A question for FFLs: Do you charge sales tax on out of state transfers?

[R Cubed]

The collection of tax on services is a state revenue issue. If the home state charges tax on services, then tax is collected. If the state does not collect tax on services, then no sales tax "should" be collected. Arizona does no collect taxes on services, I am a FFL and do not collect the tax on services.

If the business owner takes the time to read the tax code, the tax does have to be collected from the buyer. This is how it works here, I file a form with the Dept of Revenue each month on my activity reporting the gross (sales) in each catagorie. I pay the tax on those amounts to the state. Written into Arizona State law, I can, and businesses do, pass the tax on to the consumer.

So, in a nut shell, consumer paid sales tax to the merchant is an activity decided by the merchant as passing on the tax to the consumer. This is why when someone asks for a discount, as I often do, the merchant will fore go collecting the tax. And reports the sale at a lower value to equal the item's price and tax, it's what I would do.

Rick

 

[oldRoger]

I have no objection to the dealer charging sales taxes on his transfer fees if those services are taxable according to the state. FL has an absolutely Byzantine system of exemptions for various services so I don't know about the FFL fee here.

My problem is with a used firearm shipped from either in or out of state. Obviously the FFL is only transferring the gun and has no part of the sale.
I think in most places legal, private, face to face sales of used guns are not subject to sales tax if the seller is not a business. At this point how does the state have a legitimate claim to tax just because the gun had to be shipped and transferred?

 

[2152hq]

If the FFL dealer has 'sales tax nexus' with the state that the gun was sent from,,,then the FFL dealer is liable for the sales tax rate in his home state.

The 'nexus' is a confusing and often highly debated condition. In short, if the State Sales Tax Bureau determins that the FFL has any connection to the supplier/seller in the other state,,then Sales Tax Nexus has been established and tax is due.

Nexus can be established by haveing a separate office in the other state.
It can also be established by mere connection to the other out of state business thru a representative.
That rep. DOES NOT have to be an employee,,nor does a rep have to be paid for their services for nexus to be established.

Nexus can also be established if the FFL acts as an 'agent' (again,, does not have to be an employee of or paid for his work) out of state business.

Nexus of late has been determined to be in place if Internet connection with the out of state business has been established. This idea has been the newest idea used by states to collect sales tax on out of state purchases.

I think the 'nexus' is established when your transfer FFL accepts the firearm and perhaps an FFL copy from the out of state seller.
He then becomes an 'agent or representative' of the out of state FFL dealer in completing the transfer of the firearm sold to the buyer.

SalesTax is going to be collected one way or the other. Make no mistake about that.
It's very expensive to have to make payments for past sales tax due. The penaltys are very high.

Wether the firearm is new or used is of no matter.
Private sales (FTF) are generally seen as 'the occasional sale of private property' by sales tax dept's.
Start doing a few too many occasional sales,,and the BATF, in case of firearms, and the sales tax people will want you to sign up.

 

[oldRoger]

An excellent argument for FTF sales.

2152hq... Obviously most FFL holders are not going to want to fight city hall on "nexus" even if I think this is a very long stretch. I suppose we could say that any FFL has a nexus to any other FFL, and any S&W forum member has a nexus to any other member, and since some members of the forum are FFL holders, then nexus is established and we all owe use tax on everything, everywhere.
I see us over the barrel in regard to new firearms, but for the very occasional used purchaser?
How in the world can the FFL or the State know how much money changed hands in a private transaction? Perhaps you did sell me your 98% triple lock for $150+shipping. The state doesn't require an appraisal of the used firearm being shipped.
It seems to me at least in regard to used goods, that getting compliance has some really big loopholes.
Confused in Florida
Roger.

 

[rbishop]

2152hq... Obviously most FFL holders are not going to want to fight city hall on "nexus" even if I think this is a very long stretch. I suppose we could say that any FFL has a nexus to any other FFL, and any S&W forum member has a nexus to any other member, and since some members of the forum are FFL holders, then nexus is established and we all owe use tax on everything, everywhere.
I see us over the barrel in regard to new firearms, but for the very occasional used purchaser?
How in the world can the FFL or the State know how much money changed hands in a private transaction? Perhaps you did sell me your 98% triple lock for $150+shipping. The state doesn't require an appraisal of the used firearm being shipped.
It seems to me at least in regard to used goods, that getting compliance has some really big loopholes.
Confused in Florida
Roger.

Exactly why I always request that the out of state seller NOT enclose any invoice with the gun. It is the law and most dealers arent familiar with the law unless they have had a recent visit from the state revenue officers. Most all of the major online catalog sellers (LL Bean, Orvis etc) are charging sales tax at the rate charged by the state they are shipping into.

 

[2152hq]

It's not a long stretch for the recv'g FFL to be considered an 'agent' of the seller. He is after all involved in the completion of the sale,,with out him/her, the transaction would not take place.

It's already been ruled that an agent or rep does not have to be an employee or even paid for the service he provides to the seller out of state or the buyer in his state.
Contact between the two FFLs thru common or commercial carrier is also a way that nexus is established in most instances. That certainly applys here.

Yes, 2 FFLs that do any business between them have established nexus.


Take a look at some off the recent rulings involving out of state purchases with a 3rd party involved and you'll find that in most all cases, the sales/use tax was due and to be collected by the intermediary in the transaction.

I'm certainly not argueing that it's fair, or that it should be the way things are done. I don't like it anymore than the next person.
It's just the way it is that's all. They want every penny and see millions in revenue in collecting tax on out of state sales.

A call to the State Sales Tax Bureau and posing the question will get you an answer.
I have an idea what it will be in most cases.

 

[CAJUNLAWYER]

OK one more time for those who missed it the first itme around.
You owe your state sales tax on internet purchases pure and simple. You but a pair of pants from LLBean, you owe Louisiana (or whatever your state) sales tax. LLBean doesn't collect the tax but you still owe it and are expected to send it in to the state at the end of the year along with the taxes on all your other internet purchases.
Let's go one step further. You buy from the internet a shirt from Cabelas. Because they have a presence in the State of Louisiana they are obligated by state law to collect the tax from you and forward it on to the state. Moral of this story, if you buy on the internet-make sure that the company has no presence in your home state otherwise they will collect the tax from you and forward it on to the state. The question with the FFL gets murkier. since arguably they are performing a service regarding the transfer and not technically selling the gun, must they collect tax? Unless there is a special law to the contrary, they cannot since they are providing a service (much like a notary public) at leaset in Louisiana. Of course that does not relieve you of the burden of self reporting and remitting the sales tax to the state at the end of the year.
At various times the legislature attempts to tax services such as Legal, medical etc., but because us lawyers gots us such a great presence in the house and senate we can usually beat this back (think about this next time you grouse about putting the fox in charge of the wh---... hen house)
This discussion is all really acedemic because the state is still going to get their correct amount of sales tax regardless of who sends it in, you or your FFL. Me it's easier for the FFL to send it in as it is just one less thing for me to do at the end of the year.................................Yea Right

 

[oldRoger]

Naturally under the advice of counsel, (see above) I cheerfully remit all use taxes to the state promptly, in fact I usually send along a bit extra since the state spends it so well.

And I am delighted to know that many excellent attorneys are laboring in our behalf in the various state legislatures when not imprisoned for some misunderstanding or other.

 

[Super Trucker]

In MI some FFL's collect tax and say it is the law. Very few actually do this as it chases customers away but it is the law.

 

[straightshooter1]

I don't like tax! I don't like to pay it, like to read about it, like to talk about it!

I HAD to take Tax in Law School, but I hated it. There's something not quite right about CPAs, Tax Lawyers and people who do math problems in their heads.

Nonetheless, at the cost of a headache and great irritation, I have struggled through the applicable chapters of Florida's Statutes and:

I'm afraid the Tax Boys are right. It's pretty clear if you entered into an agreement with a Dealer in another state, to have a firearm sent to an FFL in this State, he should collect the tax.

Less clear, is when you enter into an agreement with an individual who ships to your FFL directly.

But, I'd expect to lose if the Tax Boys pressed the issue.

Further, if the FFL failed to collect the tax, our friends at the tax office can come visit with us and collect the same tax amount, as a use tax.

I did not look for it, but I believe there's another statute that deals with the fair market value of something that you owe a tax on-like that $800 gun you now claim you paid $21.95 for but can't find the paperwork.

Of course, finding the original seller in the other state wouldn't take a rocket scientist and it seems to be a crime (imagine that!) to defraud the State of its tax revenues.

I don't expect a knock at my door, BUT, as this State gets more desperate for tax revenue, I would expect more FFLs to get a visit from the Tax Boys and start collecting.

If I were an FFL in that position, I would make sure I got the right amount. No invoice to prove the sales amount would cause me to send the gun right back to the seller or hold it till I got one I believed legitimate.

No one likes taxes (except the government and CPAs) but I would not play fast and loose with the truth if I were an FFL dependent on the Government to keep my means of making a living.

Bob

 

[rbishop]

straightshooter 1 is correct about everything he says except that CPAs like taxes,,,,not this one! I have worked with them for going on 30 yrs but I still cant make myself like them.

Most states have a toll free number that anyone can call and ask questions about sales tax laws and regs. Sales tax compliance is one of the most complex tax statutes there are. That is why so many merchants don't have a clue what is right or wrong until the revenuers come in and tell them!

 

[Smithhound]

I've thought there was an legal restriction against charging sales taxes from internet purchases, could be wrong but I believe congress tried to address this a couple years ago and put it off. Intrastate transactions should be taxed, internet/interstate should be off limits. Technically, in my book you are buying an item from an individual (provided the purchase was from an individual, not from a dealer) therefore it is a private transaction, that individual, not being required to file taxes from sales doesn't have to. The transferring dealers fee's should be the only amount taxed, perhaps the recieving dealers.
Since no monies passed between businesses in an interstate transfer there is technically nothing to be taxed, other than fee's.
RD

 

[bobelk99]

In KY sales tax is only due on an actual sale made in KY.

BUT, anything acquired out of state incurs a use tax (nother name for same thing) that is payable at the time you file your state taxes.

Or so my tax man says.

You own the tax, by whatever name. And if you are honest, you will pay it at time of purchase, or at tax time.

Amanda:
FFL is for a holder of a Federal Firearms License.

 

[oldRoger]

Not long ago there was a post in which the OP wondered why some people liked FTF sales and in fact insisted on FTF in their classifieds.
So to add to the negative factors of transfer fees and delays we can add the use tax since I believe the use tax does not apply to legal private sales at least in FL.
Always remembering the advice above that exceeding a certain level of sales might cause the BATF to question your status.

 

[ElToro]

i can understand if am buying from a business ( dealer) out of state that my state would collect tax, but if i am buying from an individual, the local FFL is only facilitating a DROS. but if me and somebody i find local want to do a live in person FTF, no tax. doesnt seem logical.

that being said, my buddy at a gun store i do a lot of business with and had recently ( earlier this year) had a rifle transferred in ( from an individual) said the state of CA tax board came down on them last year for not collecting tax on out of state transfers. guns only apparently. the guy who sold me the m1a, made an invoice for gun $x amount and magazine and sling $y amount.

but PRK is beyond broke so they are finding anyway they can to collect tax.

 

[bk43]

It's pretty clear if you entered into an agreement with a Dealer in another state, to have a firearm sent to an FFL in this State, he should collect the tax.

I am not a lawyer but have been doing business in Florida for a lot of years. There is no duty on the part of either FFL in this situation to collect sales tax on the sale itself and neither has a right to try. The reason is that there is no nexus which is just an uppity term for business relationship. There is no money changing hands between the FFLs and their services are for the buyer and seller respectively, not each other.

Just as Caj describes Louisiana, the buyer incurs a use tax which they are obligated to pay to Florida. I keep meaning to pay mine for out of state purchases but because of my CRS(Can't Remember ____) I have trouble getting around to it.

Bob

 

[straightshooter1]

You may be right, bk43, but the statute says if there is any advertising by the "dealer' in the other state, like catalogs, electronic or any other means, that creates the nexus.

That seems to cover someone other than a private person with no FFL advertising a WTS here.

Not that I like it, you understand.

rbishop, perhaps I should have said CPAs like the income derived (albeit indirectly) from taxes. I know mine does.

Bob

 

[bk43]

Bob...ads, catalogs and such do not create a nexus per SCOTUS. It has to do with the Commence Clause and/or Dormant Commerce Clause or some such and I frankly don't know enough about the law to try Google it up and explain it. You would be far more capable of doing that for us than I.

Bob, the non-lawyer one.

 

[straightshooter1]

I believe you are referring to the Quill case, a 1992 SCOTUS case. I think you are correct about what it says.

The commentaries suggest that Quill created more questions than it answered and several read the case to mean the states were able to decide what was a substantial nexus as long as it was more than the facts of Quill. Further, on several occasions, someone introduced a bill in Congress to override the basis of the decision-the last time, as far as I can tell in my limited and very boring look at this stuff, was in 2007.

The Department of Revenue seems to think the nexus is there as they are the ones that have my FFL collecting the tax. Now whether they consider is a use tax or sales tax is unclear to me, but, since he wants no trouble with them, he collects it.

He does warn customers, that want him to receive a gun from another state, but, apparently, many are just happy to have someone who'll receive it for them. He's such a nice, honest, older guy, offers everyone coffee or a soda, etc., and has one of the better selections of guns in this area.

As I said in an earlier post, I don't use him to receive the few guns I purchase from out of state.

I am finishing the Southern Grand American and then the Florida State Shoot starts Tuesday. Maybe this Monday I can get by his shop and spend some time pulling out what the Revenue dudes say and how he submits the $ to them (does he distinguish between use and sales tax?).

But I hope to never think about this again after that.

I just finished a battle with the Federal IRS. I won (they sent a letter wanting over 10K in interest, taxes and penalties after I'd already provided receipts proving each deduction. They asked if I wanted to write a check or work out a payment plan-check the appropriate box. There was no box for neither!).

I won, but it soured me on tax (like I'd ever been interested in it at all before).

Bob

 

[bk43]

Bob, thanks for looking. I have trouble understanding that kind of stuff when I read it so I just go by what I have been told.

Bob