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crazy
01-07-2010, 1:37 PM
I was charged tax on the DROS for a stripped AR lower. I don't think this is correct. Anyone have an answer for me?

Shane916
01-07-2010, 1:41 PM
I was charged tax on the DROS for a stripped AR lower. I don't think this is correct. Anyone have an answer for me?

DROS is NOT taxed.

http://ag.ca.gov/firearms/dlrfaqs.php#40G

40. May I charge sales tax on the DROS fees?

No. On January 1, 1999, the state Board of Equalization ruled that the DROS fees are not subject to retail sales tax. Firearms dealers licensed pursuant to Penal Code section 12071 shall not charge sales tax on the DROS fees. Questions regarding firearms transfer fees can be directed to the DOJ through this website or by calling (916) 263-4887. Questions regarding sales tax can be made to the California Board of Equalization at its website www.boe.ca.gov.

professionalcoyotehunter
01-07-2010, 1:42 PM
Should not have happened.

Cokebottle
01-07-2010, 1:52 PM
Ditto.
Tax is not to be charged on labor, services (other than utilities, as you are receiving a "product"), or fees....


...unless you are the State of California, then you can charge tax on criminal fines and call it a penalty assessment, and tax on vehicle registration and call it a licensing fee, and on underpayment of income tax withholdings and call it a surcharge ;)

crazy
01-07-2010, 3:27 PM
Thank you for the speedy replies and including the section from BOE.

TripleT
01-07-2010, 6:01 PM
Don't be confused on sales tax on the OLL. That is legal.

crazy
01-07-2010, 6:21 PM
Don't be confused on sales tax on the OLL. That is legal.


I know. They charged me tax on the lower and DROS.

5150Marcelo
01-07-2010, 6:23 PM
What store?????????

ugimports
01-07-2010, 11:25 PM
Ditto.
Tax is not to be charged on labor, services (other than utilities, as you are receiving a "product"), or fees....


...unless you are the State of California, then you can charge tax on criminal fines and call it a penalty assessment, and tax on vehicle registration and call it a licensing fee, and on underpayment of income tax withholdings and call it a surcharge ;)

Tax is also to be charged on FFL transfer fees according to the BOE even though it is just a service.

halifax
01-08-2010, 5:04 AM
Tax is also to be charged on FFL transfer fees according to the BOE even though it is just a service.

When is Labor Taxable (http://www.boe.ca.gov/pdf/pub108.pdf)

Services related to a taxable sale are taxable Your charges for services related to a taxable sale are generally taxable. This is true whether you itemize the charges or include them in the price of the product. For example, suppose your taxable sale of a computer program includes 20 hours of training, and the customer cannot buy the program without the training services. The training is taxable as part of the sale whether you show a separate charge for it on your invoice or charge one amount for the program and training together.

crazy
01-08-2010, 7:18 AM
DROS is not labor.

Lancear15
01-08-2010, 7:34 AM
When is Labor Taxable (http://www.boe.ca.gov/pdf/pub108.pdf)

Exactly, a lot of people are unaware that a lot of labor is taxable. Even some repair labor (contrary the general rule given in your link). When in doubt seek a CPA. A good accountant more them pays for themselves.

ugimports
01-08-2010, 8:46 AM
When is Labor Taxable (http://www.boe.ca.gov/pdf/pub108.pdf)

http://www.calguns.net/calgunforum/showthread.php?t=246221

The BOE gave me specific information. See my Q&A with them in the linked thread.

ETA: I just realized you were pointing out the same thing with the quote you had below that.

kemasa
01-08-2010, 10:32 AM
In the case of firearms, the FFL fee is subject to sales tax if the firearm also is. In the case of a PPT, there is no sales tax, but in the case of a firearm coming from out of state from a business, sales tax needs to be collected on the firearm and the FFL fee.

It does not have to make sense, it is just the way it is.

TripleT
01-13-2010, 12:43 PM
And to be double clear (or triple or whatever) the 25.00 dros fee (or 35.00 ppt fee) is never taxable while anything added to do the transfer in the form of a fee is. ie, if a FFL charges 25.00 for the dros and 20.00 for the transfer fee, only the transfer fee (20.00) is taxed, not the dros (25.00). This is irrespective of what the tax would be on the item itself. (which doesn't seem to be in contention) The only exception would be if the firearm came from a private party then none of the transaction, dros or FFL fee is taxed. Correct ???

Damn, I hope that makes sense...

ugimports
01-13-2010, 12:44 PM
^^ Correct.

kemasa
01-13-2010, 12:55 PM
The DROS fee ($25) is no longer taxed, it used to be. That might be where some of the confusion is from.

The FFL fee is only taxed if the firearm is taxed. For example, there is no sales tax on a PPT, unless the FFL arranges the price and/or finds the buyer, the same with a firearm which is from a private party which is an occasional sale and the person does not have a business.

TripleT
01-13-2010, 1:02 PM
The DROS fee ($25) is no longer taxed, it used to be. That might be where some of the confusion is from.

The FFL fee is only taxed if the firearm is taxed. For example, there is no sales tax on a PPT, unless the FFL arranges the price and/or finds the buyer, the same with a firearm which is from a private party which is an occasional sale and the person does not have a business.

So, that sorta' throws another wrinkle into the mix. If a FFL has a customer that says I have this XYZ super zombie slayer I'd like to sell and somebody comes in asking about XYZ zombie slayers, if FFL informs seller about the buyer and then does a PPT, FFL should collect tax on the 35.00 and the XYZ_SZS or just the XYZ_SZS or neither ???

kemasa
01-13-2010, 1:09 PM
The $25 DROS fee is never taxable now, so only the $10 would be subject to sales tax. I don't think that there would be sales tax on the firearm, as long as the FFL does not deal with the money at all. The CA BOE might think otherwise, but you would need to confirm that with them.

In that example, the FFL should tell the person to do the PPT at another location so that sales tax is not collected.

Cokebottle
01-13-2010, 3:58 PM
So, that sorta' throws another wrinkle into the mix. If a FFL has a customer that says I have this XYZ super zombie slayer I'd like to sell and somebody comes in asking about XYZ zombie slayers, if FFL informs seller about the buyer and then does a PPT, FFL should collect tax on the 35.00 and the XYZ_SZS or just the XYZ_SZS or neither ???
PPT is non-taxable.
Consignment is PPT using the FFL as a middleman. The situation that you describe would basically be a consignment.

Taxable would be the purchase of a new gun, or of a used gun out of dealer inventory (where the FFL actually purchased the gun or took it in trade).
Consignment of used guns is not considered "dealer inventory".

Cokebottle
01-13-2010, 3:59 PM
The $25 DROS fee is never taxable now, so only the $10 would be subject to sales tax. I don't think that there would be sales tax on the firearm, as long as the FFL does not deal with the money at all. The CA BOE might think otherwise, but you would need to confirm that with them.
The $10 would not be taxable because the purchase itself would not be taxable.

kemasa
01-14-2010, 7:50 AM
Please read: http://www.boe.ca.gov/sutax/annotations/pdf/295.1675.600.pdf

Consignment sales ARE taxed. PPTs depend on whether the FFL negotiates the price and/or finds a buyer, which in thinking about it the FFL would need to collect sales tax on the firearm as well. It is not as clear as you would like it to be.

As I said, if you find a buyer for a PPT or negotiate the price, have the person do the transfer someplace else so that sales tax does not have to be collected.

crazy
01-15-2010, 2:52 PM
You guys are talking about a bunch of different scenarios. Mine was a simple transaction. I bought a stripped lower from the store. I was charged for the lower, $30 for DROS and tax on both. I questioned this and was told that it(DROS) was taxable. We are not talking about a lot of money, it's the principle. It wasn't the only issue with the transaction, but that's another story and for another thread.

ugimports
01-15-2010, 3:02 PM
You guys are talking about a bunch of different scenarios. Mine was a simple transaction. I bought a stripped lower from the store. I was charged for the lower, $30 for DROS and tax on both. I questioned this and was told that it(DROS) was taxable. We are not talking about a lot of money, it's the principle. It wasn't the only issue with the transaction, but that's another story and for another thread.

In addition to being wrongly taxed you should should have only been charged $25.00 for the DROS. Could be $5.00 are the dealer's fees, but it should have been clearly stated for you and not mis-represented as the state fees.

I agree it's the principle as well.

halifax
01-15-2010, 3:57 PM
You guys are talking about a bunch of different scenarios. Mine was a simple transaction. I bought a stripped lower from the store. I was charged for the lower, $30 for DROS and tax on both. I questioned this and was told that it(DROS) was taxable. We are not talking about a lot of money, it's the principle. It wasn't the only issue with the transaction, but that's another story and for another thread.

Your question was answered in post #2 and many others. What more were you expecting?

The thread took a differnt tack when other posters posted slightly different related issues. Happens in nearly every thread.

kemasa
01-15-2010, 4:08 PM
You should demand the money back. Also, if the DROS was listed as $30, then you are due $5 since the DROS is $25 and it is illegal to represent it as something else.

As you say, it is the principle. It does not matter if it is $0.10, it is wrong to be charged illegally.

gawker
01-15-2010, 4:38 PM
The FFL could have prevented this whole thread if he wrote on the receipt.

DROS $25.00
Dealer Fee $5.00

kemasa
01-15-2010, 4:43 PM
Actually not, since it was said that sales tax was charged on the DROS.

crazy
01-15-2010, 9:18 PM
Your question was answered in post #2 and many others. What more were you expecting?

The thread took a differnt tack when other posters posted slightly different related issues. Happens in nearly every thread.




I'm not expecting anything. I got one answer that seemed like the correct one, then things went in twelve directions. There is no one answer on this thread. I wanted to clarify what happened with my purchase to get the answer I am looking for.

Did I respond to your reply about something not even remotely related to this discussion. No. Maybe you can share some of your wisdom and explain how your post contributes anything to the discussion. I didn't buy software and my lower didn't come with 20 hours of training. Neither did the DROS. I would normally ignore you, but not today.

Here's your lovely contribution.

Services related to a taxable sale are taxable Your charges for services related to a taxable sale are generally taxable. This is true whether you itemize the charges or include them in the price of the product. For example, suppose your taxable sale of a computer program includes 20 hours of training, and the customer cannot buy the program without the training services. The training is taxable as part of the sale whether you show a separate charge for it on your invoice or charge one amount for the program and training together.

Thanks for all your help.

crazy
01-15-2010, 9:28 PM
In addition to being wrongly taxed you should should have only been charged $25.00 for the DROS. Could be $5.00 are the dealer's fees, but it should have been clearly stated for you and not mis-represented as the state fees.

I agree it's the principle as well.

You're right. When I picked up the lower, the receipt listed the DROS as $25 and $5 store fee, but when I was paying I was told DROS was $30. When I said that I thought DROS was $25, he said that they were entitled by DOJ to charge up to $30 for DROS. I knew that meant they were making $5 on it. That doesn't bother me as much as paying tax on something that I'm not required to.

crazy
01-15-2010, 9:29 PM
The FFL could have prevented this whole thread if he wrote on the receipt.

DROS $25.00
Dealer Fee $5.00

See above, but that's not my gripe.

halifax
01-16-2010, 4:08 AM
I'm not expecting anything. I got one answer that seemed like the correct one, then things went in twelve directions. There is no one answer on this thread. I wanted to clarify what happened with my purchase to get the answer I am looking for.

This is your original post:

I was charged tax on the DROS for a stripped AR lower. I don't think this is correct. Anyone have an answer for me?

The answer to your OP was immediate and clear: The DROS is not taxable. What more did you want unless you were trolling for yet another "HANG THE SOB DEALER" frenzy. (Hint: If that is what you wanted, you should have posted in the General Gun Discussions forum NOT the FFL's Forum)

Did I respond to your reply about something not even remotely related to this discussion. No. Maybe you can share some of your wisdom and explain how your post contributes anything to the discussion. I didn't buy software and my lower didn't come with 20 hours of training. Neither did the DROS. I would normally ignore you, but not today.

Here's your lovely contribution.



Thanks for all your help.

My response was to these posts (one of which I quoted) which had already become part of the discussion:

Tax is also to be charged on FFL transfer fees according to the BOE even though it is just a service.

Ditto.
Tax is not to be charged on labor, services (other than utilities, as you are receiving a "product"), or fees....


...unless you are the State of California, then you can charge tax on criminal fines and call it a penalty assessment, and tax on vehicle registration and call it a licensing fee, and on underpayment of income tax withholdings and call it a surcharge ;)

You asked a simple question and it was answered. What more was there to "discuss"? Be specific this time.

Matt@EntrepriseArms
01-16-2010, 11:29 AM
Wow, where have I been? I think we need to start charging people sales tax on transfers asap! The BOE seems to have a hard one for firearms dealers lately. They have been trolling the gunshows big time.

eltee
01-16-2010, 5:47 PM
OK, let me see if I get this right.

Gun from out of state store= 500.00
DROS = 25.00
FFL transfer fee = 50.00 (what FFL charges for his services)
Buyer pays tax on the $500.00 gun sale + the $50.00 service (FFL ) fee.A total of $550.00 is subject to tax based on county of transaction

PPT to PPT = no taxable amount
DROS fee = 35.00 (25.00 to Calif, 10.00 to FFL)
Buyer pays tax on the $10.00

No taxes for incidental fees such as "hand picked", shipping / handling, layaway charges, etc.

When dealer (FFL) pays his own taxes to the BOE, it will show on the return (for the transfers) no profit other than what the FFL charges for services. If the FFL is primarily a transfer dealer and not a stocking dealer, the taxes paid may look high in relation to the profit declared.

When dealer (FFL) pays his personal state and federal taxes, he can declare the taxes he paid to the BOE.

Do I have it right?

FortCourageArmory
01-16-2010, 9:33 PM
Consignments sales are PPTs that are taxable events.
Walk-in PPTs are not usually taxable events.
Out-of-state transfers are taxable events.
That's the way I remember it.....

halifax
01-17-2010, 4:36 AM
OK, let me see if I get this right.

Gun from out of state store= 500.00
DROS = 25.00
FFL transfer fee = 50.00 (what FFL charges for his services)
Buyer pays tax on the $500.00 gun sale + the $50.00 service (FFL ) fee.A total of $550.00 is subject to tax based on county of transaction

Correct

PPT to PPT = no taxable amount
DROS fee = 35.00 (25.00 to Calif, 10.00 to FFL)
Buyer pays tax on the $10.00

What FortCourageArmory said

No taxes for incidental fees such as "hand picked", shipping / handling, layaway charges, etc.

Difficult to answer since I haven't seen any clairification. Are those charges considered part of the "tangible goods" for which a measure of tax is due?

When dealer (FFL) pays his own taxes to the BOE, it will show on the return (for the transfers) no profit other than what the FFL charges for services. If the FFL is primarily a transfer dealer and not a stocking dealer, the taxes paid may look high in relation to the profit declared.

For sales tax purposes, I divide the total sales tax collected amount by the local sales tax rate to get the [BOE bogus] Gross Receipts and pay the sales tax on that.

When dealer (FFL) pays his personal state and federal taxes, he can declare the taxes he paid to the BOE.

Do I have it right?

I leave this one up to the accountant to sort out. Sorry.

Certainly the sales taxes paid are deductible but how much depends on which Gross Receipts you are using: Your real Gross Receipts or the BOE Bogus Gross Receipts. No double dipping. That's why I leave it to the accountant.

Don't take my responses as gospel. I've been wrong at least one other time in my life. :D

halifax
01-17-2010, 5:10 AM
Wow, where have I been? I think we need to start charging people sales tax on transfers asap! The BOE seems to have a hard one for firearms dealers lately. They have been trolling the gunshows big time.

More info, please.

kemasa
01-17-2010, 6:42 AM
OK, let me see if I get this right.

Gun from out of state store= 500.00
DROS = 25.00
FFL transfer fee = 50.00 (what FFL charges for his services)
Buyer pays tax on the $500.00 gun sale + the $50.00 service (FFL ) fee.A total of $550.00 is subject to tax based on county of transaction


Correct since it is from a business. If it comes from a person in which it is an occasional sale and the person does not have a business (and is willing to document it), then sales tax is not due.


PPT to PPT = no taxable amount
DROS fee = 35.00 (25.00 to Calif, 10.00 to FFL)
Buyer pays tax on the $10.00


Incorrect. Since the firearm is not taxable, there is no sales tax on the $10 FFL fee. This transaction is taxable if the FFL finds the buyer or negotiates the price, in which case tax is due on the FFL fee, in addition to the amount paid for the firearm (just like a consignment sale).


No taxes for incidental fees such as "hand picked", shipping / handling, layaway charges, etc.


No as far as I know, but I am not sure. If the shipping charge includes an amount which is profit, then that amount is taxable, if the firearm is taxable.


When dealer (FFL) pays his own taxes to the BOE, it will show on the return (for the transfers) no profit other than what the FFL charges for services. If the FFL is primarily a transfer dealer and not a stocking dealer, the taxes paid may look high in relation to the profit declared.


Profit is not stated in the sales tax return to the BOE, only sales. The numbers get a bit strange since they don't have a line for collecting tax on out of state purchases.


When dealer (FFL) pays his personal state and federal taxes, he can declare the taxes he paid to the BOE.


Yes, income tax is not paid on the sales tax amount collected.


Do I have it right?

Almost.

Matt@EntrepriseArms
01-17-2010, 8:06 AM
More info, please.

The last few gunshows that we've attended as vendors (Crossroads of the West - Ontario & Costa Mesa, CA) the BOE has made a presence. The first time I noticed them was at the Costa Mesa show a few months ago. They had employees of the BOE go around to every single table in the show and ask to see your seller's permit. They had some sort of hand held device that they used to access their network and verify all your company's info, including if you were delinquent on your sales tax payments (which it turned out we were :()

They also went at the out of state "dealers" who were selling stuff at their tables that did not have a seller's permit, and informed them they had to register and obtain one if they were going to be conducting business. There were a lot of pissed off guys, let me tell you.

When I attended the next gunshow in Ontario, as soon as I signed in with the gunshow organizers, they directed me to a table set up next to them staffed by the BOE. They had me fork over our sellers permit and they apparently recorded that we were there selling at that show.

I saw them walking around at the next gunshow after that, but they didn't have a registration table for the BOE that time.

I don't know if its a coincidence, but we later got his with a letter from the BOE stating that we owed a huge amount of money in deliquent sales taxes. The number that they stated was many tens of thousands of dollars more than we could possibly owe - I'm talking about an increase that was mind boggling.

I couldn't help but wonder if they didn't assume somehow that we raked in all sorts of sales at the shows or something and didn't report them, and assessed us with a number based on that. That is just supposition on my part, because at no point did they ever ask for our sales numbers or ask us how much inventory we brought to the shows - it just seemed like a coincidence.

halifax
01-17-2010, 8:19 AM
The last few gunshows that we've attended as vendors (Crossroads of the West - Ontario & Costa Mesa, CA) the BOE has made a presence. The first time I noticed them was at the Costa Mesa show a few months ago. They had employees of the BOE go around to every single table in the show and ask to see your seller's permit. They had some sort of hand held device that they used to access their network and verify all your company's info, including if you were delinquent on your sales tax payments (which it turned out we were :()

They also went at the out of state "dealers" who were selling stuff at their tables that did not have a seller's permit, and informed them they had to register and obtain one if they were going to be conducting business. There were a lot of pissed off guys, let me tell you.

When I attended the next gunshow in Ontario, as soon as I signed in with the gunshow organizers, they directed me to a table set up next to them staffed by the BOE. They had me fork over our sellers permit and they apparently recorded that we were there selling at that show.

I saw them walking around at the next gunshow after that, but they didn't have a registration table for the BOE that time.

I don't know if its a coincidence, but we later got his with a letter from the BOE stating that we owed a huge amount of money in deliquent sales taxes. The number that they stated was many tens of thousands of dollars more than we could possibly owe - I'm talking about an increase that was mind boggling.

I couldn't help but wonder if they didn't assume somehow that we raked in all sorts of sales at the shows or something and didn't report them, and assessed us with a number based on that. That is just supposition on my part, because at no point did they ever ask for our sales numbers or ask us how much inventory we brought to the shows - it just seemed like a coincidence.

Damn, that sucks. Good luck with that.

I have forgotten to bring my permit to shows in the past but never again.

eltee
01-17-2010, 10:23 AM
OK, so tax is not collected from the buyer on the $10.00 "profit" an FFL makes on a PPT, but the FFL must declare the "profit" on his own taxes as income and pay taxes on that if I understand this all correctly. Therefore, on a PPT the FFL gets $10.00 for the transaction, and out of this must pay income tax?

halifax
01-17-2010, 10:25 AM
OK, so tax is not collected from the buyer on the $10.00 "profit" an FFL makes on a PPT, but the FFL must declare the "profit" on his own taxes as income and pay taxes on that if I understand this all correctly. Therefore, on a PPT the FFL gets $10.00 for the transaction, and out of this must pay income tax?

Yessir

Matt@EntrepriseArms
01-17-2010, 1:47 PM
The State is so hard up for money right now, they are chasing any source they can think of.

I had never been asked for a permit or had seen any BOE presence in the past 2/12 years I've been a vendor at gunshows, and according to guys who do the circuit for years, have never seen them before either.

I'll bet they will be hitting up the craft and scrapbooking shows next.

Damn, that sucks. Good luck with that.

I have forgotten to bring my permit to shows in the past but never again.