Why do some transfer FFL charge sales tax and some don't?

[Yugiho]

I've done dealings with several FFLs in my area. Most have not charged me more than their transfer fee of around ~$30 flat for any firearm whether bought in or out of state. Not too long ago I used someone else closer to my home. He quoted me a transfer fee. I agreed. I have email proof. Then when I went to pick up the gun, he charged me sales tax on the full amount of the gun. He said it was mandatory. I was livid. This guy was clearly not understanding the law or wanted to pocket the tax money for himself.

Anyway, he threatened to return my gun to the sender, but of course I needed to pay his FFL fee and postage to mail it. Or else he was just going to keep the gun until I pay up his tax fee + transfer fee+ call in fee, which totaled to over $125.

I didn't want to leave the gun in his possession, so I paid up.

As I understand it, the FFL is allowed to charge tax on the transfer fee only, not on the purchase price of the gun from out of state.

How does this guy get away with this? What recourse do I have to get my money back?

 

[Double Naught Spy]

The sales tax charge isn't legal. He doesn't have the right to charge sales tax on an item he didn't sell.

 

[News Shooter]

Tell that to my FFL

 

[strat81]

Something is amiss with that.

You are NOT buying the gun from your local dealer. You are buying the gun from CDNN, SOG, Sarco (or whoever the net dealer is). Your dealer can charge you sales tax on the transfer fee only since that is the only product/service he is selling.

If you do not like your dealer, you can make his life miserable by contacting your state's Department of Taxation or Revenue Sales Tax Unit and complaining about your dealer's unethical sales tax practices.

Now, technically you are supposed to pay use tax on any and all items you purchase from out-of-state vendors that do not charge you sales tax. If any of you work in the accounting department of a corporation, you'll probably find they are sticklers about use tax. Your state Department of Taxation or Revenue should have use tax forms available for download.

 

[Ala Dan]

Sales tax on transfers should be abolished~! We have NEVER charged sales
tax on firearms received as a transfer; as all applicable taxes are taken care
of before we receive the firearm~!

 

[Yugiho]

This shop is in Florida. I bought the gun from a private individual from out of state.

What I really need is the specific law/rule regarding sales tax, both federal and state.

I'm almost positive he's keeping the proceeds. As soon as I get some more information, I'm going to make a huge ruckus, including reporting him to the Better Business Bureau, and the State Agencies.

 

[boredelmo]

How did he even figure out purchase price? This was a PRIVATE transaction, he should not charge anything in relation to the actual firearm, just the SERVICE of receiving it.

Warn others, whats this shop's name? BBB for sure, they are very helpful (albeit sometimes slow). Heck, call the ATF and explain what took place.

 

[M2 Carbine]

I think the only thing he could legally charge tax on is the amount he charges for the "service" (transfer) he provides in taking dilevery of the gun.

I have never paid "sales tax" to a dealer for doing a transfer.
Matter of fact one dealer told me to order and pay for the gun myself and he wouldn't have to charge me sales tax.


For some time now some States have been trying to get laws passed where they can charge sales tax on items bought out of State.
This could open a real can of worms.
I haven't heard anymore about it in several years.

 

[Flame Red]

If this occured in Florida, I would believe that most FFLs do NOT charge sales taxes on the guns or the transfer (as that is a service, not subject to sales tax presently).

However, if you were to file a complaint with the Florida Dept of Revenue, I think that you will find they would want the sales tax from you. I don't think he is supposed to collect it, but rather you (out of the goodness of your heart) is supposed to fill out a form and send it in directly to Tallahasse.

Same goes for other things. I cannot tell you how many times friends have bought furnature from North Carolina (not paying sales tax) only to get a polite letter from the state some months later asked them to pay sales tax. I think the state has a deal with those furniture places or truck drivers.

So perhaps he pocketed it (or maybe not). In either event, post his name here so others know and don't use him again of course.

 

[boredelmo]

Hm, but I mean, if you have stuff ordered from the internet, the state doesn't charge sales tax if it's from another state. That's interesting Flame Red, haven't thought about that.

 

[waterhouse]

If you google "Florida sales and use tax" you'll get the laws you are looking for.

While your dealer should [probably] not have collected tax, from a legal standpoint you are responsible for paying that tax to the state. The point of the Use tax is a)to make the state money and b) to take away an advantage that an out of state dealer has by not having to charge sale tax (thus encouraging you to buy in state, which leads directly back to "a").

See the section on Use tax here http://dor.myflorida.com/dor/taxes/sales_tax.html :

Use tax complements and is applied in the same manner as sales tax. The use tax rate and sales tax rate are the same, including discretionary sales surtax, if applicable. Use tax is due on purchases made out of state and brought into Florida within 6 months of the purchase date. Also, if you purchase a product tax-exempt that you plan to sell at retail, but end up using it at your place of business, the "use" of the product is subject to tax. If you purchase materials that are "consumed" in a manufacturing process to create your end product but are not part of the end product, those materials are subject to tax.

The "use" component of the sales and use tax provides uniform taxation on items that are purchased outside Florida but are used or stored in the state. If the item brought into Florida is subject to tax, a credit for lawfully imposed taxes paid to another state, a U.S. territory, or the District of Columbia is permitted. Credit is not given for taxes paid to another country.

I say "[probably]" because I am not at all familiar with Florida law. In Texas, it is the responsibility of the end user (the guy buying the gun) to submit Use Tax to the state.

Back to the original question, I'd say the reasons that some dealers charge tax are:
1) they are cheating the system and pocketing the cash
2) they don't understand the law, and think they are supposed to collect it, and they collect it and submit it to the state with all of the other sales tax
3) the state has specifically told them that they need to collect sales tax on such items.

 

[waterhouse]

For some time now some States have been trying to get laws passed where they can charge sales tax on items bought out of State.

I think in many states the laws have been on the books for years, they just haven't been very widely enforced, so many people either don't know about them or don't care.

Hm, but I mean, if you have stuff ordered from the internet, the state doesn't charge sales tax if it's from another state. That's interesting Flame Red, haven't thought about that.

The state you are buying from doesn't charge tax. The state you are living in probably does. It is just that most people don't pay it.

In Texas, here is the form you are supposed to fill out every time you buy something from the internet and don't pay sales tax:

http://www.window.state.tx.us/taxinfo/taxforms/01-156.pdf

 

[boredelmo]

That's really weird. I hope i don't go down like Al Capone!

 

[Yugiho]

So we need to be good state citizens and pay up?

This is interesting. But I gather it's not set in stone. Meaning it's not law. I've ordered thousands of $$ worth off of the internet and not paid tax.

If it's law, surely the state will come down hard on sites such as Amazon.com to collect taxes for them before delivery...?

 

[Gator]

I'm sure it varies by state, but in Illinois, for example the buyer is responsible for paying the sales tax no matter where the item comes from. My dealer dosen't collect it, but he hands out the state form you are supposed to fill out and send in with your payment.

 

[waterhouse]

This is interesting. But I gather it's not set in stone. Meaning it's not law. I've ordered thousands of $$ worth off of the internet and not paid tax.

It's the law in many states. Like driving over the speed limit, the fact that you have not been caught and punished yet does not mean you aren't breaking the law.

If it's law, surely the state will come down hard on sites such as Amazon.com to collect taxes for them before delivery...?

They can't come down hard on Amazon (yet) because the law usually states it is the responsibility of the buyer to pay the Use Tax. They have no legal grounds to go after Amazon.

According to this site,
http://www.michigan.gov/treasury/0,1607,7-121-1748_1904_1989-5781--,00.html

every state that collects sales tax also has a use tax LAW.

Facts on Internet and Mail Order Purchases

* Every state with a sales tax has a companion tax for purchases made outside the state. In Michigan, that tax is called the "use tax" but might be more aptly described as a remote sales tax because it is a 6 percent tax owed on sales made remotely (i.e. outside of Michigan.)
* The use tax is not a new law; it was enacted in 1937. With the birth and rapid growth of Internet sales, revenue lost from non-reporting of the use tax is becoming substantial.
* Remote selling to consumers nationally is estimated at $279 billion in 2001. By 2005, projected remote selling to U.S. consumers will grow to $429 billion, largely due to sales over the Internet.
* Currently, Michigan is losing an estimated $210 million in use taxes from remote sales in fiscal year 2001. Remote sales over the Internet will cause this loss to increase dramatically in the years ahead to $349 million in FY 2005.
* The estimated loss of $349 million is comprised of $116 million from the School Aid Fund, and $233 million from the General Fund.
* Use tax is required by law when a person purchases a good from out of state and the retailer hasn't charged sales tax in their jurisdiction.
* Non-compliance has been a problem for years with mail order sales, but the issue of "remote selling" becomes much more serious with the fast growth of Internet sales.

In Michigan, it has been a law since 1937. While states lost money for years because of catalogue sales, they didn't seem to mind much. I'm guessing with the amount they are losing due to the internet they are going to start cracking down on it quite a bit.

 

[electronrider]

If you make an out of state purchase, and do not pay sales tax to your state, you are in violation of your states tax code. Now, does everyone do this? Probably not. However, it is YOUR responsibility to do this, rather than the FFL that did the transfer. It is highly probable that he pocketed the money. If I were you I would take this as a lesson learned, and keep your mouth shut, else you get to deal with an audit on your state taxes this year, when you forget to pay that sales tax on an out of state purchase. I would not give that FFl any more of your hard earned money.

 

[foghornl]

In Ohio, they ask this question on the State Income Tax form...
Don't remember exactly how it is worded, but there is a question on out-of-state purchases.

 

[RPCVYemen]

Heck, call the ATF and explain what took place.

What do you expect the ATF to say about a state sales tax?

Mike

 

[asknight]

Why are you guys telling the FFL how much you paid for the item? It's none of their business, since they didn't sell it. They're only legally able to charge a tax on an item or service that they sell to you. Lawfully, you owe the tax to the state from which you purchased the item, and your FFL is not able to legally collect tax for another state or jurisdiction.

The Govt doesn't have the technology to reliably and conveniently facilitate the collection of taxes on goods sold over the internet across state lines. So, are we all criminals because the Govt passed yet another law that they can't enforce?

 

[nalioth]

I have found these types of dealers to be one of two types of people:

1) Honest but misinformed about tax laws. I have one of these guys down here, and he is one of the best people you'll meet, but he 'was told by the State boys' to collect tax on everything he transfers. I don't argue, but took my business elsewhere.

2) The Crooked dealer who knows the laws but is just out to 'make that extra bit'. I have unfortunately encountered some of these, too.

 

[RPCVYemen]

In Ohio, they ask this question on the State Income Tax form...
Don't remember exactly how it is worded, but there is a question on out-of-state purchases.

I haven't done my NC taxes this year, but I think they automatically compute an "out of state purchase sales tax" based on your income. If you have kept accurate records on all your internet purchases, then you can dispute the computed tax. My guess is that's a real quick way to get audited - but I don't know that for sure.

My other guess is that if the dealer marks "sales tax" on the receipt, and pockets the money, he'd be committing some kind of crime. Did he give you a receipt that clearly marked some amount as the sales tax?

Mike

 

[SASS#23149]

Did this dealer give you a receipt showing the sales taxes being paid?
If not,he pocketed the money.

my son ,in Wa state,just paid tax on the wepaon he purchased,I'll look into whether or not he should have.I know we have a 'use tax',but not sure the dealer can or must collect it...I think it's voluntary.
yea,right.

 

[Yugiho]

I do have the sales receipt showing a line that says tax. It's one of those generic receipts with no identifying marks that show it was from the gun store.

I'll wait a little while before revealing which store this is. The guy may have had the right to collect taxes according to some of the posters...

 

[moosehunt]

I'd like to know how he knew the price to charge tax against? As the recieving FFL, he had no reason to know. When I do this, which is often, I tell the client that the finances associated with the purchase are between he and the seller; I'm not involved. I rarely know the financial facts. In the cover letter to the person or business forwarding the firearm to me (I have to send them a copy of my FFL), I instruct them to make any financial reciepts out to the buyer, not me. The recieving FFL cannot charge sales tax for the purchase price. He may or may not be required to charge sales tax on the service, depending on the state, i.e. sales tax only applies to material items, not services, in some states.

As stated, you the buyer, by law, are required to pay sales tax in accordance with your state, county, and city laws. This applies to any out of state purchase (actually, in state purchases, too), and is far from new. It is law. It is generally referred to as "use tax"--same as sales tax, but you, the purchaser, take care of reporting it. Technically, this includes if you buy a used lawn mower from your neighbor, or a used firearm from your buddy. Very few people comply with this law, much to the state's aggrevation. It amazes me how many people are unaware of these laws.

Also, you talk about a "transfer fee" in a way that makes it sound as though there is such a fee established. There is not. A dealer may charge as little or as much as he wants, including nothing at all. I certainly would recommend you not do further business with this dealer. I suspect you have learned that it would be wise to address this "tax" matter with dealers in the future before you engage their services.