a straight retail sales tax -- the government gets to collect some of the tax early on, before the final retail sale is made.
Bruce    LT40HDG28 bandsaw
"Complex problems have simple, easy to understand wrong answers."

Brad_bb

WV Sawmiller, you made my point for me.  Income tax, taxes only those earning a reported income.  So yes the tax base is small- only 50 percent pay any income tax.  The Fairtax eliminates income tax and consolidates all of the hidden federal taxes into one visible salestax on new goods and services, and those who are paying income tax today will end up paying less because it will broaden the tax base.  More people will have skin in the game.  When the drug dealer goes to buy a new car or new Rolex, they will pay tax.  Also by eliminating income tax, you no longer have to file taxes, there will no longer be loopholes and exemptions.  You would control what tax you pay by deciding to buy something new, or something used where you would be paying tax.  New goods are taxed only once.  Currently you pay all sorts of hidden taxes.  Income, payroll, Alternative minimum, Estate, Excise, Gift, Corporate(which is actually paid by the end customer), Capital gains, Medicare, Self Employment, etc.  Fairtax eliminates all of these and instead there is only one simple visible sales tax on new goods and services. 

Although it's not called that, we have a form of a VAT tax in that all of the aforementioned hidden taxes are embedded in the goods you buy at every level of production.  Use a car for example, the mine that mines the iron ore pays payroll, medicare, SS, fica, excise etc and that 's rolled into the cost of the raw ore.  The mill then has those same embedded taxes for the steel they produce, and it keeps going.  One study showed that up to 40 percent of the sticker price for a new car is embedded taxes.

Since we have a form of a VAT, it makes US produced products more expensive here due to all those embedded taxes at every level of production.   In China, they do not have those embedded taxes on goods they export.  So US good may be up to 40 percent more expensive just due to our own taxation, thus making out products un-competitive.  By removing those embedded taxes and going to the Fairtax, US products would be far more competitive and many (but not all) products that went overseas, would come back to the US creating many jobs.
The FairTax was first proposed in 1996 as a bill in congress and is currently Senate Bill 35 and House Bill 55.   Many politicians in congress don't like it because it would take power out of their hands and lobbyists hands.  If there is no longer an income tax code, powerful lobbyists can't bribe congress into passing special tax loopholes.
The Fairtax, "Once you understand it, you'll demand it".

We do need tax money for the necessary functions of the Federal government.  The Fairtax doesn't reduce taxes, it collects the same amount, but changes the way they are collected.  Reducing taxes is a separate issue, but would be far easier with the Fairtax as it consolidates all the hidden ones in one visible place.
Anything someone can design, I can sure figure out how to fix!
If I say it\\\\\\\'s going to take so long, multiply that by at least 3!

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