Acoustic guitar price increases

[sdelsolray]

The law about State sales taxes changed in 2018 due to a SCOTUS opinion. Here's a link to the case:

https://www.supremecourt.gov/opinion...7-494_j4el.pdf

Basically, this is how things are:

1. A State can now require an out-of-state internet seller who sells retail goods to consumers in that State to collect the sales tax that an in-state brick and mortar retailer would charge that consumer for the same transaction. A certain level of "nexus" is required, e.g., $100,000 in sales per year or 200 transactions per year.

2. State must first pass a law which allows the State to tax such "remote seller" transactions and require the seller to register with that State, file returns, etc.

3. Some States have already done this. Others will likely follow.

It is more complicated than this, but this is the essence.

[scooter74]

Originally Posted by jonfields45

Having retired from a Fortune 500 company (at least it was most of my career) I can tell you that the finance department sets margin targets for every aspect of the business. While the tariff might be on the cost of goods as it enters the US, the multiplicative effect of the importer's markup and retail markup will pass it right along as 25% to the final MAP (minimum advertised price) that you typically see. You don't read about guitar importing being a fantastically profitable enterprise and the retail music business has not been so great either. They probably don't have margin to give up given their total cost of doing business.

My sister just got back from two weeks in China and she reports at least for the clothing industry they are taking a few different tacks. Some Chinese manufacturers are covering the tariff with a price reduction. Some are shipping through another country where there are no punitive tariffs. This is perfectly legal if a partially finished good is shipped to that country. It turns out that is a pretty big hassle and not happening in any hurry. And finally some are doing nothing and letting the importer deal with it.

In the long run regardless of how this plays out labor intensive manufacturing is probably headed out of China since no one knows where this punitive tariff action is headed in the short run or if the genie is out of the bottle for future US administrations.

I think it's important to keep in mind that this thread is about Eastman, a manufacturer who handles their own importation and distribution. I agree that a company like Fender or Gibson/Epiphone would try to tack on a fee at every turn and I wish them good luck with that.

[jonfields45]

I think the situation is much worse for a small importer who is probably not paying themselves very well as they are trying to build the business. The big guys could choose to eat the tariff for a while to see if it works out in their favor.

Ask Ted if he could absorb a tariff based price increase. I've visited his store. He is in a great (expensive) location and still offers great service and prices (meaning he has not got a lot of margin to give away).

Roughly 75% of sneakers (units) in the US are made in China, but the dollar volume is coming out of Vietnam. These tariffs combined with cheaper labor will do to the Chinese shoe industry what cheaper labor did to Maine.

It will be interesting to watch what happens to the cell phone assembly business. The value add of assembly is roughly 5% of the retail price we see, but a tariff is on the entire manufactured cost of the phone (so far they are excluded). In this case partially finished goods are being shipped to China for assembly! Fear alone is likely going to move that biz elsewhere. The press makes great hay about how China has nearby sources of all sorts of minor piece parts (like screws) which must give them some kind of advantage. What they don't know is a factory must qualify any source of supply which takes 100+ times longer than FedEx to bring you samples from anywhere in the world.

[donlyn]

As they say, things you can count on are death and taxes.

I guess the new model is death, taxes, and tariffs.

And the end result is that the consumer always ends up paying one way or another, as business still has to make a profit to stay in business.

Don
.

[RP]

Originally Posted by donlyn

As they say, things you can count on are death and taxes.

I guess the new model is death, taxes, and tariffs.

And the end result is that the consumer always ends up paying one way or another, as business still has to make a profit to stay in business.

Don
.

Between any tariff-related price increases and new sales tax regulations, I think that used guitars are going to look increasingly attractive....

[rstaight]

Originally Posted by RP

Between any tariff-related price increases and new sales tax regulations, I think that used guitars are going to look increasingly attractive....

This could also increase used prices also. You know supply and demand.

[Guitarbarian]

Originally Posted by AZLiberty

This really depends on state law. It also often exempts items if you pay the sales tax where the item is sold.

If I drive to Oregon and buy a guitar, I pay Oregon Sales Tax.
But if I buy a guitar from Oregon, I am supposed to pay AZ Sales Tax.
But not county, or city, just the State.

Actually, Oregon is one of only a few states that does NOT have a sales tax.

[tadol]

Originally Posted by rstaight

This could also increase used prices also. You know supply and demand.

Could also cause states to add taxes to used item sales (above a certain dollar amount) or try to regulate private sales channels. Once its decided that the only way to solve a problem is to add taxes, and they get used to having that extra money to spend, its nearly impossible to undo it all without coming up with some other sources of revenue -

[vindibona1]

Originally Posted by jschmitz54

I had an interesting talk with Ted at LA Guitars today. While I was getting advice about a potential Eastman purchase I asked the question about what I could expect to happen to Chinese made guitars pricing in the coming months due to the tariffs. Ted gave me an explanation that I had not considered.
He explained that these tariffs are applied of course not to retail prices but as well not to wholesale prices but to the price that it cost to manufacture the guitars. In other words the tax is applied to the value of the shipment as it arrives at the US port and that value has not yet been increased to even the wholesale value. Teds estimate is that increase in the retail price of say an Eastman E10D would be about $75.00 at the retail level.
If what I think I learned is correct the effects of the tariffs may not effect the Chinese name brand guitars as much as I thought they might.
However what is equally interesting is that American made guitar companies that import some of their lower priced guitars from China and who use a different business model would likely take those increases and add there markups to those increases potentially tripling the amount of the tariff. That sounds like a potentially large retail price increase.
If this is correct it seems these tariffs while not hurting the bottom line of the American companies on an individual sale but would likely decrease the numbers of their Chinese made guitars that are sold substantially.
I thought this was a very interesting take on the tariffs from someone in the know.
Perhaps the American companies will take a different approach and the increases across the board will be less than I originally thought they might. One thing holds true and that is guitar buyers in the US will pay more for guitars, how much is yet to be seen. Interesting.

Yes, interesting information and observations. What you discovered is that the press likes to make uninformed assumptions based on errant math and blows things out of proportion, sometimes because it helps with a "narrative".

As pointed out in other replies, the application of sales tax on online sales will have FAR more impact than tariffs on Chinese goods. A $3000 guitar purchase last year will now cost (in this area) $3300. Not only do we think we're contributing $300 to the government, but in real dollars, it's closer to $400- because we've already paid taxes on the money we're paying sales tax with. It does however level the playing field somewhat with brick-and-mortar stores.

[Goodallboy]

Just to be clear, if Chinese made guitars cost more after tariffs I don't care in the least.

In fact, I hope they cost so much that an American guitar maker will rise up and start a business to capture those sales.

[Rudy4]

Originally Posted by chistrummer

Amazed at how many people are not aware of this.

"Saving money by not paying sales tax" is an often used strategy for purchasers.

It does matter somewhat on where you live, but a good friend of mine bought a very expensive camera from a large retailer in New York and received notice from the State Of Illinois (a full three years after the purchase) that he owed the tax PLUS a hefty penalty. Needless to say it was a lesson learned the hard (and expensive) way.

[Realbluesman]

Originally Posted by Goodallboy

Just to be clear, if Chinese made guitars cost more after tariffs I don't care in the least.

In fact, I hope they cost so much that an American guitar maker will rise up and start a business to capture those sales.

Sadly, this will likely result in higher prices from American makers as well. "A rising tide lifts all boats."

[Pura Vida]

Originally Posted by jschmitz54

E10D or E10D-TC so far. But have played none. Seems to be few new ones available. I’m not sure if a dread is right for me or not. I’ve only been playing a year. I have this lovely Marin GP35E it a step down from a dread or what some call a mini jumbo and I’m not really sure where to go. At this stage I’m not a finger picker so a flat picking or all round type of guitar probably suites me but that’s pretty much what the Martin is. I just know I’d like to have a different sound to try. Lots to decide I guess.

I had a similar discussion recently with Ted. jschmitz, Ted has always been very adept at helping me find the guitar that's right for me. If you're ok with the bigger body size, then the dread would be a nice complement for your other guitar. As I mentioned in another thread, the Eastman TC up-charge is very modest, so if you're buying new, I'd definitely consider the TC, if it's available (I just checked, and Ted has two of the E10D-TC in stock). Good luck with your decision!

[BoneDigger]

This is a friendly reminder to remain on topic and stay away from politics. AGF rules indicate that political posts are not allowed. If you can discuss the rise in guitar prices from an economic and non-political perspective, feel free to do so. If you cannot, I recommend moving on.