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  #1  
Old 11-25-2010, 9:15 AM
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Default When CA FFLs should collect SALES TAX from consumers.

CA FFLs should collect sales tax on the sale of any tangible personal property sold or delivered in the State of California.

http://www.boe.ca.gov/sutax/faqpurch.htm

FFLs should not be collecting SALES TAX on transfers of occasional or private party sales.
Quote:
REVENUE AND TAXATION CODE 6006.5
6006.5. "Occasional sale" includes all of the following:
(a) A sale of property not held or used by a seller in the course
of activities for which he or she is required to hold a seller's
permit or permits or would be required to hold a seller's permit or
permits if the activities were conducted in this state, provided that
the sale is not one of a series of sales sufficient in number,
scope, and character to constitute an activity for which he or she is
required to hold a seller's permit or would be required to hold a
seller's permit if the activity were conducted in this state.

(b) Any transfer of all or substantially all the property held or
used by a person in the course of those activities when after the
transfer the real or ultimate ownership of the property is
substantially similar to that which existed before the transfer. For
the purposes of this section, stockholders, bondholders, partners, or
other persons holding an ownership interest in a corporation or
other entity are regarded as having the "real or ultimate ownership"
of the property of the corporation or other entity.

(c) A sale of property, other than hay, by a producer of hay,
provided that the sale is not one of a series of sales sufficient in
number, scope, or character to constitute an activity for which the
producer would be required to hold a seller's permit if the producer
were not also selling hay.
So if a person buys a gun from a private party on Gun Broker, then no SALES TAX should be collected. However, online auctions won from a retailer, SALES TAX must be paid.
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Last edited by tenpercentfirearms; 05-23-2012 at 7:09 AM..
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  #2  
Old 11-25-2010, 11:12 AM
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UPDATE NOTE: THE CA BOE CHANGED THEIR VIEW OF WHEN SALES TAX IS DUE, ALTHOUGH THE LAW HAS NOT CHANGED. This means that reading this thread the requirement changes. Currently, if the firearm comes from out of state, it is subject to sales tax unless it is a C&R firearm and the buyer has a C&R FFL and the seller is a private party, it is an occasional sale and not coming from a business.

In addition to what was said above, sales tax is to be collected on private party sales IF the FFL gets involved with the price and/or finding the buyer. Also, it needs to be documented that it is a private sale, an occasional sale and the person does not have a business (a bit of a gray area if the person does not have a firearms business)

Quote:
495.0848 Delivery by Licensed Firearm Dealer. A California resident
purchased a firearm from an out-of-state retailer who is not engaged
in business in California. The California customer contacts a licensed
California firearm dealer and states that he paid money to an out-of-state
dealer and wishes for the dealer to have the firearm shipped to the
dealer's place of business and legally transfer the firearm to him. The
dealer contacts the out-of-state seller and arranges to have the firearm
sent to him. Upon receipt of the firearm (prepaid by the customer),
the dealer logs the firearm into his Federal Acquisition/Disposition
books. The customer then fills out the State Department of Justice
Firearms Dealer Record of Sale. The dealer collects the state fee of
$14.00 plus a $16.00 charge to cover the dealer's expenses.

When a licensed California firearm dealer completes the registration
paperwork and delivers a firearm to a California purchaser for an
out-of-state retailer not registered with the Board as a retailer engaged
in business in this state, it is presumed that the dealer is the retailer
of the firearm. In such a case, the dealer would owe sales tax on the
total amount of the sales price of the gun, including the Department of
Justice fee passed on to the customer and including the dealers service
charge. (Section 6007)

If the out-of-state retailer was engaged in business in this state
under section 6203, the California dealer's deliveries for that retailer
will not be considered taxable retail sales by the dealer, even if the
out-of-state retailer has not registered with the Board as a retailer
engaged in business in this state. In such cases, the out-of-state
retailer has the duty to collect the use tax under section 6203 and that
retailer should collect tax on the invoice price of the firearm plus
the dealer's service charges and the Department of Justice fee that is
passed on the customer. 10/26/95. (Am. 99-2).

(Note: On and after January 1, 1999, the Department of Justice fee is not
includible in the measure of tax, but all other charges remain subject
to tax.)

Quote:
295.1675.600 Service Charge for Sale of Firearms. Since the change in
the law requiring private parties to sell firearms only through licensed
dealers, a company asks whether the fee it charges to file the required
state paperwork to the Department of Justice is subject to tax.

Whether the company is liable for sales tax on the transaction depends
upon whether the company is the retailer of the firearms. If an owner
of a firearm and a purchaser have negotiated the terms of the sale in
advance and then bring the firearm to the company to meet the statutory
requirements of the Penal Code, the company is not the retailer of the gun
and does not owe tax on the fee or any other charges for the firearm. If,
however, an owner of a firearm brings the gun to the company and requests
the company to find a buyer, the company is the consignee and the retailer
of the firearm, and is liable for sales tax on the sale. In that case, the
company must include all fees and charges in the measure of tax. 1/9/92;
2/20/92. (Am. 99–2).

(Note: On and after January 1, 1999, the Department of Justice fee is not
includible in the measure of tax, but all other charges remain subject
to tax.)
Links to the CA BOE info:

http://www.boe.ca.gov/sutax/annotati...5.1675.600.pdf

http://www.boe.ca.gov/business/Vol2/suta-d-g.pdf

http://www.boe.ca.gov/business/Vol2/suta-q-s.pdf
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Last edited by kemasa; 06-27-2012 at 9:39 AM..
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  #3  
Old 11-26-2010, 7:23 AM
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The CA BOE further believes that CA FFLs that transfer firearms from an out of state retailer are the retailer for SALES TAX purposes and are liable for the SALES TAX payment.

First, what the CA Board of Equalization (BOE) says on the matter.
Quote:
495.0843 Deliveries by California Firearm Dealers for Out-of-State Retailers

California residents order firearms from out-of-state retailers and the retailers
ship the firearms to an authorized California firearm dealer for delivery to the
customer. The California firearm dealer charges a fee to register each firearm in California.

When the California firearm dealer completes the registration paperwork and
delivers a firearm to a California purchaser for an out-of-state retailer not
registered with the Board as a retailer engaged in business in this state, it is
presumed that the firearm dealer is the retailer of the firearm under the second
paragraph of section 6007. In such a case, the firearm dealer would owe sales tax
on the total amount of the retail sales price of the gun to the customer, including
the Department of Justice fee if passed on to the customer, and including any
service charge made by the firearm dealer.

If the firearm dealer establishes to the satisfaction of the Board that the
out-of-state retailer was engaged in business in this state under section 6203, its
deliveries for that retailer will not be considered taxable retail sales by the firearm
dealer, even if the out-of-state retailer has not registered with the Board as a
retailer engaged in business in this state. In such cases, as well as in situations in
which the retailer is in fact registered as a retailer engaged in business in this
state, the out-of-state retailer has a duty to collect the use tax under section 6203.
The retailer should collect use tax on the invoice price of the firearm, plus the
service fee, even if paid directly to the firearm dealer by the customer. Also, the
Department of Justice fee passed onto the customer should be included in the
measure of tax. 12/7/95. (Am. 99–2).

(Note: On and after January 1, 1999, the Department of Justice fee is not
includible in the measure of tax, but all other charges remain subject to tax.)
The BOE quotes 6007
Quote:
REVENUE AND TAXATION CODE 6007

6007. A "retail sale" or "sale at retail" means a sale for any
purpose other than resale in the regular course of business in the
form of tangible personal property.

When tangible personal property is delivered by an owner or former
owner thereof, or by a factor or agent of that owner, former owner,
or factor to a consumer or to a person for redelivery to a consumer,
pursuant to a retail sale made by a retailer not engaged in business
in this state, the person making the delivery shall be deemed the
retailer of that property. He or she shall include the retail selling
price of the property in his or her gross receipts or sales price.
In November 2011, the BOE started to send the following document to FFLs to further inform the public of their belief that an FFL is the retailer of the firearm and will be required to remit any sales tax due. Important Notice Sales Tax Obligation

Additionally, if a customer does not provide a receipt, the dealer should use the most recent fair market value of the firearm.

Now, some people are going to argue that the BOE is wrong on this and abusing their power to force FFLs into collecting the SALES TAX when an FFL should not be doing so. Here is my response to that.
Quote:
Originally Posted by tenpercentfirearms View Post
Ok, let this be a lesson to all dealers.

The BOE is clear that you are considered the retailer and must collect SALES TAX on all retail transactions through your gun shop. If Buds Gunshop sends you a firearm and you transfer it, you owe sales tax on that firearm.

Now the BOE is equally clear that you do not have to collect sales tax from your customers and it is optional whether you will collect a reimbursement for sales tax from your customers. Note the key here is the BOE permit holder is responsible, not the customer.

USE TAX is where you order something from out of state and you pay that USE TAX on your state income tax return at the end of the year. SALES TAX and USE TAX are not the same and are not interchangeable.

Now I charge $50 for any number of long guns transfered and for a single pistol. If I were not to collect the sales tax on the retail sale, then I would be losing money on any and all transfers whose purchase price exceeds $606. I would simply be breaking even at that price. Additionally, this is assuming I am not assessed penalties and interest for failing to pay my sales tax liability on time.

Personally, I have never heard of a real store ever getting audited. Some people claim stores do and some claim they don't. Personally, I don't care. What I care about is not incurring a huge sales tax liability for a customer that is going to be mine to pay with penalties and interest in the rare case I do get audited.

And this is where threads like this get interesting. Since we all know that we are supposed to pay our USE TAX on all out of state purchases (except occasional sales from private parties), the tax is supposed to get paid one way or another. The question dealers need to ask themselves is why would posters on Calguns get so upset about a dealer collecting sales tax that they would recommend you use your credit card and make a charge back, never use any FFL that ever charges SALES TAX on a transfer, or make blanket statements that all FFLs who do so are corrupt and are keeping the SALES TAX to pad their sales(*)?

The answer is these customers do not plan on paying their USE TAX. They want their guns cheaper and they want all SALES TAX liability for their cheating to fall squarely on your shoulders, which if you don't remit the SALES TAX, that is exactly where it will lie. If these posters were such upstanding, honest citizens, they would have no problems having the dealer collect the SALES TAX since it would be one less thing they have to worry about on their income taxes every year.

"Oh, I paid that SALES TAX to the gun shop and here is my receipt" in the case of an extremely rare BOE audit on the customer instead of "Yes tax man, I saved all of my receipts for all of my gun purchases and here they are" for every single gun you buy in a year.

So for those of you who don't like throwing your tax liability square on the shoulders of others, I am not sure if I would judge the complete operation of an FFL based on whether they collect SALES TAX or not. I like to follow the law and that is why I collect it. Now, if one of my competitors doesn't want to collect the SALES TAX (which I personally know some who don't) and you have no intention of paying the USE TAX which means you will get the gun cheaper, by all means use them. If you plan on paying the USE TAX anyway, then what is the difference? In that regard my shop is really no different than theirs and so hopefully you would judge a shop based on customer service, selection, and price.

Stating that you would never use a gun shop that charges SALES TAX on your taxable out of state transfer seems like faulty logic to me. Again, that would assume you plan on paying your USE TAX and that you aren't just trying to cheat the system at the expense of a business that is trying to follow the law. Stating you have no intention of paying the USE TAX and you are going to purchase the firearm from the cheapest source is a logical statement. It might not be rational considering you are breaking the law over probably less than $50 in taxes (quite rarely over $100), but hey, that is your decision to make.

For my gun shop, we don't assume other people's tax liability and we never will, no matter how much potential back taxes we build up.

(*)I use Quickbooks Point of Sale for all of my sales transactions. The amount of work required to void your transaction, remove the SALES TAX, and then create a new receipt where I leave the SALES TAX out is not worth it. Not to mention it would be pointless because in an audit the BOE would just look at all of my voided transactions and notice the originals had SALES TAX and the follow ups didn't. I would be in prison or paying out my rear for the rest of my life. Never mind collecting sales tax and not remitting it has to be the stupidest thing ever since the customer should have a receipt that shows SALES TAX was collected and that could be turned into the BOE and the BOE could quickly discover the SALES TAX was not remitted based on the sales receipt number showing a void.
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Last edited by tenpercentfirearms; 11-10-2011 at 1:15 PM..
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  #4  
Old 11-26-2010, 4:10 PM
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Old 01-04-2011, 12:14 PM
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Question for you: on the Front Sight promotional where we're getting free guns, is there something which covers guns which are free? I guess this is the same as winning one in a raffle, etc.

I have a hunch the state is going to want sales tax on the MSRP of each and every gun we get.
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Old 01-09-2011, 2:43 AM
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Quote:
Originally Posted by grammaton76 View Post
Question for you: on the Front Sight promotional where we're getting free guns, is there something which covers guns which are free? I guess this is the same as winning one in a raffle, etc.

I have a hunch the state is going to want sales tax on the MSRP of each and every gun we get.
I've "won" prizes before. The organization doing the giveaway sends a tax form in with the value of the item and you should get a small post card with a tax form number on it stating the value of your prize. When you do your taxes there's a form you'd fill out for "gifts" or "prizes" which I think is at a different tax rate then your normal taxes. When I won this I was a kid so I was exempt from paying it ($500 monitor).
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Old 01-09-2011, 2:53 AM
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Quote:
Originally Posted by ugimports View Post
I've "won" prizes before. The organization doing the giveaway sends a tax form in with the value of the item and you should get a small post card with a tax form number on it stating the value of your prize. When you do your taxes there's a form you'd fill out for "gifts" or "prizes" which I think is at a different tax rate then your normal taxes. When I won this I was a kid so I was exempt from paying it ($500 monitor).
I think you're referring to income tax there.

Quote:
Originally Posted by grammaton76 View Post
Question for you: on the Front Sight promotional where we're getting free guns, is there something which covers guns which are free? I guess this is the same as winning one in a raffle, etc.

I have a hunch the state is going to want sales tax on the MSRP of each and every gun we get.
I asked the BOE specifically about Front Sight "gifts" and sales tax before. Their response didn't really address my inquiry regarding out-of-state gift givers.

Quote:
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 concluded that I am not responsible for the sales tax under 495.0843 and 6007 because, clearly, the BOE says the "giver" of the gift is.

That was just my conclusion though...not legal advice.
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Last edited by halifax; 01-09-2011 at 4:09 AM.. Reason: added disclaimer
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Old 01-09-2011, 9:27 PM
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Quote:
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.
Sounds to me like the end user should pay use tax on the purchase price at the end of the year.
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Old 03-14-2012, 1:55 PM
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Quote:
Originally Posted by ugimports View Post
I've "won" prizes before. The organization doing the giveaway sends a tax form in with the value of the item and you should get a small post card with a tax form number on it stating the value of your prize. When you do your taxes there's a form you'd fill out for "gifts" or "prizes" which I think is at a different tax rate then your normal taxes. When I won this I was a kid so I was exempt from paying it ($500 monitor).
What they should do instead is take the gun out of the box, fire one shot, and label it as a used gun and say that it's worth $5.

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Old 05-14-2014, 3:54 PM
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Quote:
Originally Posted by grammaton76 View Post
Question for you: on the Front Sight promotional where we're getting free guns, is there something which covers guns which are free? I guess this is the same as winning one in a raffle, etc.

I have a hunch the state is going to want sales tax on the MSRP of each and every gun we get.
No such thing as free at the very least you technically have to declare anything you have won/or free as income.
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Old 01-10-2011, 10:51 AM
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Why do you say that the end user should pay? All of what you quoted do not mention the person who gets the gift.

Quote:
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.
The above bolded statements do not apply to the person who receives the gift. There can be a different if you take a course and part of that they include something.
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Old 01-10-2011, 11:17 AM
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Declaring tax collected on transfers, etc.

When an FFL is doing his taxes, what happens if the shop does alot of transfers of high end guns and therefore collects alot of California sales tax which is out of balance with the actual profit the dealership made on dealer (shop) sales?? Do the tax collectors question why the total tax collected far exceeds the amount for declared sales?
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Old 03-01-2011, 8:37 AM
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Quote:
Originally Posted by eltee View Post
Declaring tax collected on transfers, etc.

When an FFL is doing his taxes, what happens if the shop does alot of transfers of high end guns and therefore collects alot of California sales tax which is out of balance with the actual profit the dealership made on dealer (shop) sales?? Do the tax collectors question why the total tax collected far exceeds the amount for declared sales?
You think they care that they got extra money? They would probably be jumping for joy.

Quote:
Originally Posted by nobama View Post
Article I Section 9 of The United States Constitution says "No Tax or Duty shall be laid on articles exported from any state"
This isn't exactly a tax laid on the item. The tax isn't an "item bought online tax" it's a "use tax." They typically word things carefully to avoid this stuff. In other words it's a "we're-getting-your-money-one-way-or-another tax"

Last edited by SixPointEight; 03-01-2011 at 8:40 AM..
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Old 01-10-2011, 11:28 AM
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I have never had a problem. I am not sure if the BOE talks to income tax people, both just want their money.
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Old 01-22-2011, 4:46 PM
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You dont charge tax on the DROS, what about HSC?
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Old 01-22-2011, 7:01 PM
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Quote:
Originally Posted by Cash83 View Post
You dont charge tax on the DROS, what about HSC?
I don't. It isn't tangible property.
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Old 01-22-2011, 7:31 PM
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Cool, thanks. figured it wouldn't be taxed for the same reasons as the DROS
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Old 01-23-2011, 7:23 AM
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The DROS used to be taxed, but that has changed. I have never seen anything in which it is said that the HSC should be taxed.
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Old 01-27-2011, 5:15 AM
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I traded for my guns shipped from buds. Do they want a letter saying so?
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Old 02-01-2011, 7:30 PM
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So let me get this streight? So say I buy a gun from a gun deal in Arizona (not a private party) The ship the gun to a FFL near me. That FFL then will charge me a DROS fee ($35) plus a possible fee to recieve the gun as well as sales tax on the cost of the gun? Am I correct?
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Old 02-01-2011, 7:34 PM
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Not correct, the DROS fee is $25. The FFL can charge any fee they want and they are required to collect sales tax, so the rest is correct.
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Old 02-01-2011, 8:21 PM
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The only difference between me buying this gun from an out of state retailer online vs. buying a jacket online (from an out of state retailer) is that the government forces me to go through a dealer...it is on the purchaser of the jacket to pay use tax on it if he uses it in CA, IMO (which is different than what the BOE states) it shouldn't be any different with a gun. Unfortunately, it appears that they'll find any excuse to collect mandatory social program donations from you. Another reason I left CA.
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Old 02-01-2011, 8:26 PM
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Quote:
Originally Posted by xLusi0n View Post
The only difference between me buying this gun from an out of state retailer online vs. buying a jacket online (from an out of state retailer) is that the government forces me to go through a dealer...it is on the purchaser of the jacket to pay use tax on it if he uses it in CA, IMO (which is different than what the BOE states) it shouldn't be any different with a gun. Unfortunately, it appears that they'll find any excuse to collect mandatory social program donations from you. Another reason I left CA.
It would be the same amount either way. B*tch about it all you want, I do, but the only people that make a stink about it are those who want to evade paying it altogether.
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Old 02-01-2011, 8:27 PM
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FYI but CA is not the only one doing this. Washington FFLs are also required to collect sales tax on any guns transferred into the state based on the invoice. If the invoiced amount is obviously understated (up to the FFL's judgement), it's up to the FFL to assess sales tax on market value as determined by them.
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Old 02-02-2011, 7:27 AM
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You are supposed to pay sales tax on purchases made out of state, so the only difference is that with the case of a firearm, you are forced to pay because the FFL, a CA business, is required to collect the sales tax.
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Old 02-02-2011, 8:41 AM
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If I purchase 1 or 2 firearms out of state a year and have them mailed to a CA FFL, does this not qualify as "occasional"?
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Old 02-02-2011, 8:57 AM
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If I purchase 1 or 2 firearms out of state a year and have them mailed to a CA FFL, does this not qualify as "occasional"?
Has nothing to do with sales/use tax on the firearms. If you only bought 1 in your life. Sales/use tax is due whenever you purchase a firearm from an out-of-State retailer.
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Old 02-02-2011, 9:34 AM
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Occasional applies to the seller, not the buyer. If the seller is a private party, but is selling more than on an "occasional" basis, then sales tax would be required to be collected even though the seller does not have a business.
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Old 02-02-2011, 9:39 AM
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Article I Section 9 of The United States Constitution says "No Tax or Duty shall be laid on articles exported from any state"
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Old 02-02-2011, 9:48 AM
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In this case, it applies to items which are imported, but in any case feel free to fight this, as well as all the infringements on the Right to keep and bear arms. It might be unConstitutional, but unless you have the money to fight it the most you will get is free room and board and all the sex that you don't want.
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Old 02-07-2011, 10:49 AM
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Originally Posted by kemasa View Post
In this case, it applies to items which are imported, but in any case feel free to fight this, as well as all the infringements on the Right to keep and bear arms. It might be unConstitutional, but unless you have the money to fight it the most you will get is free room and board and all the sex that you don't want.
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Old 02-18-2011, 7:21 AM
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I thought about you guys the other day when I talked to a guy who owns a business that deals with the movie industry. I told him about the BOE and how the tax works on guns, etc. He said that the BOE came after him one time and in his words, "They make the IRS look like little puppies when it comes to collecting." Apparently, they froze all his assets and took money from his bank accounts. When he wrote to them and asked for a payment plan, they simply wrote back, "We do not offer payment plans" and continued taking money from his accounts until he paid his debt.

I'm all for getting the best deal, but I hope these FFLs have their ducks in a row when it comes time for audits. I would much rather see them stick around and continue selling guns.
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Old 02-18-2011, 8:35 AM
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My personal opinion is that it is the FFL's job to follow the law and collect the sales tax as required and it is the voter's (aka buyer's) job to take action to get the laws changed to something more reasonable. Complaining to the FFL and others gun owners will not get things changed.
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Old 02-19-2011, 9:33 AM
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Here's text I received back in 2009:
Quote:
Thank you for your recent e-mail requesting our advice regarding the proper application of the California Sales & 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.

Revenue and Taxation Code Section 6007 defines the term ‘‘retail sale’’ or ‘‘sale at retail’’ to mean a sale for any purpose other than resale in the regular course of business in the form of tangible personal property. When tangible personal property is delivered by an owner or former owner thereof, or by a factor or agent of that owner, former owner or factor to a consumer or to a person for redelivery to a consumer, pursuant to a retail sale made by a retailer not engaged in business in this state, the person making the delivery shall be deemed the retailer of that property. He or she shall include the retail selling price of the property in his or her gross receipts or sales price.

Sales and Use Tax Annotation 495.0843, Deliveries by California Firearm Dealers for Out-of-State Retailers. California residents order firearms from out-of-state retailers and the retailers ship the firearms to an authorized California firearm dealer for delivery to the customer. The California firearm dealer charges a fee to register each firearm in California. When the California firearm dealer completes the registration paperwork and delivers a firearm to a California purchaser for an out-of-state retailer not registered with the Board as a retailer engaged in business in this state, it is presumed that the firearm dealer is the retailer of the firearm under the second paragraph of section 6007. In such a case, the firearm dealer would owe sales tax on the total amount of the retail sales price of the gun to the customer, including the Department of Justice fee if passed on to the customer, and including any service charge made by the firearm dealer. If the firearm dealer establishes to the satisfaction of the Board that the out-of-state retailer was engaged in business in this state under section 6203, its deliveries for that retailer will not be considered taxable retail sales by the firearm dealer, even if the out-of-state retailer has not registered with the Board as a retailer engaged in business in this state. In such cases, as well as in situations in which the retailer is in fact registered as a retailer engaged in business in this state, the out-of-state retailer has a duty to collect the use tax under section 6203. The retailer should collect use tax on the invoice price of the firearm, plus the service fee, even if paid directly to the firearm dealer by the customer. Also, the Department of Justice fee passed onto the customer should be included in the measure of tax. 12/7/95. (Am. 99–2).

(Note: On and after January 1, 1999, the Department of Justice fee is not includible in the measure of tax, but all other charges remain subject to tax.)

Annotations are summaries of the conclusions reached by staff counsel as applied to specific factual situations. They are a research tool and intended to provide guidance regarding the interpretation of Board statutes and regulations. Annotations are not regulations of the Board and do not have the force or effect of law. In any instance where there is an inconsistency between the statutory law and an annotation, statutory law is controlling.

According to your email, you state that you are a firearm dealer in California. You question the application of tax on a firearm received from an out-of-state dealer for the purpose of holding and issuing it to their customer once a background check is cleared. You inquire whether you are liable for tax upon issue of the firearm to the seller’s customer. The answer is based on the out-of-state dealer not being registered for the collection of tax in California. Should this not be the case, my answer will differ.

When a licensed firearm dealer is utilized for the process of transferring a firearm to a purchaser, the licensed firearms dealer may be regarded as the retailer under certain circumstances. Whether the licensed firearms dealer is regarded as the retailer or not would depend on whether the person actually selling the firearm is a retailer and also whether the person selling the firearm is considered to be a retailer engaged in business in this state

A California licensed firearm dealer that processes the transfer for a customer would be liable for the tax in situations where the seller is a retailer that is not engaged in business in the state of California. As such, you will be considered liable for the tax if the out-of-state seller is not registered with the State of California.
Please see the last bolded section. This is why I collect sales tax when the firearm is coming in from a business out of state (not a private individual). Being told I'm liable means I need to collect the tax in order to not get hosed. It's also hard for me to claim ignorance since I received this before I sold my first firearm.
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Old 03-01-2011, 10:05 AM
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Actually, in this case it is not use tax, it is sales tax. It is taxed based on the sale of the item and it applies equally to firearm which come from within the state or from outside the state.

The sales tax and income tax are separate and as far as I know, they don't compare notes and it is also easy to explain, so there is really no issue there.
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Old 03-12-2011, 6:39 PM
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Related to this thread I really hate when other dealers not collecting tax are making it sound like those of us that are doing things legit our cheating the customers. Here's a note I got from a customer recently. Emphasis added by me. This just makes me sick. I replied to the customer asking if he can provide me the dealer's names so I could educate them, but he has since moved on.

Quote:
I am getting back to you in regards to the sales tax you are charging on gun tranfers from dealers online. I have done some checking around. i know some FFL dealers in San diego and in Santa Clara. All have said there is no sales tax in place on guns being transfered in from out of state. Regardless if new or used or from a private party or a dealer. They said any dealer charging sales tax is in error and is pocketing that sales tax instead of reporting it. To say I am annoyed with this is a understatement.
There are plenty of dealers not charging this tax. Its partially my fault for not looking into thisfirst as well. Its not personal its just business and for obvious reasons Friends and I will have to use other dealers in the area that dont charge this expensive tax. Thanks again and good luck.
I even provided this thread + my note from the BOE to the customer so they would understand and got this back:
Quote:
I was just told how can you charge sales tax when your not selling the firearm? They said the firearm is not yours to collect tax on.
eeerrrr...yeah I'm pocketing the sales tax...why the hell woud I want to put myself at a competitive disadvantage collecting a tax and then conspiring to cook my books to hide that said tax.. these other FFLs do not understand how incredible complex that is when you're using computerized receipts and most of your transactions are with credit cards.. they must be small cash based FFLs. My guess is if they are likely not reporting most of their cash sales as well if that's how they think dealers do business.
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Old 03-13-2011, 7:38 AM
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I keep a copy of the BOE information to hand customers when they ask in person. Through email, I provide the links. It is more important to educate the customer and explain to them that they could be liable for the sales tax (most likely the BOE will go after the dealer though).

A customer is not going to give you the names since they don't want those people corrected. I think it is interesting that they claim that FFLs who are collecting the sales tax are pocketing it. That is libel/slander since that is a criminal act. There is NO proof of such a claim, so it shows the character of the people involved.

I doubt that they are hiding anything since I think they just don't know the requirements. I saw one FFL who posted on his web site that he does not collect sales tax from out of state firearms. Clearly, that FFL was not hiding anything.

The reality is that the CA IS selling the firearm. Dealer Record of SALE. What people don't get is paying for an item and change of ownership of the item are two different things. The ownership of a firearm does not change until a FFL does the paperwork, who pays the money does not matter.
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Old 03-15-2011, 2:32 PM
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I've been having my customers sign a sales/use tax acknowledgement form before starting any firearms transactions to avoid this headache.

(Summary)
- Tax will be collected on all firearms shipped to us from out of state retailers unless they can prove they are registered with the CA BOE.

- Tax will be collected on all consignment sales

- Tax will not be collected on private party sales (which I did not coordinate or do consignment)

- Tax will not be collected on prize guns unless over $1,000 (see rules for 1099-R forms)

- All retail items sold from our business to consumers are subject to tax when sold within the state of California, no exceptions.

This might be upsetting for someone who wishes to evade paying taxes but as a registered vendor with the BOE I am liable for taxes due, any customer who does not agree to sign the tax acknowledgement doesn't get to go forward with completing the transaction/purchase.

To date I have had zero resistance to this as I do provide the tax codes and reference information in the form (long version).
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Old 03-15-2011, 10:56 PM
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Quote:
Originally Posted by GetBulletsandBrass View Post
(Summary)
- Tax will be collected on all firearms shipped to us from out of state retailers unless they can prove they are registered with the CA BOE.
Will you really collect tax if I order something from someone that is a BOE holder but doesn't collect the tax? I would change that to

Quote:
Tax will be collected on all firearms shipped to us from out of state retailers unless the buyer can provide a receipt showing that the CA state sales tax was paid.
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Old 03-15-2011, 3:42 PM
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Tax is to be collected on Private Party Sales if you, the FFL, get involved with finding the buyer or dealing with the price.
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