It is interesting that they at least explored the idea of building in the UK, and that tax policies factored in so negatively. Does the US have similarly structured import taxes?
In the United States, there are no import duties on computers or on computer components.[1] But there are no duties on assembled computers or on computer components entering the United Kingdom either, so far as I can tell.
Assembled computers are listed under heading 8471 of the Harmonized Tariff Schedule, which is used by all trading nations. (They are referred to as "automatic data-processing machines"; the terminology and categories are all quite archaic.) The UK imposes no import duty on computers of any type.[2]
Parts and accessories "suitable for use solely or principally with" computers are listed under heading 8473.30 and likewise can enter the UK duty-free.[3] It's possible that some required components are listed elsewhere in the HTS and that those are not duty-free. But that seems unlikely; almost everything in Chapters 84 & 85, which cover all electronics, can enter the UK free of duties.
I'm not familiar enough with the UK tariff regime to know whether there are other considerations beyond the base duty rate. (But it doesn't look like it; the relevant Acts of Parliament setting duties for each class of good are noted on the BusinessLink site linked below.) So I have no idea what import tariffs Raspberry Pi need (or think they need) to pay. It certainly doesn't look like the UK has some screwy import regime that penalizes firms wanting to assemble computers there.
1. So long as the goods' country of origin has "most favored nation" status. This means, essentially, that it has normal trade relations with the United States. That includes all members of the World Trade Organization.
I will have a go answering this - tax and import laws in the UK, like the US, are extremely complicated and often bizarre.
It's therefore almost certain nobody except Raspberry Pi's accountant / legal advisors would be able to give the definitive reason, but I am pretty sure it is to do with how components vs full computers are classified for duty purposes.
There are specific import laws designed to aid manufacturing industries, and it could be that these laws need to be extended to component assembly. For example, the UK does very well in car and aerospace manufacturer, and there are import laws regarding components designed to aid this.
I don't know about import taxes. But, US does not have a VAT like UK. It has a sales tax which is only paid by the end user. Usually the consumer. Materials like cotton (and I guess electronic parts) used in manufacture aren't taxed (at least not with a sales/VAT).
No? I was under the impression that if I wanted to buy a bunch of cotton or silicone or diodes that I'd have to pay taxes on that. Then once I manufacture my awesome device using only those materials, plus a Swiss army knife and a rubber band, I could sell it to you and you'd get to pay another round of sales tax. On the backend of this transaction of course is the machinery used to harvest/manufacture the raw materials, for which the farmer/manufacturer also paid a sales tax on. Unless there is some kind of subsidy at play here.
If you are purchasing materials that will be resold, or used to build a product that will be sold, you do not need to pay tax on those materials. It's a simple matter to get a sales tax certificate from your state -- you can do this online in many states. When you buy the materials, you give the seller your sales tax ID number and that will remove his need to collect the tax from you and your need to pay it.
So if either of you are audited, he can point to your ID number as the reason he didn't collect and pay tax and you had better be able to show that you collected and paid tax from the people you sold your product to.
This is per-state. For example, Oregon has no sales tax except for a couple things like tobacco and gasoline. Most states which have sales tax only have retail sales tax (plus a couple random ones). But no, wholesale is generally not taxed. (This is the difference between "sales tax", which happens when the end product goes to the consumer, and "value added tax", which happens multiple times. I don't think a single state will tax you on a box of diodes you order from your supplier, but if you go to Radio Shack they'll probably tax you.)
Value added tax does not happen multiple times, as it is refundable. In effect it is just a retail sales tax. However the rates are high in Europe, often 20%.
Thanks! Follow up question: what is wholesale? Can I buy a yaer's worth of potatoes tax free? How about a lifetime supply of socks?Or are we talking about huge quantities?
(Warning: This post contains lots of generalizations, because every US state has different laws. Look up your state's regulations regarding sales tax if you want to be sure.)
In this context, "wholesale" has nothing to do with the quantities and everything to do with the intended usage. If you're intending to make a product or perform a service which would require you to charge sales tax to YOUR customer, then you can usually avoid paying sales tax to your suppliers, because otherwise the state would be collecting from both you when you buy components and your customer when you sell the finished product. That would get sorted out when you file your sales tax return, but it's easier to only have one link in the chain actually pay the tax in the first place and avoid the situation entirely.
Basically, the idea is that unless the buyer or item being sold is specifically covered under an exemption, sales tax should be applied precisely once on its journey from raw material to the hands of its first actual owner, preferably as late as possible so as to capture the product when it's at maximum taxable value. This is in contrast to a VAT, where the tax is applied at every step in the process proportional to how much "value" was added at that step.
I was curious about the taxes as well. Does anyone know what the argument for having a tax system set up this way would be? I imagine there must be some reason, but I'm not sure what it would be.
Actually, and maybe I'm missing something, they are quite wrong. Yes you pay a VAT on components, but as a business you reclaim it and pass it down the line.
As long as you are engaging in commerce you never pay VAT on the items you for your business. Also, there are electronic schemes to speed up the reclamation process. If you have a business ¿TaxID? number some resellers will drop the VAT for you knowing they'll reclaim it anyway.
