Sales tax on transfers?

[ACP]

Does anyone here pay state sales tax on a gun you have purchased from an out of state party (i.e. Gunbroker) and are accepting through a local transfer dealer? Or does it vary state to state?

I paid a man down South for a pistol. It arrived by mail at an FFL in my home state today. The paperwork with the pistol said "paid in full."

But the FFL says since he has entered it on his books, I have to pay him sales tax. I owe as much in state sales tax as the cost of the transfer fee. All told, $48. That practically negates the savings of buying over the Internet in the first place.

 

[Zundfolge]

Sounds like either he doesn't know what he's talking about or he's fleecing you.

I've NEVER paid sales tax on a firearm I had shipped to an FFL. Maybe he could charge sales tax on the FFL fee ... but otherwise I believe he's probably in the wrong.

 

[Langenator]

Maybe there are FFLs on here that can straighten me out, but from the wide variation in transfer fees I've seen, my impression is that the fee is basically what you're paying the FFL for his trouble in doing the paperwork. You're paying him for his "specialized" labor, same as for a mechanic, or plumber, or electrician. I don't know if any part of the transfer fee is any sort of actual remittance to the state and/or federal government.

Since you're paying the FFL for labor, if your state/locality requires sales tax on labor charges, it sounds straight.

 

[Brigrat]

It depends on state law. What state are you in? Every state has different laws on taxing items shipped into the state that were purchased from out of state.

 

[Bill Hook]

You only pay tax on the service rendered, not the item purchased. you are being screwed, but you may just have to pay for not clarifying this up front.

If you purchase at this place regularly, make it clear that this is the last money they will see from you and look at shotgun news, auction arms, gunsamerica or gunbroker for FFLs who do transfers in your area.

 

[Redlg155]

I personally think he is screwing you over and has no understanding of the laws, or does and wants to make you pay him a bit more in his pocket. In any event I'd make sure you got a reciept that included the sales tax charge. That way you can make a complaint after you make sure your state does not charge sales tax for out of state purchases.

The general rule is that sales tax is not charged for out of state purchases. You did not purchase the weapon from the dealer. The only service he provided was a FFL transfer. Any tax if collected could only be on the fee charged for the service. If he charged tax on the total transaction amount that you paid the seller, he would also have to add the amount of your entire weapon purchase in his total tax liability for the purposes of payment of sales taxes. I very seriously doubt he did or will do that.

It depends on state law. What state are you in? Every state has different laws on taxing items shipped into the state that were purchased from out of state.

A simple way of finding this out would be to call somewhere like Midway USA. Ask them if they are required to charge shipping to residents of your state.

Good Shooting
Red

 

[jsalcedo]

I ordered an old enfield through a decent shop.

The gun was $69 Shipping was $13, The transfer fee was $15 and the sales tax was $7.75 Making the purchase through the shop was unwise.

(Got my C&R now.)

They also explained that anything they buy with their FFL is entered into their books and therefore is in their inventory requiring state sales tax.

 

[HABU]

I had an FFL tell me they had to charge sales tax on a pistol. I scoffed in their face. Needless to say, they didn't do the transfer. The FFL that did do the transfer did not charge me tax.

 

[Smoke]

They also explained that anything they buy with their FFL is entered into their books and therefore is in their inventory requiring state sales tax.

...and they are full of it. I can't speak for other states but charging you tax on the gun was wrong. Tell the state comptroller and see if they paid the tax to the state.

In TX you would pay sales tax on teh fee the dealer charges to do the transfer, but that's all.

Smoke

 

[blades67]

Yes, firearms transfered through an FFL holder must be entered in the Bound book. Unless your state applies sales tax to services, such as a transfer, there would be no reason for him to charge you sales tax.

 

[JohnKSa]

Two ways to play.

First way.

You make payment directly to gun owner who ships to FFL. FFL takes shipment in your name of YOUR gun and does transfer to you.

You owe a transfer fee and perhaps taxes on the transfer fee. No sales tax because the FFL is not SELLING the gun. No SALE, no SALES tax.

Second way.

You visit FFL and tell him to order firearm. FFL pays gun owner who ships to FFL. FFL takes shipment of HIS firearm and does transfer to you.

You owe him for the gun, for the transfer fee, for taxes on the gun and taxes on the transfer fee. He sold you the gun and you must pay sales tax. He made a SALE, there is SALES tax.

It should be pretty simple to explain to him that way. I'm not sure he's trying to rip you off, he's probably just clueless...

 

[Cawdor]

Here is what the Texas Comptroller says about sales tax on purchases made from retailers outside Texas:

3. Do I owe tax on goods purchased via mail-order catalogs or Internet merchandise?

Yes. A seller who uses catalogs or the Internet to sell goods is treated the same as any other seller of taxable items. If you purchase merchandise through a catalog or the Internet from a seller located in Texas, you owe Texas sales tax on the purchase. If you purchase merchandise through a catalog or the Internet from a seller located outside of Texas and use the taxable item in Texas, then you owe Texas use tax on the purchase. An out-of-state mail-order company or an Internet company may hold a Texas Sales and Use tax permit and collect Texas tax. If the out-of-state seller does not have a Texas permit or does not collect Texas use tax, the use tax is due and payable by the purchaser.

http://www.window.state.tx.us/taxinfo/sales/faq_use.html#use3

 

[JohnKSa]

I believe the part about "use tax" refers primarily to vehicles and is being quoted out of context there.

Something's odd about that website anyway--I think it's oriented primarily toward retailers--not individuals. Have you ever filed a TX sales tax or a TX use tax return? I've never even heard of one...

But if your conscience bothers you, the tax is payable to the comptroller--NOT the FFL. Any way you cut it, the FFL should not be collecting tax for a sale that he did not make.

 

[Mushinto]

Cawdors got it right, ...

... they call it a "Use Tax" and you owe it. Florida is the same way. Most people don't know this.
The only difference JohnKSa, between the current laws and the new ones proposed is that they want the law to actually be enforced and taxes collected by everyone, out-of-state or not.
ML

 

[Cawdor]

The use tax applies to more than vehicles.

SUBCHAPTER D. IMPOSITION AND COLLECTION OF USE TAX

§ 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, § 1, eff. Jan. 1, 1982.

§ 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.

§ 151.104. Sale for Storage, Use, or Consumption Presumed

(a) A sale of a taxable item by a person for delivery in this state is presumed to be a sale for storage, use, or consumption in this state unless a resale or exemption certificate is accepted by the seller.

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

http://www.capitol.state.tx.us/statutes/ta/ta0015100.html#ta163.151.417

 

[Cawdor]

A little more information.

§ 151.052. Collection by Retailer

(b) The owner or former owner of tangible personal property, a factor of the owner or former owner, or an agent of the owner, former owner, or factor shall collect the sales tax and add the amount of the tax to the sales price of the tangible personal property if the person delivers the property to a consumer in this state or to another person for redelivery to a consumer in this state under a sale of the property that is not a sale for resale and that is made by a seller not engaged in business in this state.

If an FFL is a factor or an agent under the law, he would have a duty to collect sales tax.

 

[BluesBear]

http://www.thehighroad.org/showthread.php?s=&threadid=50685

 

[ajacobs]

I for a long time thought that all these people who were charged a tax were getting ripped off by their dealers, and they still may be if the dealer isn't reporting and paying the tax. My dealer does not charge tax. But as a result of a recent television new segment, I have realized that my own state would require me to pay the tax and some other state's do also. We have a large issue with this in our state as NH does not have a sales tax and people go across the border and buy computers and big screen tv's etc. The NH retailers have been cooperating with the VT state Tax department and sending letters to people letting them no what that they owe. This only works for them though on larger purchases when names are recorded for things such as a warranty or payment by a credit card. I guess my thoughts are now that each state is different, a transffer dealer therefore may or may not be ripping you off, and I may or may not be braking the law by not submiting the tax myself.

 

[Majic]

§ 151.052. Collection by Retailer

Cawdor, as the FFl holder is not selling anything (just providing a service), is he/she not the retailer in this type of transaction? He/she is not the owner, former owner, agent, or factor of the seller, but an agent for the buyer. The FFl holder charges the buyer, but collects no fee or gain any profits from the seller. I don't see how this applies here.

 

[BluesBear]

Canada has what is called a good & services tax. Which allpied to services rendered as well as goods sold. When i was working in BC, when I repaired a customers locomotive, even though I didn't sell or install any new parts I still had to charge GST on the amount.

I don't know fo any states in the US that do that, but I admit that I am not versed in the tax laws of all 50 states.

My usual local transfet FFL at first tried to charge me sales tax. I just said xyz over in 123 didn't charge me tax so I'll just go back to using them. He said, "OK we'll skip the tax". Now my reciept just says transfer fee and no mention is made of tax.

Just go to one of your local pawn shops and ask if they charge tax on pawns.

Ask your local garage if they charge sales tax on tire rotation.

 

[Cawdor]

Majic - I don't think the matter is clear. If I were an FFL in Texas, I would want a legal opinion regarding my obligation to collect sales or use tax for transfers on firearms purchased out of state. If the FFL is caught not collecting tax when he should have, he will be expected to pay it.

Here is a question: Is the gun sold before or after the NICS check? If the purchaser fails the NICS check, is he the owner of the gun? If he is not the owner until after the NICS check, where does the sale take place?

Here is another: An FFL cannot sell or transfer a gun without a NICS check, unless it is to another FFL. If a gun is purchased from an out-of-state FFL, is unreasonable to see the local FFL as acting for the out of state FFL, regardless of who pays his fee?

 

[cratz2]

If my FFL is in a good mood, he either charges me nothing or $10 plus $3 for the NICS. I've never been charged tax on the gun itself and I've probably bought 20 guns over the internet/from forums.

 

[JohnKSa]

Here is a question: Is the gun sold before or after the NICS check? If the purchaser fails the NICS check, is he the owner of the gun? If he is not the owner until after the NICS check, where does the sale take place?

The gun belongs to the purchaser. Just because the FFL takes shipment doesn't make him the owner. If the purchaser can not take delivery, the gun goes back to the seller and the purchaser gets his money less shipping back.

What you're saying is the equivalent of saying that when you mail payment to someone and they ship the package, the package is owned by the carrier until they deliver it. That's not correct.

Even if sales/use tax is due, the FFL should not be collecting it--except the portion that is on the actual service he provides. So, the transfer fee should include sales tax.

The FFL is the agent of the purchaser, not the seller (unless the seller contracted with the FFL to take delivery--which is the opposite of the current situation.).

Any way you cut it, the FFL does not need to collect or pay sales tax in the case described above.

Here's the kicker--unless you WANT to, you don't even have to tell the FFL what the purchase price was! Remember, he's not collecting the money, and the shipment doesn't have to list the price of the gun. So what's he going to collect on in that case?

 

[ajacobs]

John sounds correct

I would also like to clarify a previous point, in the NH example I gave above it is not the stores responsibility to collect the tax, it was the individuals responsibility to remit it.

As John mentioned they don't need to know the purchase price, tell them it is inherited from an estate if you by it from an individual. If you are buying from a distributer directly shame on you, the ffl should charge you whatever he wants but shouldn't lie about it and call it the sales tax.

 

[marklbucla]

I just did my Federal and California taxes yesterday. The law here requires that anyone who buys something over the internet or by phone to pay "use tax" whether or not the vendor collects it. So either way, you're SUPPOSED to pay it off though I don't know whether or not it can be policed if it were left up to you.

About half of the people I've asked to do gun transfers for me (about 6-7) have said that they would collect the tax directly.