Would I be tax exempt under Industrial processing.
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  1. #1
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    Default Would I be tax exempt under Industrial processing.

    I own a welding company, we weld and fabricate just about anything, I'm buying a used Forklift and am wondering if I fall under any tax exept status for (Industrial Processing) I know when I'm working at my concrete and asphalt plants, I cant charge them sales tax because they process raw materials... my accountant is a little fuzzy in this area, so I thought you Gentlemen might know of any loop holes for something of this nature.

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    My understanding is you are tax exempt for:

    Anything used directly in manufacturing.
    Anything used or consumed in manufacturing.

    That's what I've put on tax exempt forms and never had any troubles.

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    It depends entirely on your state.

    In my state, you don't pay sales tax on anything related to manufacturing, printing/media, agriculture, or services.

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    Here, let me help you out. Go see your CPA and not a bunch of people on the internet.

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    not sure I get your question. If you are in the business of buying and selling forklifts, you would not pay sales tax on it, because you'll be collecting sales tax on it when you sell it.

    To be tax exempt on a forklift because you weld, that just doesn't even make any sense.

    But, are you talking about a sales tax incentive to get people to buy machinery? Obviously that would vary from state to state, but the last few machines I bought there was a program in California where they cut the sales tax in half. That was a nice chunk of change.

    But, like wild west said, check with your accountant. And if your accountant is fuzzy on the matter, you need a new accountant.

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    Some sellers want you tax number to give tax-free.

    Some just give it with the bill to a company name...

    used Forklift?

    Seller does not want the state coming around with "You owe some sales tax dollars".

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    I am assuming you are referring to sales tax. If so, if you purchase a FL for resale then with the proper tax ID you do not pay sales tax on it and you collect it when you sell it. If you buy a FL (new or used) for use in your business you will pay sales tax on it. Now, if you are trying to purchase a FL for use in your business and not paying sales tax on it using your resale ID then I would advise against it. States take a very dim view of this and the fines can be considerable. TALK TO YOUR CPA!!

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    Here in the US, sales tax is governed by state laws, so the only people who should be responding to the OP's question are people conducting business in Michigan. Everything else is just noise. You really need to talk to your CPA... lacking that, go to the Michigan gov't web site and see if they have a page about sales tax exemptions for production equipment, and exactly what is exempt, and what documentation you need to claim the exemption.

    Dennis

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    I would stay away from “loop holes” and just follow your state tax laws.

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    It varies by state and if you buy your forklift in another state the rules can be different.
    Funny that your accountant is hazy on this.
    If the lift truck is used 100% as a integral part of your manufacturing operation I would think you should be tax-exempt here in Michigan under industrial processing but I am not a CPA or tax lawyer.
    Is your accountant a CPA and used to dealing with fab shops or the such?
    You may be missing other benefits.
    At the least google "state of michigan sales tax exemption industrial processing" and read the state guidelines.
    Note that you do have to pay sales tax on office supplies/equipment (with some exceptions) and any vehicle that has a license plate.
    Anything that is consumed in the manufacturing process like machines, dies, tooling, packing peanuts, safety glasses, etc. is exempt.
    Obviously raw materials like your steel are exempt.

    More to the point, I have never paid sales tax on a lift truck but you have to provide the tax-exempt form to the seller.
    If you are a regular customer of Mc-Master, MSC or the like you have to renew this form on a regular basis.
    Bob

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    Quote Originally Posted by Portable Welder View Post
    I own a welding company, we weld and fabricate just about anything, I'm buying a used Forklift and am wondering if I fall under any tax exept status for (Industrial Processing) I know when I'm working at my concrete and asphalt plants, I cant charge them sales tax because they process raw materials... my accountant is a little fuzzy in this area, so I thought you Gentlemen might know of any loop holes for something of this nature.
    Basic stuff, this. If your Accountant is "fuzzy" on that? Either they haven't been given clear information about your business. Or they are not much of an Accountant. Book keeper or "Posting Clerk", rather, and reading challenged, even so.

    Fix BOTH situations or you risk bigger problems than this one.

    For example.. those clients you "cannot charge sales tax"? You need to have a copy of THEIR exemption cert / State tax number in your files and associated with each invoice to them.

    Some, not all, or your own suppliers need the same info from you. None of this should be "new information" if you are paying an Accountant.

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    Quote Originally Posted by Monarchist View Post
    ......

    For example.. those clients you "cannot charge sales tax"? You need to have a copy of THEIR exemption cert / State tax number in your files and associated with each invoice to them.
    .....
    A good point I missed to touch on.
    If you do not have this form on file you can be on the hook for unpaid sales taxes even though you did not charge the customer.
    It gets worse if you do business out of state as there are lots of rules and forms to fill out every year to some states and you really need tax people with experience in what you do.

    As you grow you pass the normal accountant level and a good CPA and tax lawyer, while very expensive, will save you more than they cost.
    Bob

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    Get a new accountant. This is a very simple question.

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    Thanks to everyone who replied, I'm in the process of getting a new accountant, my new accountant sent me the tax exempt form along with 27 other pages to read through, they had a few pages describing how the forklift is used, for some functions its not tax exempt and for some functions it is... so under industrial processing, they allow you to put the percentage that the forklift is doing a job considered industrial processing, so I put 70% is industrial processing, so lets say I paid $ 10,000.00 for the truck, I only have to pay 6% sales tax on the 30% which would be $ 3,000.00.

    This was one of those items that your accountant cant give you a yes or no on, you need to read through and figure out for your self depending on its use.

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    Quote Originally Posted by CarbideBob View Post
    As you grow you pass the normal accountant level and a good CPA and tax lawyer, while very expensive, will save you more than they cost.
    Bob
    This is where it pays to use a firm large enough to have at least two of those specialities under the same roof AND a savvy posting clerk. They can confer between and among themselves, already do so regularly, earn more for themselves even on more competitive fees to your side from averaging-down their costs and applying their time more effectively.

    No magic. Much the same in our own businesses, ain't it?

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    Quote Originally Posted by Lanso View Post
    I would stay away from “loop holes” and just follow your state tax laws.
    Good advice!

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    This is not a loop hole, it's following the intent of the tax law.

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    Quote Originally Posted by Portable Welder View Post
    This is not a loop hole, it's following the intent of the tax law.
    I got "loop hole" from your original post.

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    Quote Originally Posted by Portable Welder View Post
    This is not a loop hole, it's following the intent of the tax law.

    By the way, if you know tax law why are you asking a group of machinists?

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    I didn't know the tax law when I asked the question, sometimes when you ask questions like this to other professionals in the same industry, they themselves have asked the same question to their accountant and have found out what the rules are on a particular subject.
    I would imagine that most guys here have a forklift, so I replied back to let others know what I found out based on the literature my accountant sent me that I spent an hour reading through to educate myself, hopefully others here can save a substantial amount of money on their next purchase of a forklift if part of what their using it for is deemed to be considered Industrial processing, since new forklifts can cost $60,000 - $ 80,000.00 on average the potential savings on sales tax could be $ 4,800.00.


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