How do used machinery dealers do their taxes?

[carbidecraters]

Ok so a dealer buys a machine for $50K and sells it for $70K. What would differentiate them from capital machine vs gross income. Would they have to pay taxes on the 70K or only the 20K they made? How would they list these on their taxes?

[Fegenbush]

I'm a little confused by your question. I would assume they operate like any other business that sells things and pay taxes only on profit made. The IRS here in the states calls that adjusted gross income. Basically, it's income minus expenses, but that's just a very basic explanation. There's a reason people go into tax law, and it isn't because it's an easy line of work.

[Caprirs]

There is typically no sales tax on capital equipment. So using your example, the dealer buys the machine for $50K and sells it for $70K. The buyer pays only the $70K, not $70K + tax. Since the dealer collects no sales tax, he is only liable for his corporate income tax.

The difference between a capital machine investment vs. gross income is the dealer will not report depreciation on the machine for his income taxes. The dealer purchased the machine with the intent to re-sell it. Therefore, the IRS does not view that machine as capital while in possession of the dealer.