Here in KY we are being taxed on all our gasses used
for welding due to the fact that the "gasses are not
part of the final product."
Are any parts of the gases used chemically combined
with the metals and thus DO become part of the final
product? Or, are the gasses just used (like electricity)
to bring the materials up to temp?
"DharmaOne" wrote: Here in KY we are being taxed on all our gasses used for
welding due to the fact that the "gasses are not part of the final product."
That's the law in CA also. I'm still trying to figure out how coated stick
welding rod should be taxed. The steel goes into the product, and the flux
does not. And if you are a poor welder, and have to do a lot of grinding
(like me,) shouldn't that affect the taxation?
What happened ? Did we export you a bunch of Europe's VAT inspectors
or something ? That has to be one of the most unworkably fuckwitted
rules I've yet heard !
"That's not an inclusion, it's a tax deduction"
How do you figure it to be an unworkable rule?
It makes sense if you have a grasp of the sales tax and how it works.
It's not just Kentucky, it's everywhere.
Everything you buy in the course of running a welding business is taxed at
some point (with very few exceptions). Because you have a tax resale
license, by whatever name your state uses, doesn't mean you get to not pay
sales tax. Everything you buy, without paying tax at the point you purchase
it, you have to charge tax for at the point you sell it, and report and send
in that tax to the government(s). They aren't letting you buy things, and
just giving you break by not charging you tax, they are deferring the
collection of the tax until after you have marked the product up, therefore
not just taxing your raw materials but instead taxing the total of
everything you add to the raw material cost between the time you purchase
material to the time you sell a finished product. And, making you do both
the paperwork and the tax collection on your final product.
If you look at consumables, they fit into the scheme of things as an item
you should rightfully pay the tax on at the point you purchase them.
Because two people have already posted to say that they can't work it.
All reclaimable sales taxes are a bad idea. They generate a fixed
amount of revenue per item, but the amount of administrative effort
increases with every business transaction. Of course it's not the
government who has to pay for this, it's the businesses.
Here in Europe we have a system that's bad enough. If I buy fnords, I
pay VAT on them. If they're for my business, I can reclaim this VAT.
If I sell something to another, then I must charge them VAT and pass
it to the tax office. However no-one cares what my business _does_
with these fnords. I can sell them on at retail. I can melt them down
and cast them into statues of Gordon Brown. I can even balance them on
my head to help me concentrate while I'm doing the casting. No-one
cares - they count the values, and they don't want me sneaking them
home for my personal use.
Now Europe's VAT rules are crazy. The rates change for "essentials"
and "luxuries". Apparently children's clothes are essential but
adult's aren't. Biscuits are one thing, cakes another. Years ago I
had a tax office communication informing me that for the purposes of
VAT, edible snails were now to be regarded as "land-based fish". At
that point I realised these people were clearly insane and I just
shouldn't worry about them.
But this law is even worse. It's not just based on dipping every
businesses' pockets. It's not just imposing arbitrary categories of
high and low tax. This law appears to be based on the _usage_ of the
item. Now mollusc taxonomy clearly over-stretched the minds of these
tax gnomes, so how are they expected to understand welding? If I buy
paint, does that change for tax depending on whether I use it to paint
my products, or to paint my workshop door ? What happens if I buy 10
cans of paint, use 9 of them for a production run and then get left
with the last one ? If I use it to brighten the workshop instead, did
I just commit heinous tax fraud ?
No they didn't, they are looking for a way around it.
I skipped that part as I have no interest in understanding european tax
You don't have the grasp of the concept, so your comments are about as
pertinent as mine would be on the VAT. Usage is beside the point in the end.
It seems welding gases fall under this guideline for what is exempt at least
in Minnesota for a company doing manufacturing.
I know repair shops pay tax upfront on allot of their purchases even if
they are for resale.
Materials and supplies that are a component or ingredient or are consumed,
destroyed, or lose their identity in the manufacture of products you will
sell to customers. This exemption allows nontaxable purchases not only of
raw materials, but also any other materials consumed during manufacturing
that do not actually become a part of the finished product, including acids,
bleaching agents, oils, greases, sandpaper, etc. This exemption does not
include apparel or safety equipment worn by employees, chemicals and
cleaning agents used to clean the plant or production equipment (except food
processing), and tools.
"Steve Peterson" wrote: (clip) It makes sense if you have a grasp of the
sales tax and how it works. (clip)
This is true. But rules which are simple and obvious in 99% of the
applications can appear ridiculous under some circumstances, and these are
the cases people love to cite: I'll give you an example from my paint
store. Paint thinner is taxed when it is sold to people use it to clean
brushes, or thin paint,
except for sign painters. A sign painter charges sales tax on the finished
sign, so the thinner he uses in his paint is purchased for resale (no tax at
time of purchase.) But the thinner he uses to clean his brushes is consumed
by him--not resold--so the paint store is supposed to tax it when he buys
it. I could not decide how to handle this, so I called the California tax
people, and they told me I had to estimate what proportion of the thinner
was used to clean brushes. How did I handle it? Every once in a while I
would charge the signpainter sales tax on his thinner. I can't think of a
better way, but it certainly doesn't seem rigorous.
The way you snipped the message made it appear I said something that was
part of JTMcC's statement. I agree tax exemption laws are quite confusing
and I try my best to abide by the law in purchasing materials for my small
business. Paying sales tax twice on items really sticks in my craw but
sometimes it is easier to pay twice than to try to sort it all out.
"Sven" wrote: The way you snipped the message made it appear I said
something that was part of JTMcC's statement. (clip)
Sorry about that--I'm taking your word for it--I tried to backtrack through
the posts to see what I did, and I give up; I can't unscramble it. At least
it was not a case of violent disagreement.
I will comment on another part of your answer: how to deal with double
taxation. At least in California, and I suspect in most states, if you keep
track, there is a place on the tax return to claim credit for this.
Probably not worth the trouble unless it is something very large, but I
thought I'd mention it.
The position of taxes is much clearer if you look at government as a
very large corporation with the ability to require every person in its
geographic area to uses its services at a cost it determines. Like any
corporation that has a monopoly there is no incentive for efficiency or
cost control. The more "services" you provide the more taxes you can
justify, and more employees. With more government employees you have
fewer people to vote to reform the system by reducing government. Taken
to the extremes and you have stagnation in the economy, and a reduction
in the standard of living. This is essentially what happened to the