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ugimports
12-28-2009, 1:35 PM
I have a customer that wants to sell a Beretta 85F (not on roster). I understand if we do a consignment sale that it gets DROSd as a PPT if the buyer is local. So this leads me to my questions:

1) Can a consignment sale be shipped, if so, what's the paper trail?
2) If I purchase the firearm from the customer, I can only sell it out of state or to LEO in CA, correct?
3) Is sales tax collected on consignment sales? I'm assuming yes, but wanted to verify since it gets DROSd as a PPT.
4) What's the "standard" fee for consignment fees? 5% or 10% of sales price or flat fee?

Thanks,

Cougar
12-28-2009, 2:18 PM
On #3. I've never heard of someone getting into trouble for collecting and submitting to the state sales tax revenue that was not actually due ;-)

My reflex said "No" because you are not actually reselling the material. You are never the owner the item and are not actually "selling" the item. You are merely collecting a service fee from the seller to act as an intermediary.

But.... I see that the BOE has some foggy logic to support a "Yes".

Here's a BOE fact sheet on consignment sales:
http://www.boe.ca.gov/pdf/pub114.pdf

ugimports
12-28-2009, 2:48 PM
On #3. I've never heard of someone getting into trouble for collecting and submitting to the state sales tax revenue that was not actually due ;-)

My reflex said "No" because you are not actually reselling the material. You are never the owner the item and are not actually "selling" the item. You are merely collecting a service fee from the seller to act as an intermediary.

But.... I see that the BOE has some foggy logic to support a "Yes".

Here's a BOE fact sheet on consignment sales:
http://www.boe.ca.gov/pdf/pub114.pdf

Good link, still confused. :confused:


I arrange sales for other people, but my sales agreements donít fit the two conditions described above. Are my sales taxable?

Broker sales: You may qualify as a broker if you do not transfer ownership of an item to the buyer without first getting permission from the owner, or if the owner maintains control of the item prior to the sale. A broker generally will not owe sales tax for the transaction. Instead, the owner of the property would be the seller, responsible for tax on the sale. Generally, as a broker, you need a permit if you make sales on your own behalf. For more information on retailer and broker sales, please see Regulation 1569, Consignees and Lienors of Tangible Personal Property for Sale, on our website at www.boe.ca.gov or you can also call our Taxpayer Information Section at 800-400-7115.


I would think the gun store is the broker since permission is needed from the owner in order to transfer ownership of the item to the buyer. Since the seller needs to fill out DROS paperwork I would assume that qualifies as "getting permission" from the owner...However, if that paperwork and pricing are decided ahead of time you really wouldn't need the seller anymore especially if you've already filled out a DROS worksheet...thoughts anyone else?

tenpercentfirearms
12-29-2009, 8:04 AM
Be aware you cannot do consignment sales without a second hand sellers license and usually you have to hold the guns for 30 days before you can consign them. I think the local shops charge 20%.

ke6guj
12-29-2009, 11:35 AM
Be aware you cannot do consignment sales without a second hand sellers license and usually you have to hold the guns for 30 days before you can consign them. I think the local shops charge 20%.is that a state law or a local ordinance? I seem to recall some FFLs saying they had to have the second hand seller license, and others saying that they didn't. And I have heard that some places they don't have to wait the 30 days. 20% seems to be the going rate from waht I've seen.

I do wonder how a cosignment is legally differentiated from a PPT in that there is no limit to the fees that an FFL can charge for a cosignment, even though legally it is considered a PPT for terms of DROS.

kemasa
12-29-2009, 12:02 PM
Consignment sales can be shipped, but then it can not be done as a PPT.

Yes, If you purchase it, then you can only sell it out of state or to LEO.

If you get involved in finding the buyer and/or the price of the sale, then sales tax has to be collected.

See:

http://www.boe.ca.gov/sutax/annotations/pdf/295.1675.600.pdf

The nice thing about standards is that there are so many to choose from. Some places charge 20% or more. You can do what you want. I personally don't think that a percentage really makes sense. Do you do more work because the firearm is cheap or expensive? In some cases you might since a $20k firearm will take a lot more work than a $200 one. So, if you do a percentage, then you might want to change the percentage based on the approximate value of the firearm and the amount of work that you have to do.

To respond to the referenced (http://www.boe.ca.gov/pdf/pub114.pdf), it specifically says


You are responsible for obtaining a seller’s permit and paying the sales tax on the retail selling price of consignment sales when you:
• Have possession or control of the item you are selling, and
• Can transfer ownership or use of the item to the buyer without further action on the part of the owner.


Since you have possession of the firearm, that applies.

kemasa
12-29-2009, 12:05 PM
The fees, not the sales price, are still limited for a consignment sale when done as a PPT. Yes, the FFL is getting more money, but they can not charge a separate fee in excess of $10 for the transfer. Who gets the money for the selling price of the firearm is a different issue and is not a fee.

ugimports
12-29-2009, 3:54 PM
is that a state law or a local ordinance? I seem to recall some FFLs saying they had to have the second hand seller license, and others saying that they didn't. And I have heard that some places they don't have to wait the 30 days. 20% seems to be the going rate from waht I've seen.

I do wonder how a cosignment is legally differentiated from a PPT in that there is no limit to the fees that an FFL can charge for a cosignment, even though legally it is considered a PPT for terms of DROS.

I checked with DOJ and the second hand seller's license is local ordinance. So I'm checking with my local city folks if I need one or not.