[LMB] Tax law and the publishing industry

[Michael R N Dolbear]

> >From: "Ed Burkhead" <edburkhead at insightbb.com>
> >Date: Sun, 2 Dec 2007 10:11:58 -0600

> From: PAT MATHEWS <mathews55 at msn.com>

> >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.

> Yes. The tax law created a problem, the solution for which is either
> Print on Demand or a Used Book Clearinghouse. Amazon and several others >
have been using the latter model.

No. This is complete legend. Congress made no change and the Thor Power
Tool case "did NOT cause inventory to be TAXED, it eliminated an inventory
based tax dodge." (Thank you Rick Boatright).

Current tax law (Britain too) is just GAAP in this respect(mind you, most
people don't understand GAAP and its slogan "inventory is valued at the
lesser of cost and net realisable value"). A conversation with Jim Baen
resulted in mutual incomprehension so it had never been explained to him
either he being a great editor and publisher, not an accountant.

"If you have business reasons for needing to understand current publishing
practice, I suggest you go in search of Patrick Nielsen Hayden's detailed
explanation of why it isn't true."

quote (Patricia C. Wrede used to BE an accountant).

"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 

Or people who play lawyers on TV
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=439&invol=522

And it is all about the attempt by the company to value inventory
<i>below</i> <b>the cost of production</b> instead of the lower of (market
price, cost).

Topic last on the list 16 Apr 2007

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