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halifax
10-08-2009, 12:59 PM
Are so-called "gifts" from non-private parties taxable?

Scenario One: At a Friends of the NRA dinner, the NRA rep told me the prizes "are gifts and not subject to sales tax" although the dealer the NRA bought them through didn't charge the NRA sales tax. So no CA sales tax has been paid.

Scenario Two: I have received two pistols from Front Sight that have a receipt from Tactical Armory clearly marked:

"This transfer is conducted on behalf of the Front Sight Firearms Training Institute. The items transferred are gifts and should not be charged sales tax"

I believe the CA BOE doesn't see these as gifts because the participants paid to attend the course.

What is your take on this?

kemasa
10-08-2009, 1:53 PM
The answer is that it depends. The person who donate the item is responsible for the sales tax, if required. If a company donates an item and ships it to CA, then there is no sales tax due. If they donate the item and bring it with them to CA and donates it, then they have to pay the sales tax. If the dealer that the NRA bought them from is in CA, then there is a problem. The dealer would need to have a sales tax letter from the NRA and then the NRA would be responsible for paying the sales tax, not the person who was given the item.

In the past, I dealt with the FNRA and had an issue in which they charged people the wrong sales tax. I was informed about it by one of the people who purchased an item and he wanted his money back. It seems that they noticed this when they were going over the money, but did nothing about it. The law is very clear on this issue: give the money back OR send it to the state. The FNRA was going to keep the money. I had to push this issue in order to get it corrected.

I donated a rifle and I paid the sales tax. No choice.

#2 is clear, you did not pay for them and it was given from out of state, so no sales tax would be required.

These are my opinions and you should confirm this with the CA BOE.

kemasa
10-08-2009, 2:17 PM
I got a response notification, but I don't see it posted here. The people who were overcharged sales tax were people who bought firearms at the auction. I think some might have won the firearm and they were charged sales tax, but I am not sure of that.

tenpercentfirearms
10-08-2009, 9:44 PM
Gifts are most certainly taxable.

http://www.boe.ca.gov/pdf/reg1670.pdf

halifax
10-09-2009, 5:00 AM
OK, in scenario one, the FNRA is responsible for paying the sales tax but didn't. Does that let me off-the-hook on collecting it?


Scenario One: At a Friends of the NRA dinner, the NRA rep told me the prizes "are gifts and not subject to sales tax" although the dealer the NRA bought them through didn't charge the NRA sales tax. So no CA sales tax has been paid.

In scenario two, either Front Sight or Tactical Armory (both out-of-state businesses) are responsible for collecting CA sales tax and again I'm off-the-hook!!?

Scenario Two: I have received two pistols from Front Sight that have a receipt from Tactical Armory clearly marked:

"This transfer is conducted on behalf of the Front Sight Firearms Training Institute. The items transferred are gifts and should not be charged sales tax"

I believe the CA BOE doesn't see these as gifts because the participants paid to attend the course.

tenpercentfirearms
10-09-2009, 5:34 AM
The BOE considers you the retailer unless it is an occasional sale from a private party. So technically in an audit, they might say you owe it.

djbooya
10-09-2009, 9:17 AM
non-firearm related, but I won a graphics card from Comdex back in the day and at the end of the year was sent a form to pay gift tax on the item I won during a contest. Comdex was in Nevada and I was in CA. So even if sales tax isn't applicable some fed tax will be down the line.

halifax
10-09-2009, 9:38 AM
non-firearm related, but I won a graphics card from Comdex back in the day and at the end of the year was sent a form to pay gift tax on the item I won during a contest. Comdex was in Nevada and I was in CA. So even if sales tax isn't applicable some fed tax will be down the line.

Yeah, that would be income tax on gifts.

halifax
10-09-2009, 9:40 AM
The BOE considers you the retailer unless it is an occasional sale from a private party. So technically in an audit, they might say you owe it.

Scenario two, right?

kemasa
10-09-2009, 10:04 AM
In the case of #2, I had a customer who was being given a firearm from Alaska, where there is no sales tax. The BOE said that as long as I got a letter, then sales tax was not due since they were out of state and the person who received it paid nothing. If it was given in-state, then sales tax would be due.

As for #1, I suspect that the BOE could go after you if sales tax was due. The easy target is the one right in front of you. I would push the FNRA to pay the sales tax if the place that it came from was in CA.

halifax
10-09-2009, 12:11 PM
In the case of #2, I had a customer who was being given a firearm from Alaska, where there is no sales tax. The BOE said that as long as I got a letter, then sales tax was not due since they were out of state and the person who received it paid nothing. If it was given in-state, then sales tax would be due.

...

This brings us back to scenario two in my OP. I believe the BOE says if you receive a "gift" from an organization for a function or activity that you paid to attend, it's not a gift and not exempt from CA sales tax if the cost of attendance covers the cost of the "gift".

I've emailed that question to the BOE and await a reply.

kemasa
10-09-2009, 12:34 PM
Part of the question is who is responsible for the sales tax. If the item is purchased not for use in the business, then sales tax has to be paid by the person who buys it. I don't think that the person who receives the item would be responsible for the sales tax.

The issue with the second one is that it was from a place outside of CA and if they do not do business in CA, then they are not responsible for collecting sales tax. That is an important issue.

halifax
12-07-2009, 11:03 AM
On October 9th I e-mailed the BOE my questions:

Comments: I posted this question to other CA Firearms Dealers on a forum. The responses were varied and uncertain. I'd like an official reponse from the BOE:

Are so-called "gifts" from non-private parties taxable?

Scenario One: At a Friends of the NRA dinner, the NRA rep told me the prizes "are gifts and not subject to sales tax" although the dealer the NRA bought them through didn't charge the NRA sales tax. So no CA sales tax has been paid.

Scenario Two: I have received two pistols from Front Sight that have a receipt from Tactical Armory clearly marked:


"This transfer is conducted on behalf of the Front Sight Firearms Training Institute. The items transferred are gifts and should not be charged sales tax"

I believe the CA BOE doesn't see these as gifts because the participants paid to attend the course.

What is your take on this?

Thank you

Today, December 7th, I got a reply:

Thank you for your recent [:rolleyes:] e-mail requesting our advice regarding the proper application of the California Sales and Use Tax Law.

As a preliminary matter, section 6596, “Excusable Delay-Reliance on Advice,” of the California Sales and Use Tax Law grants taxpayers relief from future liabilities if the underreported tax is based on incorrect written advice provided by a Board representative. However, without specific details regarding the transactions in question, I cannot provide you with a specific opinion. The answer given is intended to provide general information regarding the application of tax based on the information you have provided and will not serve for relief of liability under section 6596.

For your general information, the Revenue and Taxation Code provides that sales tax is imposed on the gross receipts from the retail sales of tangible personal property in this state. The sales tax is imposed upon the retailer for the privilege of selling tangible personal property at retail in California. The use tax is complementary (and mutually exclusive) to the sales tax and is imposed upon the storage, use, or other consumption in this state of tangible personal property, not subject to the sales tax. The obligation to pay the use tax is on the consumer.

Regulation 1670, “Gifts, Marketing Aids, Premiums and Prizes,” provides that persons who make gifts of property to others are the consumers of the property and tax applies with respect to the sale of the property to such persons.

As such, those that purchase tangible personal property, i.e. firearms, for the purpose of giving as gifts should pay sales tax reimbursement to the seller or report use tax on the purchase price of such items. For additional information on reporting California use tax, please refer to Publication 79b.

I hope this information is helpful. If you have any further questions regarding this or any other issue, please write or call our Taxpayer Information Section at (800) 400-7115. You may also visit our website at www.boe.ca.gov.

I think there are answers in there somewhere. The NRA is responsible for the tax on firearms given to attendees. Front Sight also, but they are not in CA, so I doubt they pay it.

Is this telling me NOT to worry about the sales tax?

Fjold
12-07-2009, 11:20 AM
I think there are answers in there somewhere. The NRA is responsible for the tax on firearms given to attendees. Front Sight also, but they are not in CA, so I doubt they pay it.

Is this telling me NOT to worry about the sales tax?


That's the way I read the reply from the State and they even tell you up front that you will get relief from penalties if they are wrong.