[Partisan Ranger]

I talked to my local FFL in Winchester VA last night about transferring the Glock 27 I ordered. He informed me that his transfer fee was 20 bucks AND that he had to charge me sales tax. What the hell, I said.

He told me that the Virginia authorities (state police? I don't know) busted him for not charging sales tax on guns he transferred in 2002. The FFL said, but I didn't buy the guns, I'm just transferring them. The cops said that the law says that when he transfers the guns, he 'owns' them before handing them over to the buyer. Thus he must pay sales tax.

Anyway, he had to go down to Richmond and appear in court. He ended up paying a $250 fine and is on probation for a year.

So, he has to charge me sales tax for my gun. However, he did mention that as there usually is no invoice with the gun, he has no idea whether my Glock costs $100 or $1000. So it sounds like he'll 'guess' that my gun costs about $100 and charge me only 4.5% of that, or $4.50.

Has anyone else run into an FFL who charges sales tax?

[D Hags]

I have always been charged sales tax with a transfer. Although it has been only a couple of times, I distinctly remeber my dealer state that he was required to do this; by state law.

[Goaltender66]

Well, you don't owe sales tax per se, but rather "use tax."

Let's say you purchase something from a vendor in Nevada. You, as a Virginia resident wouldn't be subject to Nevada or Virginia "sales" tax in this instance, because it's an interstate transaction. However, Virginia charges use tax on things that would otherwise be subject to sales tax were you to purchase it in the state (and the tax is, coincidentally, the same rate as Virginia sales tax). Per the law, you are responsible for submitting this use tax on your own. However, almost no one does it, and certainly not individuals doing their EBay thing...rather use tax is intended for businesses who buy a lot of stuff from out of state, stuff like capital equipment.

Lately I've heard from some people that Virginia's tax people were looking at businesses that do a lot of interstate commerce for their customers, and gun stores are on the list because of the federal regulations vis a vis FFL transfers. So they are putting the collection burden on the businesses instead of on the customer.

The explanation of your gun store owner is incorrect, as at no point during a FFL transfer does the store take title of the gun...any more than FedEx takes ownership of something you ship. They are simply an agent for the transaction.

Goalie

[Partisan Ranger]

My problem with it is, if they really do start making FFL's in Virginia collect sales (or use) tax, that means I pay shipping, transfer, AND tax. This could largely eliminate the advantage of purchasing online for some guns, which I imagine the authorities see as a kind of side benefit. Anything to discourage the purchase of firearms...

But on the Glock, even if I was charged the full sales tax, I'd still come out ahead. The local gun shop wants $600 for the Glock 27 with night sights, and I can get it for $508 online. With sales tax, shipping, and transfer, my total cost is about $560.

[Mike Irwin]

I heard our elected butt plug Mark Warner on the radio this morning coming in to work whining about how much Virginia and other states are losing through internet sales, and about how huge the budget deficit is.

Christ, made me sick.

[Goaltender66]

Partisan, while I think there may be a kernel of truth in your feeling that part of the motivation of this is to discourage gun sales, in Virginia's case I think the real motivation is a little less insidious.

As you know, our state is prepped for a huge budget fight on the 2004 state budget. Mark Warner, while conservative (out of necessity) on gun issues, has proven himself far more liberal when it comes to raising revenue from the citizens of our fair Commonwealth. He's already tried to get taxes in Northern Virginia raised, and his efforts were stymied by the voters who rejected his endorsed tax referendum. He's come up with another "plan," but he's said he's waiting until after the elections to unveil it. There's only one reason to wait...because it contains tax hikes and he wants to be sure there are as many Dems in office as possible before he springs it on us. Further, he's shown that he's happy to hold vital state services (like transportation) hostage until he gets his tax increases passed.

So right now Virginia has a projected shortfall of $1 billion in the 2004 budget. It's therefore to his advantage to try to shake as much money out of us as possible, since an outright tax increase isn't feasible right now. This action by the tax board is just one way of doing it. You'll note that in NoVA, state troopers are suddenly enforcing HOV lane restrictions very aggressively. They don't really care about congestion...they care about the $50 to $500 each violator adds to the state's coffers.

Legally you owe the use tax on your purchase. It just hasn't been enforced in the past because on individual purchases the amounts are small potatoes and aren't worth the cost of enforcement. It's always been easier to collect it from businesses, where the amounts are greater and many of which they audit anyway. But for Warner to be able to spend the kind of money he wants to, he is choosing to shake every last dime from the tree that he can.

Goalie

[Kharn]

IIRC, The ATF used a similar method during one of the great FFL purges of the 80's/90's:
Either turn in your license, or we'll let your state comptroller know how many guns you've been buying and havent paid taxes on (as most kitchen-table dealers didnt bother to pay use taxes on guns they bought from out of state for their personal collection).

Lots of kitchen table dealers surrendered their FFLs rather than deal with the back taxes, fines and all that. :eek:

Kharn

[JohnBT]

Revenues are UP...again.

Spending is UP...year after year after year.

The only thing down is the amount of bucks they'd LIKE to spend.

Sigh. They lie. There is plenty of money, just not as much as they'd like to spread around before the big election - and ALL of the seats are up for grabs in Nov.

We once again have another governor who is in over his head. Trouble is this one has almost no experience dealing with the state government.

(And I see they're reorganizing the Dept. of Trans. - - - - again. How do you build a section of Interstate that won't drain and then cover it up for 7 months without doing anything? I dunno.)

John

P.S. - For $40 extra I'd buy locally and see what I'm getting upfront. The only gun I've ever mail-ordered was a hard-to-find gift for my uncle. I'm picky, I know.

[Smurfslayer]

Exactly what are they charging the sales tax on ?

If you are purchasing the item interstate, and the FFL is only transferring it and charging you for that service, you haven't "purchased" an item from him/her so exactly WHAT are you paying tax on ?

The transfer fee?
The amount you paid for the item?

Did you pay YOUR FFL or the seller (interstate) ? If your FFL picked it up for you, and you paid him/her - cut & dry, you owe tax.

Else... You're only paying the transfer fee...

Virginia Arms is very straight forward - Close or not, I consider them a 'trusted source'. If they charge, I'll believe it's legit. Bernie's fellow biker-scum, and they're not out to rip anyone. I've transferred a few guns to there, but honestly I don't remember if they charged me tax... I know their transfer fees were very low, they are all extremely helpful and courteous...
HTH

[Goaltender66]

Smurfslayer, the use tax works differently than sales tax.

Use tax applies to purchases made from out of state vendors. To determine if your purchase is subject to use tax, there are two criteria:

1) The vendor must not have "nexus" in Virginia. In other words, the seller cannot have any kind of sales presence in the state. If you look at LL Bean, you'll note that a person from Virginia ordering online from their website will have to pay Virginia sales tax, because LL Bean has nexus in VA...namely their store in Tysons Corner.

2) The item purchased must be subject to sales tax had the transaction occured instate instead of across state lines. So in VA, things like bread and milk aren't subject to sales tax. If you were to buy bread over the internet, it wouldn't be subject to use tax. But a pistol is subject to sales tax, so in the absence of a sales tax liability (like an interstate purchase with nexus), it's subject to use tax.

So the use tax in Partisan's case applies, as the vendor has no nexus, and it's an item that would ordinarily be subject to sales tax if he purchased it from the gun store. Calling it "sales tax" is a misnomer, because although the rate is the same (4.5%), it really isn't a tax on the sale per se. Per the law, the purchaser is required to report and pay use tax, but recently Virginia's tax folks have been putting the burden on Virginia businesses who facilitate such transactions to collect and submit the tax. The tax is based on the price of the item purchased and usually has to be supported by an invoice or receipt when the tax is remitted.

Incidentally, most every other state in the union has use tax in one form or another. Historically it's been unevenly enforced, but in some states that's beginning to change, particularly with many states running budget deficits as a result of the tech bust.

[Majic]

First off why would the state police be monitoring a tax payment? That would be the job of the state tax revenuer.
Second I have in front of me right now an invoice for a gun I had transfered to me just a few weeks ago by my local dealer and there is no tax charged on it, nor has he ever charged me before.

[jacketch]

Because the State Police are tax collectors also (even if you call them fines)!

[Jeff OTMG]

The city of Austin, Tx was trying this, but the state said no. What the dealer does have to charge tax on is if there is a tax on a service charge. So if the dealer charges $20 to do the transfer then there is tax on the $20. The state said that if there is no revenue, then there is no tax and since the dealer didn't generate a revenue sale there could be no tax.

[Lennyjoe]

Never paid sales taxes on FFL tranfered weapons here.

[Smurfslayer]

the sole liability of the taxpayer (purchaser). IIRC, there's an entry on the VA Tax form for this...

[Mike Irwin]

Tonight I'm picking up a rifle that I bought out of Nevada. It will be interesting to see if I'm charged sales tax.

[Goaltender66]

Smurfslayer, you are correct in that historically use tax has been the responsibility of the purchaser to remit. But more and more, VA tax people have been putting the burden on the store, not the purchaser. In the gun store's case it's easy because they have to keep records of the transaction anyway, and they are subject to audit because they collect sales tax.

It would be interesting to have Virginia's interpretation tested in court, wouldn't it? The store is empowered to act as agent of Virginia for sales tax, but the statutes are (at best) unclear about use tax.

Goalie

[TaxPhd]

Every state that has a sales tax has a use tax. Internet sales cost states lots of money in lost tax revenues, and as such, the states are starting to get very aggressive in their enforcement efforts.

Given that a state tax agency has the power to require withholding and remittance of sales taxes from any business that has nexus, it is not a big leap to see them use that same power to require withholding and remittance of use tax from anyone that has nexus and is associated with the transaction. In the case of guns, that would the transfering FFL. You won't see this in many other types of transactions, as there is not a "transfer agent" involved in the state of purchase.

[Ironbarr]

Okay - then how does this work with private party sales using one or more FFLs?

IMO FFLs are providing a service - not product - and services have not yet been taxed (VA).

[Mike Irwin]

Picked up my gun.

No sales/use tax charged except on a couple hundred primers I stuck on my tab for Mtnbrk (who was then kind enough to let me play with his dog and pay for dinner! :) )

[Goaltender66]

Ironbarr, between two private parties (in the same state) the selling party is not able to collect sales tax, because (more than likely) that person doesn't have a license to do so. Instead, the buyer is responsible for submitting use tax on the transaction. Will he? 99 44/100% of the time he won't, either through ignorance of the law or other. And it isn't worth the time or effort for the state to track down these types of purchases. But if it's between two FFLs, the receiving FFL (in VA) is now instructed to collect the use tax from the buyer.


Goalie

[JohnBT]

Goaltender66 - Virginia has had a sales tax on groceries for years. JT

[Mike Irwin]

"But if it's between two FFLs, the receiving FFL (in VA) is now instructed to collect the use tax from the buyer."

And again, I picked up my gun last night, which was purchased from an FFL dealer in Nevada, and set to my FFL dealer in Virginia.

No sales/use tax was charged on the transaction.

[Goaltender66]

Mike, which means either the FFL in question is ignorant of the law (not having been audited yet) or is deliberately violating said law.

JohnBT, good catch. I stand corrected for what I used as an example.


Goalie

[Smurfslayer]

If Bernie & the VA Arms staff aren't charging it, chances are, 'tis BOGUS!

They have a large client base that includes quite_a_few Law Enforcers, and as I previously indicated, the entire staff is very_professional... I'd have a hard time thinking of another dealer(ship) that was so diligent about being all above board.

I suggest finding another FFL, one like Bernie at VA Arms !

[Poodleshooter]

How is there legal precedent to force the FFL transfer agent to collect use tax if the actual purchaser is the private citizen? Would that failure to obtain use tax be enforceable against the FFL? I would think that the FFL has no actual purchasing role, simply a role as the legal transferor of the goods. This seems like requiring the UPS man to collect use tax if he delivered an out of state mail order purchase to my door. He has simply arranged for the legal transportation of my goods, and charged me a fee to do so.
The reason I ask is that the ATFE's FFL guidelines show the actual sale of a firearm to a non-resident as occuring at the time of purchase from the out of state dealer, not at the time that possession occurs.

[spacemanspiff]

"use" tax???? thats insane. your income is taxed federally, and possibly by the state as well. so your money is yours to use, and you wind up paying a sales tax, and for items sold between private parties, a use tax?

doesnt all those taxes hurt the value of the dollar?
i guess us alaskans should count our blessings, we have no sales tax (in anchorage anyways) and no state income tax either. on the other hand, we pay out the nose for products anyways, because it supposedly costs more to ship stuff up here.

[RustyHammer]

Most places around here have started doing that too since the BATF started doing inspections. Your story sounds very similar to the way things have changed here too.

One of them basically said that the BATF is basically an extension of the IRS when it comes to collecting taxes on gun sales. They can audit the books, check to make sure that sales tax was collected, and hit the both the FFL holder and the purchaser (me) if they weren't paid.

The local IRS folks have started cracking down on businesses who order computers, supplies, etc. online to make sure that they have paid sales tax, i.e. use tax, on them. Know of several firms who have been hit, like we were, last year.

Just can't win.

Really bites.

[Goaltender66]

Not to sound flip, but hey...OJ got away with murder so that must mean the laws against murder are bogus.

Ahem. Sorry...didn't mean to sound sarcastic.

All I can say is that the VA statutes regarding use tax are pretty clear, as far as tax laws go. Heck, even the LEOs that told the store in question the rationale for collecting the tax were wrong (it has nothing to do with the store "owning" the transferred good.). Plus, and this is not a slam, but I wouldn't trust a VA trooper to know about the tax law, any more than I'd trust a tax administrator to know what constitutes probable cause. To me, the issue isn't whether the tax is owed, but who should collect it, and there's a very honest argument that the FFL should collect it.

Anyway, the FAQ showing a summary of the law can be found here (http://www.tax.state.va.us/site.cfm?alias=IndividualFAQ3), under "What is Consumer's Use Tax?" The actual return and instructions (in PDF format) are here (http://www.tax.state.va.us/Web_PDFs/indForms/currentyear/cu7-2002.pdf). And the fact that the FFL has nexus in the state seems to be justification for Virginia's tax people to require them to collect the tax...as posted earlier, they require it for nexus-holders when they sell within the state. I don't know about the parallel between the FFL and a delivery service like UPS, but it seems to me it's cost-prohibitive to require UPS to do it since they deliver many other things besides goods purchased out of state. The percentage of things transferred via FFL may be higher. I don't know, and I hope the tax people don't either. :)

In short...yes, it bites. And yes, I hope VA Arms doesn't run afoul of anything, as it is a good shop.

Goalie

[mattd]

Pee in a cup for not paying sales tax, makes sense.:rolleyes:

[TaxPhd]

Goalie, you are right about it not applying to UPS. Too burdensome, plus they do an awful lot of transactions that aren't face to face.

I am pretty sure that the VA tax authorities are acting under the exact same power that allows them to require a business with nexus to collect and remit.

[Goaltender66]

Taxphd, I think you're right about the nexus bit. I do know this issue is fairly new and as such is probably still being applied unevenly.

From the you-didn't-ask-but-I'm-telling-you-anyway department, about three years ago my company got hit hard with the use tax issue and we ended up having to pay a couple hundred grand in taxes, penalties, and interest to make it go away. Use tax is one of those things VA (and other states) use to get more coin out of businesses, but until recently they haven't leaned on individuals. Nowadays, it seems more and more states are taking another look at it to help their sagging budgets.

Goalie

[Smurfslayer]

An FFL transfer is a service; the FFL processes the transfer of the firearm from interstate commerce. Since the sale was between party A and party B, FFL (party C) is not "selling" anything but a service, which the last time I checked, wasn't taxed yet.

I checked the link, went to individuals, and then, business... didn't see anything regarding collection of "Use" tax under businesses. Found 1 paragraph under individual. The issue of disagreement here is not whether or not the tax is owed, rather, if the FFL is required to collect it on an independent transfer of a firearm. The answer to that is no, as no tangible good is being sold, no part of inventory. Further, once the money is paid for the item, it belongs to the purchaser in much the same way as a class 3 transfer occurs. Since you have already effected the purchase, again, YOU the purchaser are responsible for the use tax, subject of course to the statute of limitations ;) If an FFL in the Commonwealth of Virginia is being required by VDT to charge the USE tax for FFL transfer processes, then by all means, scan a copy of the VDT memo... 2 other FFL's I know or do business with concur - no duty to collect use tax on a transfer.

[Smurfslayer]

If one wants a good example of pursuing a "use" tax, see Maryland's state comptroller, former governor, Prince of Perks - Willie Don Schaeffer. He has actually sued some NC furniture outlets for "taxes" because in his words" many Maryland residents go to NC to buy cheap furniture and bring it back to MD and these residents aren't paying tax on it"... He wanted the customer names so they could be hit with the tax bill... Anyway...

[Majic]

So if an "use tax" exist, at what rate is it charged? It cna't be levied against the actual purchase price because the FFL holder has no means of knowing that amount. What percentage of the transfer fee the FFL holder charges is charged? Also what if the FFL holder doesn't charge a fee for transfering? How can he be required to charge a tax on a free service?

[Poodleshooter]

Why does the VA FFL holder's nexus matter if title doesn't transfer to them at some point (or does it)? Shouldn't it be determined by the title transfer, which presumably occurs in Nevada when the firearm is rung up, or possibly even from the purchasers calling point in VA when they call in their CC data? While it's certain that a VA FFL has nexus by it's residence in the state, what's not clear to me is whether they ever take title to the firearm.