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Question
Hello,

First off, thank you for taking your time to read my question and help me answer it!

I just started a business that manufacturers a few products. I selected manufacturing as my business classification.

I manufacture the products and then sell these for retail. I set up a single member LLC for this business.


After starting my business, I heard that manufacturers get taxed at a greater rate than businesses who only resell/retail. If this is the case, then I do know of a company that could manufacture these same products and I can just resell them.

I would like to remain a manufacturer though since I could make more money, but if I have to pay higher taxes, it won't be worth it.

Question: Do manufacturers pay more taxes than resellers/retailers? If so, what percentage more? The business is in Texas (no state income tax).


Please let me know. Hopefully I explained myself clearly!

Thank you
Mirella

Answer
You are a bit out of my expertise, but here are my thoughts. I believe your business success will probably depend on your overall sales volume, not on the potential of a few percent tax difference. You assume that reselling someone else's product will be just as successful as manufacturing your own (where you control quality and product features). That said, as a reseller you will probably pay state (you may be subject if you ship out of state) and local sales taxes on top of corporate profits. As a manufacturer you usually avoid the store front type sales taxes. Best of luck.
RS

Tax Planning

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Richard S

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My expertise is in collecting past due taxes and tax returns. While at the IRS I worked on wage and bank levies, liens, Offer in Compromise, late filing and payment agreements every day. I spoke with over 20,000 people concerning their issues while I worked there (just retired).

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Ten years working for the the IRS in Collections and tax return review. Worked with over 20,000 people on their IRS issues. Explained their options and usually worked out a solution while they were on the phone.

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Masters Degree from Iowa State in Ames.

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