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Old 01-05-2018
a21stud a21stud is offline
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Join Date: Oct 2013
Posts: 1,266
Default B2B or saving tax $$.

Racemaster posted the following and Hemi said it was probably a B2B deal which got me to wondering how B2B deals work. Below is my stab at it. I'm sure someone will let me know where I'm wrong and it's cool as I want to get it right.

Originally Posted by Racemaster
That's true it will not lead to increased sales. Why Ford is involved with Tasca in FC is puzzling.

Here is my guess at how B2B's work. One of you tax/accounting guys please correct me where I’m wrong..

If Tasca pays Ford $300 million this year for cars and parts for their dealerships, Ford must pay taxes on that $300 million minus the costs of sales. If it cost Ford $270 million to produce and deliver the $300 million dollars in cars and parts, they might pay something like 35% tax on the $30 million profit. In this example that would be paying $10.5 million in taxes.

But if Ford trades Tasca $10 million dollars worth of product for Tasca to run his Funny Car with “Ford” in big letters on the sides, that reduces Ford’s tax burden to $290 million in gross sales minus the same $270 million it cost to produce and deliver the product. That makes Ford pay my guestimated 35% tax on "only" 20 million of profit or $7 million. Ford just saved $3.5 million in tax burden they were going to have to pay while getting advertising at 24 events around the country plus any TV, internet and paper publicity Tasca can generate for a net cost of $6.5 million.

Plus Ford gets to keep one of there best dealers very happy. They now have bought NHRA based marketing at a 35% discount. Tasca Ford doesn’t have to spend $10 million of their own to advertise Tasca Ford on the car, car hauler, etc.

Bob Tasca also gets to do what he wants, (drive a funny car) without having to use any personal “after tax” dollars of his own.

Is this close to right?
a21stud only refers to the more common 21 stud flathead motors early drag racers coveted before the Chy. Hemi and sbc came along.
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