When CA FFLs should collect SALES TAX from consumers.

[Gowking]

How about the following scenarios:

1) A customer buys a used firearm from an out of state dealer either through an auction site, on-line store or mail order.

2) A customer buys a used firearm from another person who lives out of state. The seller uses an out of state FFL to handle the shipping to the CA FFL.

Would tax be due on the purchase price?

-G

[halifax]

Originally Posted by gowking

How about the following scenarios:

1) A customer buys a used firearm from an out of state dealer either through an auction site, on-line store or mail order.

If the firearm was from a dealer's inventory (stock), it is a retail sale; hence, taxable.

2) A customer buys a used firearm from another person who lives out of state. The seller uses an out of state FFL to handle the shipping to the CA FFL.

The firearm is ultimately coming from a private individual and is not taxable. Best to have the seller include a note stating that.

[kemasa]

I just received email from the CA BOE regarding the sales tax change.

This section is quite interesting in terms of the recent sales tax change:

What is the date of sale?
A sale occurs when a customer takes title to or possession of an item. (Not when payment is received.) Consequently, sales are generally subject to the applicable tax rate in effect when the merchandise is delivered to the customer, unless a contract specifically identifies and passes title to the customer at a different time.

Note, the sale can be considered differently depending on who you are dealing with, this applies only to sales tax.

[nobama]

Thats ridiculous...that means that all items purchased online should have sales tax collected when they are delivered? So I guess the mailman is supposed to collect the sales tax? lol

[greybeard]

Originally Posted by kemasa

I just received email from the CA BOE regarding the sales tax change.

This section is quite interesting in terms of the recent sales tax change:



Note, the sale can be considered differently depending on who you are dealing with, this applies only to sales tax.

I wonder if thaat means when you DROS it or pick up?

[kemasa]

Online is quite different and the mailman is a delivery service, not part of the sale.

The issue is the change of the tax rate, with respect to when it is started. In this case, it is the best interest of the customer since the tax rate is going down.

It is when you pick it up, not when the DROS is submitted.

BTW, I think it is a good thing to charge the reduced sales tax, although it is a pain to re-calculate everything, but consider the other way. If you bought a firearm when the tax was lower, but are forced to wait to pick it up so then you have to pay a higher sales tax which was not in effect when bought it, that is not right. Now, consider if you could pick it up the day before the tax rate went up, but then couldn't, so then suddenly you have to pay more, even if you paid for everything.

[tenpercentfirearms]

Originally Posted by kemasa

BTW, I think it is a good thing to charge the reduced sales tax, although it is a pain to re-calculate everything, but consider the other way. If you bought a firearm when the tax was lower, but are forced to wait to pick it up so then you have to pay a higher sales tax which was not in effect when bought it, that is not right. Now, consider if you could pick it up the day before the tax rate went up, but then couldn't, so then suddenly you have to pay more, even if you paid for everything.

The way I process transactions as a sales order and then when they pick up as a sales receipt makes this easy. When you go to make the sales receipt, it already knows the tax rate is lower and it shows how much I need to refund you.

When the tax rate went up, if you already paid in full, I just paid the extra 1% and took it off the sales price. I didn't want anyone who paid in full to have to pay more.

Since a sale is not complete until the goods are delivered, I will continue to add more long guns onto a DROS. Now the feds and the CA BOE agree with me!

[kemasa]

Well, it really does not matter what the Feds consider a transaction to be since it is clearly different than the CA DOJ. Same is true with the CA BOE, so if you continue to add long guns onto a DROS, you are not following the law. Don't forget the 10 waiting period after the sale of a firearm.

[tenpercentfirearms]

Originally Posted by kemasa

Well, it really does not matter what the Feds consider a transaction to be since it is clearly different than the CA DOJ. Same is true with the CA BOE, so if you continue to add long guns onto a DROS, you are not following the law. Don't forget the 10 waiting period after the sale of a firearm.

Ah, but it isn't. You have yet to show how long a single transaction lasts and you never will. Clearly by Federal and BOE guidelines a single transaction lasts until the seller signs the 4473 and/or the goods are delivered.

And how can you wait ten days if the transaction is not complete until delivery of goods? The firearms is not sold until delivery.

Let's not muck up this thread though. You can read more about this here.

http://www.calguns.net/calgunforum/s...d.php?t=425903

[EBR Works]

A few question:

Are you guys collecting tax on the amount of your dealer fee for out of state transfers? From reading the regs, this appears to be required.

How about for those dealers doing single shot conversions? Would the rental charge for the conversion kit be taxable?
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[tenpercentfirearms]

Originally Posted by EBR Works

A few question:

Are you guys collecting tax on the amount of your dealer fee for out of state transfers? From reading the regs, this appears to be required.

Yes. It is part of the retail sale.

Originally Posted by EBR Works

How about for those dealers doing single shot conversions? Would the rental charge for the conversion kit be taxable

I was going to tax it because it is really part of the retail sale, but now that I think about it, I want to establish that the sale of the SSE pistol is quite separate from the gunsmithing/assembly back into normal configuration after delivery.

We should hash this out.

[nbkvig2]

I have a specific situation that I am wondering about. If I purchase a USED gun from someone that is out of state, he is a private FFL holder that runs his business from his home. But he mentioned that this is from his private collection. Would it depend on how he sells it? If he ships it as a FFL dealer would I have to pay use tax then (even if it's a USED gun)? If he ships as a private party, then I'm guessing I would not have to pay use tax? Should I clarify this with the seller first? Or will it not matter since it's used?

[tenpercentfirearms]

Originally Posted by nbkvig2

I have a specific situation that I am wondering about. If I purchase a USED gun from someone that is out of state, he is a private FFL holder that runs his business from his home. But he mentioned that this is from his private collection. Would it depend on how he sells it? If he ships it as a FFL dealer would I have to pay use tax then (even if it's a USED gun)? If he ships as a private party, then I'm guessing I would not have to pay use tax? Should I clarify this with the seller first? Or will it not matter since it's used?

I would have him draft a document that states he is a private citizen selling a private gun and no sales tax is due.

Then take that document to the transfer dealer and ask them if that is acceptable. If they say no and they can't give you a good reason why, find a new transfer dealer.

I'd accept it. I'll let the BOE grill you and the seller. I did my part.

[tenpercentfirearms]

Did everyone see this thread?

http://www.calguns.net/calgunforum/s...d.php?t=466199

Don Gussler is a well know transfer dealer in San Diego. A great guy to send transfers to.

Don just went through an audit (I confirmed he went through an audit directly with him, but didn't get a ton of details as it isn't my business) and according to this post...

Originally Posted by SDJim

I've known Don from many years on the Navy Shooting Team.

I was at his shop shortly after the "audit" where a FTB Agent accompanied the DOJ Inspector.

Just concentrating on the last three years of sales (they could have gone all the way back to day one if they wanted), Don's fine was in five figures (lucky for him they offered a 3 year payment plan).

The reason they are focusing on FFL's is because of the meticulous records FFL's are required to keep. Think of it as "low hanging fruit" for the FTB collectors.

If your non-tax collecting FFL hasn't had a visit yet . . . It's just a matter of time. It's just to easy (for the FTB) to ignore.

So rightly or wrongly, that's the way the state of CA want's to play the game and we're stuck in the middle.

he took a 5 figure hit. That means between $10,000 and $99,000!

If you are not collecting sales tax on transfers, you really are taking a huge risk.

This isn't about us competing with each other. I could care less if you are a dealer who doesn't collect taxes on transfers and get all of my transfer business. I like selling my own inventory more.

This is about not getting reamed by the BOE and being stuck with your customer's sales tax liability. Protect yourself fellow dealers.

[nbkvig2]

Originally Posted by tenpercentfirearms

I would have him draft a document that states he is a private citizen selling a private gun and no sales tax is due.

Then take that document to the transfer dealer and ask them if that is acceptable. If they say no and they can't give you a good reason why, find a new transfer dealer.

I'd accept it. I'll let the BOE grill you and the seller. I did my part.

Thanks! But my second part of the question, does the gun being used have any factor at all? From what I'm understanding is that no matter if it's used or new, if it's coming from a vendor (FFL holder) then use tax must be collected? If it's a private sale, then no use tax should be collected correct?

[EBR Works]

What about shipping charges? If I charge a client for shipping either on an inbound order or outbound to his transfer FFL, is this taxable?
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[tenpercentfirearms]

Originally Posted by nbkvig2

Thanks! But my second part of the question, does the gun being used have any factor at all? From what I'm understanding is that no matter if it's used or new, if it's coming from a vendor (FFL holder) then use tax must be collected? If it's a private sale, then no use tax should be collected correct?

Used has nothing to do with it. Is it a retail sale or not? If a retailer sells it, then yes it is taxed. If a retailer does not sell it, then no it is not taxed and is just an occasional sale.

Originally Posted by EBR Works

What about shipping charges? If I charge a client for shipping either on an inbound order or outbound to his transfer FFL, is this taxable?

From the BOE.

http://www.boe.ca.gov/sutax/faqpurch.htm#10

10. Are delivery and handling charges taxable?
Delivery charges.

You have the property delivered directly to your customer using a common carrier, the U.S. Mail, or an independent contractor
Tax does not apply to the delivery charges under these conditions if the charges are clearly stated as a separate entry on the invoice or other bill of sale. If the delivery charges are not stated separately, they are taxable.

Example.

You sell a refrigerator and have it delivered by an independent contract carrier. On the invoice, you show a $750 charge for the refrigerator plus a separately stated $50 charge for delivery (the amount charged you by the carrier). Since the delivery charge is stated separately, tax applies only to the charge of the refrigerator ($750). If the invoice had shown a single charge of $800, tax would apply to the entire amount.

Note: If you charge more for delivery than your actual costs, the added amount is subject to tax. In the example above, if you had charged your customer $60 for delivery, but your actual delivery cost was $50 (the amount charged by the independent contract carrier), tax would apply to the additional $10 charge.

You use your vehicle to make the delivery
Tax applies to the delivery charges if you use your own vehicle, whether or not those charges are separately stated on the invoice.

Example. You sell a refrigerator and deliver it to your customer using your own vehicle. On the invoice, you show a $750 charge for the refrigerator plus a separately stated $50 charge for delivery. Tax applies both to the delivery charge and the charge for the refrigerator.

Note: Tax does not apply to delivery charges using your own vehicle if there is a written contract of sale, signed before delivery, that transfers ownership of the property to the purchaser prior to delivery.

Handling charges. Handling charges are generally taxable.

Combined charges. If you charge a single amount for delivery and handling (for example, the invoice shows a single amount for "postage and handling" or "shipping and handling"), the portion of the charge that represents handling is generally taxable, while the portion that represents delivery may or may not be taxable.

Note: It is important to use terms such as "delivery," "shipping," or "postage" on the invoice to represent delivery charges. A separately stated charge that says only "handling", for example, is not considered a delivery charge and the entire handling charge is taxable--even if postage or shipment charges are indicated on the package.

For more information on delivery charges, or information on how tax may apply to a specific transaction, please see Regulation 1628, Transportation Charges or publication 100, Shipping and Delivery Charges. You can also contact the Board's Information Center 800-400-7115 or your nearest Board office.

So for when you are shipping items, if you charge the exact shipping from your carrier and have that invoiced, it is not taxable. I charge a flat $10 shipping rate for like $100 orders. I simply tax it all as it isn't worth my time to weigh the package, figure out what the shipping is going to be from USPS or UPS, get the box all ready, then run their card and invoice for the extra savings of about 1.4 cents.

If the firearm is coming in on a transfer, if the shipping is invoiced, I don't include it in the transfer sales tax calculations.

[Santa Cruz Armory]

You have to be a friggin' lawyer just to try and make a buck in this state!

[EBR Works]

Thanks Wes......I think

[kemasa]

One thing to remember is that if you sell a firearm to another CA FFL, YOU are responsible for the sales tax on their transfer fee even though you don't know what it is.

[bombadillo]

So if I buy a used gun from a retail shop and it was transferred to a local dealer, but from a dealer, am I supposed to be paying sales tax on it or how would that work. Can I pay it as a use tax at the end of the year or should it be upfront to the FFL?

[kemasa]

Originally Posted by bombadillo

So if I buy a used gun from a retail shop and it was transferred to a local dealer, but from a dealer, am I supposed to be paying sales tax on it or how would that work. Can I pay it as a use tax at the end of the year or should it be upfront to the FFL?

The FFL is required to collect the sales tax unless the place you bought it from has a presence in CA, in which case that FFL is required to collect the sales tax on the firearm, as well as on the transfer fee of the local FFL. The exception is if the firearm is a private sale, an occasional sale and it is not coming from a business, as long as the FFL does not get involved with the price or finding the buyer.

[tenpercentfirearms]

Originally Posted by bombadillo

So if I buy a used gun from a retail shop and it was transferred to a local dealer, but from a dealer, am I supposed to be paying sales tax on it or how would that work. Can I pay it as a use tax at the end of the year or should it be upfront to the FFL?

This is kind of confusing. Anytime you buy tangible personal property from a retail store in CA, the retailer is responsible for paying sales tax. So in your above scenario, if you bought a firearm from a CA dealer and had it transfered to another CA dealer, the original gun shop should pay the sales tax. Whether the gun is new or used means nothing. Only that the firearm was sold by a retailer.

If you bought the firearm from a retailer out of state, then the CA gun shop receiving the firearm must pay sales tax on the purchase price of the firearm and the transfer fee. Not all dealers collect the sales tax from their customers. A FFL does not have to collect the tax; however, the FFL must pay the tax. So if a dealer gets audited and did not pay the tax, they are going to have to pay some hefty fines and back taxes.

I choose to collect the sales tax since I have to pay it. I don't enjoy paying other people's taxes for them, though some dealers might.

If you did not pay the sales tax to a dealer, then in theory you should pay the Use Tax at the end of the year. However, you would have a solid argument that you were not liable for the Use Tax as the FFL was the retailer and they should pay the Sales Tax for you as the retailer of the firearm. So if the BOE audits a gun shop and then goes to the customer and asks if you paid the Use Tax, the proper answer is "No and I don't have to. The retailer is responsible for paying sales tax on that CA retail transaction, not me." If the BOE claimed it didn't get paid, remind them the retailer is responsible for collecting and paying Sales Tax, not the consumer. Any Sales Tax the dealer failed to collect is the dealer's fault as they still owe the Sales Tax.

And that there dealers is why you would be foolish not to collect and pay sales tax on retail firearms transactions.

[bombadillo]

Wow, the mess you guys have to go through is unreal. I really do feel for you wes.

[tenpercentfirearms]

Originally Posted by bombadillo

Wow, the mess you guys have to go through is unreal. I really do feel for you wes.

It is honestly not a big deal. Collecting sales tax on your out of state transfer is really, really simple. I am not sure why some people make it out to be such a big deal.

[bombadillo]

Because we're taxed enough already. T.E.A. party! 35% out of each paycheck, 8.5 percent on anything I buy and another 8.5% on a private party transfer. Its getting ****ing ridiculous. When do we say enough is enough.

[kemasa]

The actual collecting of the sales tax is not a big deal, it is knowing when to collect the sales tax and all the issues which is a real pain.

I also agree that we are taxed far too much already. They take it bit by bit until you have nothing left, but that does not mean that I am going to violate the law for someone else, especially when I would be taking all the risk and getting nothing out of it.

[bombadillo]

Totally understand. I feel for you guys and the crap you have to go through. I'm just a rule pusher and will push till the ends of all possible ends. Not trying to come off like a jerk, just a penny pinching tight wad that wants to keep all the money I possibly make!

[freonr22]

I heard on the radio today about how the boe might exempt walmart.com as their vendor cns? Is based out of state. How is that different? On phone can't link story easily

[kemasa]

The Walmart issue is whether they have to collect it from their website when the items actually come from another company or whether the person owes it on their income tax return. It is not whether sales tax is due or not and firearms are different as well.

[mcgill]

Will one of you senior members help summarize my confusion?

It seems we might collect tax under three different categories:

1) The firearm

2) The FFL transfer fees we add on to the state fee(NOT CA DOJ DROS)

3) handling fees (for the part that exceeds the actual cost of shipping)

Do I have the categories correct? Any to add?

Next seems to be the debate or confusion is on when we collect tax.

The “when” seems to be spelled out on all the threads and is found in other past posts. I haven't completely grasped it yet, but I'll keep reading.

When we collect tax, are all three categories always taxed (i.e firearm, FFL fee, & handling fee)?

When we don’t collect tax, does that include all three categories (i.e firearm, FFL fee, & handling fee), or just the firearm?

I have no heartburn collecting tax. I need to do what the BOE requires, but I am confused, even after reading this long post. I just want to make sure I do it when it's required and don't do it when its not required. No big deal

[freonr22]

Originally Posted by kemasa

The Walmart issue is whether they have to collect it from their website when the items actually come from another company or whether the person owes it on their income tax return. It is not whether sales tax is due or not and firearms are different as well.

how is this different than an out of state inbound transfer?

[kemasa]

Originally Posted by mcgill

Will one of you senior members help summarize my confusion?
...
Do I have the categories correct? Any to add?

Well, in my opinion there are really not three categories. If the firearm is subject to sales tax, then it has to be collected on the transfer fee and handling fees. If the firearm is not subject to sales tax, then it is not collected on the other items, with one exception.

The exception is really not an exception, but one in which you can be nice to another FFL and keep them out of trouble, but that you should be aware of. If the firearm is purchased from a CA business, then that business is required to collect the sales tax on the transfer fee of the FFL transfer dealer (assuming it was shipped from the seller to another FFL). The problem is that the seller FFL does not know what the transfer FFL charges, but is still responsible for collecting the sales tax. So, while it might not be correct, I collect the sales tax on the transfer fee if CA sales tax was collected by another CA FFL. It is required to be collected, so my collecting the sales tax protects the other FFL, at least for the items that I transfer for them.

Originally Posted by freonr22

how is this different than an out of state inbound transfer?

Because a firearm has to go through a CA business, the FFL, and as I said, it is not about whether the tax is owed or not, it is who and how it is collected.

[freonr22]

I guess what I am trying to say kemasa, and not argumentatively whatsoever, just for my clarification, is walmart.com is a california based business, per the news/radio article. ...why should they get special treatment

[kemasa]

They should not get special treatment, but the claim seems to be that the company actually selling the product and shipping it does not have a CA presence. While the web site is Walmart and while Walmart has a CA presence, the real seller does not.

I think that the joke is that Walmart wants to force Amazon to collect sales tax, but they do not. That is typical of Walmart's business practices and due to such things I try to avoid Walmart as much as possible.

[Mike's Custom]

The real problem of buying from a out of state private party is that a CA resident can not do a PPT in CA. The DOJ says the "sale" takes place in CA and on the DROS there is no place to do a out of state PPT. It is done as a Dealer Sale and as a sale it is taxable.

[kemasa]

Originally Posted by Mike's Custom

The real problem of buying from a out of state private party is that a CA resident can not do a PPT in CA. The DOJ says the "sale" takes place in CA and on the DROS there is no place to do a out of state PPT. It is done as a Dealer Sale and as a sale it is taxable.

Incorrect. If the firearm is a private sale, an occasional sale and not coming from a business (from actual seller, it does not matter if a FFL is used to ship it), then there is no sales tax to be collected. It does not matter where the firearm comes from. It can be shipped from a private party within the state and you can't process it as a PPT, but it is still not subject to sales tax. It is best to document it though. It is not required to be a PPT and remember, a PPT can be required to have sales tax collected if the FFL finds the buyer or gets involved with the price.

[kemasa]

Recent letter from the BOE regarding sales tax and FFLs:

http://www.calguns.net/calgunforum/a...1&d=1320950409



Note: The DROS amount is incorrect.

[bombadillo]

So what about consignment guns. I've had guys with consignment guns that I was under the impression it was working out to be more or less a PPT and the dealer takes 10% of the purchase price. 2 of the local dealers want tax on the whole thing and it just didn't sound right to me. I was wondering because some collect tax and some don't on that instance.

[kemasa]

In the case of a consignment, sales tax is due since the FFL is finding the buyer and/or negotiating the price of the firearm. It is not really a private sale as it is being done by the FFL. The BOE is quite clear on this aspect. In the case of a seller who talks to a FFL and the FFL finds the buyer, if the FFL does the PPT, they would be required to collect the sales tax, but it would also be hard to prove what actually happened.