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Taxes on Molds

Posted: Thu Jul 26, 2018 3:13 pm
by jlkincai
What has been the experiences with states charging sales taxes on molds built for customers when molds are built at an outside tool shop, paid by molder, and molder charges the tool cost to customer?

Jlkincai

Re: Taxes on Molds

Posted: Mon Aug 06, 2018 10:21 am
by Troyonix29
I've reached out to several MAPP members to see if they might have input on this issue and have asked them to post if they do.

Thanks!

Troy

Re: Taxes on Molds

Posted: Mon Aug 06, 2018 10:38 am
by samir.patel@mwmolding.com
If a manufacturer is registered as a reseller as most of us I assume are, then there is no sales tax to be charged or collected since the mold is being used to manufacture products that are resold to OEM companies. It's the same when we purchase an injection molding machine and anything else that is used in the manufacturing process. At least this has been my experience.

Re: Taxes on Molds

Posted: Mon Aug 06, 2018 10:52 am
by scotttitzer
Samir answered the same way we would. We do not collect sales tax on molds here in Indiana.

Personal property taxes are another story. Hope this helps.

Scott

Re: Taxes on Molds

Posted: Mon Aug 06, 2018 11:41 am
by Troyonix29
The accountant for Metro Plastics Technologies just sent in this response:

"Lindsey,

In Indiana I do agree that it is exempt as long as you have an exemption certificate for the customer. Can’t answer the question for other states, for instance just got a letter from a client that Kentucky just changed there rules starting 7/1/18 that they will start collecting sales tax on installation charges.

Brian Brammer, CPA
317-398-9753 Ext. 107
website: www.brammerandyeend.com"

Re: Taxes on Molds

Posted: Wed Aug 22, 2018 2:03 pm
by mdevereux@muellerprost.com
Hi everyone,

I thought I'd add my two cents.

While each state has its owns rules with respect to sales and use tax, many provide an exemption for items used to manufacture goods or items used in research (which, many times, a mold is used in the conduct of research).

Many states provide complete exemptions, while others provide partial exemptions - such as California - they provide a reduced rate of tax for tangible property used in manufacturing or research of 3.3125%.

In determining whether a tax is owed, who collects it, and what goods are exempt, processors should follow title to the tool and whether an exemption applies when title changes hands.

This is the case with personal property tax, as well. If your customers owns the tool (even though you have possession of the tool), they are likely the party liable for the personal property taxes.

I have a manager in my office that specializes in sales and use tax if anyone would like to discuss their specific facts and circumstances. We'd be happy to help. MAPP members receive three hours from us as part of our sponsorship, so you're welcome to use those hours in that capacity.

Thanks,
Mike
Michael J. Devereux II, CPA, CMP
Partner and Director of Plastics Industry Services
Mueller Prost LC
mdevereux@muellerprost.com

Re: Taxes on Molds

Posted: Wed Aug 29, 2018 4:45 pm
by GSIB2017
In Virginia, if you purchase for customer and then invoice the customer, you must collect sales tax. For years we understood if it "touches" the product, it is tax exempt We got audited and had to pay back plus penalties, the auditor considered it a resale. Now we just have the tool maker directly bill the customer, and we work with tool maker to make sure the tool will run in our machines.