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Discussion:Qualified Production Activities

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Discussion Forum Index --> Consumer Questions --> Qualified Production Activities

Dsyadav (talk|edits) said:

11 November 2005

Effective for tax years beginning December 31, 2004, taxpayers are permitted a deduction for income tax for 9 percent of the qualified production activities income - Code Section 199. What businesses fall under qualified production activities? Is a commercial printing press a qualified production activity business? And how about a restaurant - is preparing meals a production activity?

Bonnyl56 (talk|edits) said:

15 November 2005
Perhaps my knowledge as a registered tax preparer as opposed to a CPA will be more than evident by my response to this question, but I would think that the printing press is already being depreciated and restaurant meals being prepared are done so by staff, which already receive payroll tax deductions to benefit the employer.

I do not have the IRS Code Section 199 in front of me and this is the first I have heard of this, but I would think this pertains more to Schedule F for farming etc.

Jsanchez (talk|edits) said:

15 November 2005
The American Jobs Creation Tax Act of 2004 created new code sec. 199 that provides a deduction for both corporation and individual business owners, effective for years beginning after 2004. The main beneficiaries of this deduction will be businesses that produce goods, develop software or construct property in the U.S. For tax years 2005 or 2006 the percentage is only 3%. Here are some of items not included as domestice production gross receipts.

Sale of food or beverage prepared at a retail establishment. For this purpose, a retail establishment is real property leased, occupied or otherwose used by he taxpayer in its trade or business of selling food or beverages to the public at which retail sales are made. Therefore, a restaurant at which food and beverage are prepared, sold, and served to customers (or that offers only take-out food) is a retail establishment and not eligible for te production deduction. However, if the facility is only used to prepare food and beverage for wholesale sale, it is not a retail establishment and receipts woul be DPGR. A facility at which food or beverage are prepard (whether for human or non-human consumption) will not be treated as a retail establishment if less than 5% of the food or beverages that are sold at the facility during the tax year are retail sales. I know this is long, but this code section is very complex. (DPGR)= Domestic Production Gross Revenue

Cpwme (talk|edits) said:

3 March 2010
What about a homemaker who makes candy in her kitchen using raw materials (cocoa, sugar, etc.) packages it in a Christmas wrapping and sells retail to customers? Would this be Qualified Production Property?

The denial for food prepared at a local retail establishment is unclear to me. Is the denial because it is not considered "manufacturing" or "production" or is it because it was prepared at a retail establishment? Keep in mind the definition of QPP (in this case) as tangible personal property manufactured or produced within the USA. Are Hershey's sales directly to the consumer not QPP?

The only answer to me that makes sense is that preparing food at a retail establishment is not considered "manufacturing" or "production". Furthermore, I don't see how this could change by selling wholesale.

IRS needs to produce a long detailed list by business and nature of business to clear this up. I don't see that happening. To me the househiold candymaker fits the definition of "manufacturing" or "producing' is its purest meaning.

Kevinh5 (talk|edits) said:

3 March 2010
'homemakers' are not allowed the deduction

only businesses, or people in business

who pay wages and salaries

Polizei (talk|edits) said:

11 April 2010
What about a company that builds their own branded computers, they buy the parts and build custom computers/servers for their clients?

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