[TheForge] opinions of tax status

Thu Dec 26 12:50:01 2002

To calculate the cost of coal, supplies, etc. for the individual item is
usually a little difficult unless you measure the amount of coal that you
start with and end with and unit costs of each supply item. Usually the
total cost is calculated at the end of the accounting period and charged in
total on the federal tax forms (local reporting depends on what jurisdiction
you're in.) There are many ways to determine how to distribute costs to
individual items that vary with the item. For examples: property taxes are
usually based on how much of the property the business occupies, the truck
on how many of the miles are for the business, lights on how long they are
on, coal and metal on actual weight or measure, and so on. Some things are
an educated guess - like how much water, oxygen, acetylene, propane, etc.
You can log your time spent on each project. On some supplies, it isn't
worth the effort to try to keep costs exactly by item. Your accountant can
advise you.

Ray Baker (CPA)
Frontier Forge
Olympia, WA

----- Original Message -----
From: "Larry" <[email protected]>
To: <[email protected]>
Sent: Thursday, December 26, 2002 8:50 AM
Subject: Re: [TheForge] opinions of tax status

> Another question on this same line........
>     When we make an item, that  has $XXX.XX of steel in it, plus forge
time,
> coal and such, plus what ever other expendables were required to
manufacture
> it, plus labor.  And then we sell it to the customer for $XXXX.XX, how do
you
> determine the actual profit on the item for income tax purposes?
>
> Thanks,
>
> Larry
>
> Bob Evarts wrote:
>
> > I figured I'd find out what the opinion is here before I talk to my
> > accountant.  When  we sell an item we've forged and/or fabricated
> > directly to a customer, are we providing a nontaxable service, or are we
> > selling a retail item that we should be collecting state sales tax for?
> > I'm just fishing for personal opinions here, and will let my accountant
> > be the final word.  I'm new to actually trying to make a living at this,
> > and so far, I haven't collected tax on anything, although most of what
> > I've sold has been to a retail outlet, so I haven't needed to.  I did do
> > some commission work through the Christmas season though, and this was
an
> > afterthought.
> >
> > Bob Evarts
> > Forging a good life from the raw material of time
> >
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