Do you have to pay State sales tax from an FFL transfer from OUT of state?


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StrikeFire83
February 23, 2011, 01:05 PM
I've been looking at Buds Gun Shop and really digging their "shipping included" prices. The root of my question is this: If I buy something from Buds and have it transferred to an FFL in Texas, do I have to pay Texas sales tax? Is it an absolute, or does it depend on the FFL?

The price + FFL transfer fee + sales tax = Not as wonderful a deal as it might appear to be.

Anyhow, thanks in advance for any help yall can provide.

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UpTheHill
February 23, 2011, 01:07 PM
depends on how your state law is written.
Maine has a 5% sales and use tax,
so technically everything I buy over the internet, I'm supposed to be a good boy and tell the state and send them their 5% use tax, since
I'm going to use it in Maine.

based on this if a local FFL charged me the 5% tax, he'd be correct. though the one I use doesn't do this.

rellascout
February 23, 2011, 01:07 PM
Depends on the state. In WV you pay it on your state income tax. The transfering FFL does not collect the sales tax.

1911austin
February 23, 2011, 01:09 PM
You would not pay sales tax on the firearm. You would only pay the dealer his transfer fee. In the great state of Texas, you would only have to pay tax if Bud's had a business location within the state of Texas.

StrikeFire83
February 23, 2011, 01:10 PM
Well, I'm in Texas. We have no income tax, but we do have an 8.25% state sales tax. If going through an FFL is a way to AVOID the sales tax because the weapon is fully paid for and all he is doing is a transfer, then that seems to be the way to go.

StrikeFire83
February 23, 2011, 01:13 PM
^ Thanks, 1911Austin. You replied while I was typing my response above. Now to find a reasonable FFL in Lubbock!

mgkdrgn
February 23, 2011, 01:17 PM
: If I buy something from Buds and have it transferred to an FFL in Texas, do I have to pay Texas sales tax? Is it an absolute, or does it depend on the FFL?

Is there a legal requirement that you pay the sales tax? Probably.

Is the FFL going to collect that for the state? No. He has no idea what you paid for that firearm.

Does it make it tough to impossible for a local FFL to compete with Buds? Yep. Even if I sell at my wholesale cost (ie, charity work), once I add on the sales tax I MUST collect on local sales I'm behind.

Are more of the flat bust broke states likely to change this sometime in the future? If they can figure out how, you betcha. Enjoy while you can.

Jon_Snow
February 23, 2011, 02:11 PM
Are more of the flat bust broke states likely to change this sometime in the future? If they can figure out how, you betcha. Enjoy while you can.

Sadly, someof them already do. Here in Ca every FFL HAS to collect our 9.25% sales tax on every gun they transfer. That was an unexpected hit when I bought my Citori online.

Bubbles
February 23, 2011, 02:14 PM
Some states, such as WA, have a law in place that forces the FFL to collect sales tax on the transferred gun if the wasn't paid in the state of purchase.
http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/FirearmTransfers.aspx

Others, like WV, assess state sales tax on the transfer fee, but not on the transferred firearm.

rajb123
February 23, 2011, 02:23 PM
The US Supreme court settled this many years ago. States are not entititled to collect sales tax from out-of-state purchases unless the seller has a place of business within your state of residence.

Example: You live in NJ and the sales tax is 8%. If you buy a widget in Texas and the seller ships it to you, you should not have to pay 8% sales tax to NJ unless the seller also has a brick-and-morter place of business in NJ.

From a practicle matter, the seller may require you to pay this anyway because they often get threatened by states and the state of NJ will likely try to collect the sales tax when you complete your state tax return.

I assume for gun sales, however, the answer depends upon where the gun title transfer takes place.

You should consider discussing this with the seller and FFL before you complete the transaction.

strmday
February 23, 2011, 03:01 PM
mgkdrgn and rajb123 nailed it pretty well.
I'm in Ohio and the FFL does not collect sales tax on the firearm but does on his transfer fee. When we fill out our state income tax, you are asked for the value of purchases made outside the state where Ohio tax was not collected. Then you submit the state sales tax on that figure. As of now, out of state retailers, don't reconcile purchases and taxes paid by me with the state. I think we'll see that change.

NavyLCDR
February 23, 2011, 03:04 PM
You would not pay sales tax on the firearm. You would only pay the dealer his transfer fee.

The part immediately above is correct.

In the great state of Texas, you would only have to pay tax if Bud's had a business location within the state of Texas.

This part immediately above is entirely in error. Texas statutes Chapter 151.101 requires the purchaser to pay a use tax equal to the sales tax that would have been paid to the retailer:

SUBCHAPTER D. IMPOSITION AND COLLECTION OF USE TAX

Sec. 151.101. USE TAX IMPOSED. (a) A tax is imposed on the storage, use, or other consumption in this state of a taxable item purchased from a retailer for storage, use, or other consumption in this state.

(b) The tax is at the same percentage rate as is provided by Section 151.051 of this code on the sales price of the taxable item.

Acts 1981, 67th Leg., p. 1552, ch. 389, Sec. 1, eff. Jan. 1, 1982.


Sec. 151.102. USER LIABLE FOR TAX. (a) The person storing, using, or consuming a taxable item in this state is liable for the tax imposed by Section 151.101 of this code, and except as provided by Subsection (b) of this section, the liability continues until the tax is paid to the state.

(b) A person storing, using, or consuming a taxable item in this state is not further liable for the tax imposed by Section 151.101 of this code if the person pays the tax to a retailer engaged in business in this state or other person authorized by the comptroller to collect the tax and receives from the retailer or other person a purchaser's receipt given as provided in Section 151.103 of this code.

http://www.statutes.legis.state.tx.us/Docs/TX/htm/TX.151.htm


Washington state is now requiring FFL's to collect the use tax as a condition of their license because individuals were not.

The US Supreme court settled this many years ago. States are not entititled to collect sales tax from out-of-state purchases unless the seller has a place of business within your state of residence.

Entirely correct, because the buyer's home state will require them to pay a use tax.

rajb123
February 23, 2011, 04:24 PM
For an out-of-state gun purchase, does the FFL in the buyer's state obtain title to the gun and then subsequently transfer title of the gun to the buyer? If no, I believe the state in the buyer's jurisdication should not be able to collect sales tax unless the seller has a place of business within the buyers state.

Strmday said:
When we fill out our state income tax, you are asked for the value of purchases made outside the state where Ohio tax was not collected. Then you submit the state sales tax on that figure.

According to federal case law set by the Supremes, states have no right to collect sales tax from out-of state transactions unless the seller has a physical place of business within your state. Yeh, the state income tax forms will ask you if you have any out-of-state purchases where sales tax was not paid. The questions are typically posed cleaverly to avoid telling people about the established federal case law on the topic. What the state tax law question really means is this:

"Did you purchase any goods in another state where the seller has a physical location in this state (e.g., your state of residence) and where the seller did not collect sales tax from you?

States often threaten out of state vendors with legal action for failing to collect and submit sales taxes, but legally, they have no right to collect them and do not have jurisdiction outside their own state whenever the vendors do not have a place of business within their state.

I'm a CPA.

StrikeFire83
February 23, 2011, 04:27 PM
I just want to do everything 100% completely above-board. Today I found a local shop in Lubbock that is $25 to $50 within all of Bud's prices on the guns I'm interested in. Frankly, I'll deal with a local guy who's fair on trades and lives in the community, and it's only fair that I pay sales tax. I'd rather pay it up front than try and deal with it at tax time.

Today, however, I looked at a Smith and Wesson M&P9c and got three prices:

Shop 1 - $719 (Good God NO!)
Shop 2 - $549 (Getting Better...)
Shop 3 - $499 (BINGO)

pbratton
February 23, 2011, 04:29 PM
Good thing there's not state income tax in Texas ...

Seller should not be collecting sales tax from the sale unless the seller has an establishment in the state the buyer resides in.

The FFL, at least in Texas, should not be collecting sales tax for a transfer.

brickeyee
February 23, 2011, 04:38 PM
The US Supreme court settled this many years ago. States are not entititled to collect sales tax from out-of-state purchases unless the seller has a place of business within your state of residence.

The decision dealt with if an out of state business could be required to collect sales tax.

Unless the business has a physical location in the state they cannot be forced to collect sales tax by the state for items they ship into the state.

The state can still force YOU as a resident to pay a use tax on purchases made out of state and shipped into your state.

Numerous states have been looking for a way to enforce the use tax.

Many now have a 'voluntary reporting' on state income tax forms.

Virginia has actually pursued folks that purchased furniture in NC and had it shipped into Virginia by reviewing shipping company records.

Single large purchases make it worth pursuing offenders, and the shipping companies have to answer to the state if they want to do business in the state.

It is liable to only get worse as states look to every source of money they can.

StrikeFire83
February 23, 2011, 04:50 PM
Looks like Texas DOES have a USE tax.

http://www.window.state.tx.us/taxinfo/taxforms/01-forms.html#Use

From Form 01-156 Use Tax Form

Use Tax Return

* 01-156 Texas Occasional Use Tax Return - to report & pay tax on items brought or delivered from outside the state into Texas

mgmorden
February 23, 2011, 04:58 PM
The questions are typically posed cleaverly to avoid telling people about the established federal case law on the topic. What the state tax law question really means is this:

"Did you purchase any goods in another state where the seller has a physical location in this state (e.g., your state of residence) and where the seller did not collect sales tax from you?

Usually the state income tax forms specifically call it a "Use Tax" to get around this. Yes, common sense says that it walks talks and quacks like a sales tax, but in reality, often times semantics rule when it comes to legalities. In states that have it, you're supposed to report all untaxed out of state purchases on your yearly tax returns and pay the appropriate amount of use tax.

verdun59
February 23, 2011, 05:27 PM
In Virginia the FFL collects it.

waterhouse
February 24, 2011, 03:24 PM
Are more of the flat bust broke states likely to change this sometime in the future? If they can figure out how, you betcha. Enjoy while you can.

I've often wondered this. We have the Use Tax here. While people order tons of stuff online and don't pay a use tax on it, it seems that most of those items would be hard to track. Guns would be somewhat easy to collect on if they decided they wanted to enforce it. Due to ATF regulations, there is a clear record of who ordered what make, model, etc, where they ordered it from, and where they live, also generally including things like their SSN. Considering the 8.25% tax, I bet there are untold millions in unpaid taxes on transferred guns, with all of the necessary data just sitting in dealer's bound books. Given the budget shortfalls in most states, I think it is only a matter of time before someone looks into it.

mgmorden
February 24, 2011, 03:59 PM
I've often wondered this. We have the Use Tax here. While people order tons of stuff online and don't pay a use tax on it, it seems that most of those items would be hard to track. Guns would be somewhat easy to collect on if they decided they wanted to enforce it. Due to ATF regulations, there is a clear record of who ordered what make, model, etc, where they ordered it from, and where they live, also generally including things like their SSN. Considering the 8.25% tax, I bet there are untold millions in unpaid taxes on transferred guns, with all of the necessary data just sitting in dealer's bound books. Given the budget shortfalls in most states, I think it is only a matter of time before someone looks into it.

They're already doing it for some items. One of my other hobbies is aviation (I'm a private pilot - PP-ASEL). In the lower tiers of private aviation where many guys are just regular folk doing their best to fly on a working man's budget, there is a lot of interest in homebuilt airplanes as naturally new factory airplanes are rather expensive. The kits in comparison are a bargain, but they still can range $10k-25k or more. Apparently quite a few builders have been caught avoiding the use tax on those big kit purchases.

hermannr
February 24, 2011, 08:02 PM
WA and some other states don't collect "sales" tax on purchases outside the state, they collect "Use" tax which is the same thing but just a method to get around the prohibition against collecting an out-of-state sales tax..this Use tax is considered an excise and therefore legit. Most common example of this type of tax is when you register an automobile that was purchased out of state. They collect it when you license the vehicle. Other "use" taxes include when a company purchases something that it could resell for it's own use and not for resale.

tkaction
February 24, 2011, 10:07 PM
My FFL in pa. only charges $10 to transfer but if I buy out of state and dont have a bill of sale that shows I paid sales tax he collects it. He will be asked to verify the value of transactions though his ffl to the state on a quarterly basis and he has to justify the amount collected versus the sales amount. If he doesnt or lies he loses his right to have a business in pa.

oneounceload
February 24, 2011, 10:12 PM
MOST states have a sales/use tax - that means you are required to submit the required tax even on internet purchases - because it is so hard to enforce currently, most folks do not bother - as more and more ways are coming up to generate revenue, many states are requiring states to collect the tax for them and submit it - whether or not they have a B&M store in that state or not.

DMF
February 24, 2011, 11:57 PM
Most (if not all) states have a use tax, which is the functional equivalent of sales tax on items purchased outside the state and brought into the state to use. Texas most certainly has a use tax. Local taxes apply also.

http://www.window.state.tx.us/taxinfo/local/index.html

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=346

"Out-of-state purchases. Use tax is due on taxable items purchased out of state that are stored, used or consumed in Texas."

Whether the FFL collects or you self report, you are legally required to pay it. Just because you may have been getting away with not paying it doesn't make it right.

Article explaining use tax: http://www.usatoday.com/money/perfi/columnist/block/2002-06-18-state-tax.htm

A and O
February 26, 2011, 12:43 AM
Land of the free? Sounds more like the Land Of The Fee

Jorg Nysgerrig
February 26, 2011, 01:19 AM
The US Supreme court settled this many years ago. States are not entititled to collect sales tax from out-of-state purchases unless the seller has a place of business within your state of residence.
Cite?

Both Quill Corp. v. North Dakota and National Bellas Hess, Inc. v. Department of Revenue of Illinois say the the retailer without a physical presence does not have a duty to collect the sales tax on behalf of the state, but I'm not aware that either of them said the state couldn't collect use taxes on out of state purchases from the consumer.

To which case are you referring?

Jolly Rogers
February 26, 2011, 03:13 PM
So what happens if some one relocates to the states that have the "use tax"?
Do they have to pay a use tax on all of their belongings? Who determines what the tax is on used items?
Joe

brickeyee
February 26, 2011, 03:42 PM
Use and sales taxes are on new items.

The federal courts have ruled that states cannot require out of state entities (if they have no physical presence in the state) to collect sales tax for them.

They did not say that states cannot collect sales tax on out of state purchases from state residents, just that they cannot require out of state merchants to collect the tax.

Most states do not demand the tax be paid if you already paid a sales tax out of state (though some have higher tax rates and want the differenace).

To avoid everyone in a state trying to skirt the sales tax rules, use taxes have been added to the mix.

If you purchase something out of state (the state cannot require the merchant to collect for them) the state wants a 'use tax' that SURPRISE is often the same rate as the sales tax you would have paid buying from an in state merchant.

The taxes are legal, if annoying.

If you already paid a sales tax on the item their is usually a way to not pay twice.

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