FFL in Virginia Charging Sales Tax

[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, under "What is Consumer's Use Tax?" The actual return and instructions (in PDF format) are here. 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.

 

[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]

It's a service, not a good

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]

incidentally

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.