Originally created as a Domestic International Sales Corporation in 1971 to stimulate U.S. exports, Interest Charge-DISC (IC-DISC) is a variation of the original creation. It allows U.S. manufacturers that export their goods to a benefit from a reduced tax rate on the profit of those items. Considering the highest tax rates are 34%-35% for individuals and corporations, this is an area manufacturers need to examine closely.
It is very important to understand the Destination Test, because it's very possible a manufacturer doesn't know they are an exporter and can qualify for the IC-DISC. The manufacturer may sell a product to customers located in the U.S., but if those U.S. customers then export that product within 1 year of its receipt without further manufacturing the product, the manufacturer can claim the sale as an export sale. The key to claiming the sale begins with knowing your customer, and what they will do with the product after purchase.
Bowers & Company's Tax experts can take you through the rules, requirements, and methodology behind the set-up and affirmative election to be treated as an IC-DISC.
For manufacturers who export, you should give us a call at (315) 234-1123 or email us ("Contact Us" form on this page) to find out more about this important tax savings strategy.