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Old 05-23-2012, 2:57 PM
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kemasa kemasa is offline
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Join Date: Jun 2005
Location: Ventura County, CA
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The BOE response to what sales tax to collect on penny auction sites:

In your email you state you are a California Federal Firearms Licensed (FFL) gun dealer and you have a question about sales made through the website, You explained that people purchase bids from the website and then use these bids on items they want to purchase. The site noted that the average bid cost is $0.65 and when a bid is placed the price of the item being auctioned goes up by $0.01. There are also other bidders and other types of “auctions.”

Specifically you asked what should the California sales tax be based on for firearms purchased through’s website when they are shipped to you for registration and delivery to the purchaser, the purchase price? the total the person paid to purchase the product? or the retail value of the firearm?

Below is information from the website:

“Welcome to,*an exciting new*online*penny auction site dedicated to offering firearms and outdoor sporting equipment at deeply discounted prices. All firearms are shipped from a Federal Firearms Licensee ("FFL") to a local FFL near you.* Further, the local FFL will require you to complete the normal paperwork ATF Form 4473 and complete an NICS E-check online to verify that you are eligible to own a firearm.** Bids are on average 65 cents on our most popular and larger packages and slightly higher for smaller bid packs.* Packs range between 30 and 500 bid packs. Remember, though, that each bid you place is a bid you've purchased.”**

Per bidgunner’s website, in order to participate in the auction, users must first purchase bids which are sold in packages. These bids are spent on the auctions. Once an auction has been won, the auctioneer ( collects the auction price of the item (final bid) in addition to the monies already collected from the pre-purchased bids placed during the auction.

RTC section 6012 defines “Gross receipts” to mean the total amount of the sale or lease or rental price, as the case may be, of the retail sales of retailers, valued in money, whether received in money or otherwise, without any deduction on account of any of the following:

The cost of the property sold.
The cost of the materials used, labor or service cost, interest paid, losses, or any other expense.
The cost of transportation of the property, except as excluded by other provisions of this section.

The total amount of the sale or lease or rental price includes all of the following:

Any services that are a part of the sale.
All receipts, cash, credits and property of any kind.
Any amount for which credit is allowed by the seller to the purchaser.

Therefore, in accordance with the above citation, for products being auctioned at these type of “penny auctions,” sales tax is due on the total amount received by the auctioneer for all the bids placed plus the amount of the final auction price (winning bid) for the product. Basically, receives payment for the product in the form of the final auction price plus the amount of all bids placed for the specific product being auctioned. Thus, in most instances, allowing the ability to provide their products to the final bidder for lower prices.

As these are penny auctions, the bidding starts at $0.00 and goes up by a penny each time a bid is placed and bids cost on average $.65. As an example, assume the winning bid for a firearm on bidgunner’s website was $7.00, therefore there were 700 bids placed which were purchased for $.65 each. Thus, the site collected $455 (700 x $.65) in pre-sold bids. Accordingly, in this example the gross receipts subject to tax would be $462 ($455 plus the final purchase price of $7.00).
The reference number available upon request.
FFL Transfer/Special Order Dealer since 1993.
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