I hope that as you go through these articles that you gain a better sense of things that you need to consider and deal with before starting your ammunition company.
As the government quarter is about to end, I realized that I didn’t mention another vital thing to remember. This applied to how you will develop your cost model. Many people probably do not know that on every sale of ammunition, there is an excise tax that must be paid. This is due every quarter and must be received by the Tax Bureau by the 20th of the month that it is due. These are due on April, July, October, and January. You have to pay for the quarters inventory by the end of the month after the quarter ends. This is why the last payment is due in January.
Now with this, the amount of tax is 11% of everything produced. All of the rules of this are pretty complicated and I won’t elaborate too much here as I don’t want to be giving legal advice where I’m not qualified.
For this you will need to register, you do this by sending your check in, to the Alcohol and Tobacco Tax and Trade Bureau. You can get the information from your ATF agent when they come to interview you for your FFL. They do not collect the tax, but they will give you the organization that does.
I needed to hit this topic as I just sent my check in for this quarter, and wanted to let everyone know that when you are selling ammunition as a company, you need to include this in your price. The manufacture pays this tax, not anyone else. Sales tax however is different, and maybe I should mention this while I’m on a roll about taxes.
Sales tax is a state and local matter, and your area may be different than where I am, but I’ll give you a general feel of things. There are state, and local taxes. I reside in the state of Alabama. Here, every month you need to submit your state and local taxes. You only need pay for ammunition sold in the location where you have a business presence. This gets a bit complicated, so you should consult a tax accountant for help in your local area. This also applies across state lines if you have multiple locations. For my business, we are located in Alabama, so anywhere I sell in Alabama, I owe Alabama state tax. This includes in person or on line. If you sell however to a gun shop, they are responsible for the sales tax, and you do not need to remit this, as that would be double taxation. As a rule of thumb, whoever sells to the public, pays the tax.
One last thing in this regard. This isn’t just an ammunition issue, but for all businesses. This is the “start up”. When you are starting your company, you will have a large amount of up front expense. Until you start selling your product, every dollar goes into the “start up” phase. You do not exit this phase until you open your doors. Once this happens, all of the money that you have spent up to that point will be spread across 15 years. So you only get to write off on your taxed 1/15th of that amount. So, the reason I bring this up is to get out of this start up phase as fast as possible. If you wait until everything is perfect, you will not see a full return on this money for 15 years. Now the particulars are up to an accountant to address, but you need to consider getting out of this phase as fast as possible. You will incur a large amount of expenditures getting your building, supplies, machines, and all of the other needs such as boxes, trays, accounting software, computers and the like prior to selling anything. But if you can start on one caliber, and phase the other ones in, it might be a better idea.
Until next time, I hope that this is helping you plan what you might like to do for your business.