[LMB] Thor Power Tools, yet again (was: Tax law and the publishing industry)

[D Echelbarger]

Ed Burkhead wrote:

> The third topic we discussed, relevant here, was about
> backlist books.
> 
> The bookstore owner said that in the 1980s, Congress
> changed the tax law making it no longer profitable to
> keep backlist books.  He said that publishing companies
> used to make big print runs of an author's books and keep
> the extras in a warehouse, selling them slowly as orders
> came in.  The tax law changed this.
> 
> Now the publishers are punished for warehousing these
> books so when sales drop off, the remaining books are
> dumped, often at cheap prices, to get rid of them.  The
> publishers are no longer offering slow-selling backlist
> books.

Ed, I'm sure the bookstore owner believed this to be true,
but it's not.

This old post (which I keep around because this keeps coming
up) explains it better than I could:

--

What Thor Power Tool held (and it was a US Supreme Court
decision, BTW)  was that inventory may not be written off 
for tax purposes until sold or discarded.

So apparently what happened is that a lot of publishers
actually scrapped, and continue to scrap, remaindered books 
that they kept in warehouses, already written off but still 
available for sale.  If they have to actually dump them to 
get the deduction, why bother to keep them?

Mitch Miller
(still a tax lawyer) (sigh)

<snip>
Thor Power Tool Againnnnnnnnn !

<snip>
"THIS IS NOT TRUE. US publishers are *NOT* taxed on their 
inventory. I know a great many editors have said this, but 
they are *WRONG*. The people in their accounting departments 
never bothered to explain clearly what had happened, and so 
this is the impression the editors got, and they have
spread it all over, and as a former accountant it drives me
nuts."

Patricia C. Wrede

http://www.sfwa.org/bulletin/articles/thor.htm

--
And yes, that's Pat Wrede as in the YA author. She's a good 
friend of Lois's and used to post to the list occasionally, 
back when Lois herself didn't.

Diane E