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  #1  
Old 11-07-2007, 8:03 PM
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Default The return of the transfer sales tax thread.

Here is what I sent the Board of Equalization.

Quote:
I have some new questions regarding my collecting of sales tax from customer orders sent in from out of state. I would appreciate a response with the appropriate tax code references so I can pass them on to my customers.

In your last response (I have attached the original response), you stated that even though I am just transferring a firearm, I am considered the retailer for sales tax purposes. What should I do when a customer either refuses to disclose the purchase price of the firearm they are transferring and/or gives me a purchase price that seems much lower than the firearm's retail value? What price am I supposed to collect sales tax on since I am not involved in paying the person out of state for the firearm?

Second, do I only collect sales tax from out of state transfers from other retailers? Revenue and Tax Code 6007 states that

"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."

If an individual that is not a retailer or otherwise is engaged in business sells a firearm online or by phone to another private individual in this state, federal and state law requires the firearm be transferred through me. However, is that considered a retail sale because it did not come from a "owner, factor, agent, or retailer"? For example, when two California residents conduct a private party transfer through my gun shop, I do not collect sales tax on the firearm's price because it is considered a private transaction between two individuals.

Thank you for your responses.

Wes Morris
Here is the BOE's response.

Quote:
If an in-state purchaser of a firearm purchases the firearm from an out-of-state person who is not a retailer, the drop shipment provisions do not apply and the transaction is not subject to tax. The drop shipment provisions provided by Revenue and Taxation Code section 6007 and Regulation 1706 only apply in a situation where you are processing a sale on behalf of an out-of-state retailer. Sales between private parties are not subject to tax as occasional sales, regardless of whether the private party seller is located in-state or out-of-state.

If you are processing the paperwork for an in-state purchaser pursuant to a sale of the firearm by an out-of-state retailer, you would be responsible for collecting the use tax from the purchaser based on the purchase price of the firearm. I would think in most cases, the purchaser you are processing the sale for should have a sales receipt of some kind issued by the out-of-state retailer documenting the purchase price. In the event the purchaser does not have such a receipt, you may wish to contact the retailer directly for a copy of such documentation. I would recommend making a copy of this receipt for your records to document the amount you collected tax on. If the amount shown on the invoice is below the firearms retail value, you should still use the purchase price shown on the invoice in calculating the tax due. If neither the purchaser nor the retailer provides you with documentation establishing a purchase price, I recommend you use a fair retail value of the firearm in calculating the amount of tax due.

I hope this information is helpful. If you have any further questions regarding this or any other issue, please write again or call our Information Center at (800) 400-7115. You may also visit our website at www.boe.ca.gov.
So now I have changed my website. If it is a private party transaction forced into a transfer because it comes from out of state or even in state, no more sales tax. Only from other retailers.

Now, I am only making $25 on this transaction. No way am I tracking down the retailer in order to figure out how much you really paid. No receipt, then I am going to charge the sales tax on retail price.

I just went ahead and sent a copy of this question proposed by Gene Hoffman.

Quote:
Question 3:
What if the firearm comes from out of state and the purchaser already
paid the person shipping the firearm to me? I am simply a transfer
dealer charging the person a $25 DROS fee imposed by the state and $30
to do the transfer. I did not sell any tangible personal property. Do I
still tax the cost of the firearm? Do I tax my $30 service charge for
conducting the paperwork?

Response:
If the firearm dealer is registered with the Board of Equalization, the
tax will be collected by the selling dealer. When the dealer ships the
firearm to you, you should obtain from the customer documentation
showing the tax paid to the selling dealer. If the out-of-state firearm
dealer is not registered with the Board of Equalization, you must
collect the use tax on the sales price of the firearm and remit the tax
to the Board. You are considered the retailer of the firearm in this
situation pursuant to Revenue and Taxation Code Section 6007. Again, the
$25 DROS fee is exempt from tax, but your $30 service fee is subject to
tax, regardless of whether the selling dealer collects tax on the sale
or not.



Let me propose the case where the out of state firearms dealer who is
not registered with the BOE sells a firearm to a third party over the
phone or the internet and that third party, subsequent to the sale, asks
me to take delivery of the firearm so as to comply with Federal and
State Firearms transfer laws. Clearly sales tax is not collectible on
the firearm as I was not the owner, factor, or agent of the former owner
of the firearm and no sale will occur when the customer takes delivery
of the firearm from me after complying with state waiting periods. Also
note that 9th Circuit case law makes clear that as an FFL I am an agent
of the Federal Government when completing a transfer and under common
law would be considered an agent of the current owner who wishes to
legally transfer possession while title has already been transferred
when he purchased the firearm over the phone or internet. You answered
that in this situation I was required to collect use tax, implicitly
agreeing that no sales tax is due as there is no sale of the tangible
property.

Question 1: Doesn't CCR 1827 (b) (1) makes it clear that I do not have
to collect use tax as I am not the shipper or deliverer of the tangible
personal property into the district and I did not in any way participate
in making the initial sale or causing an order to be made with the out
of state firearms dealer?

Question 2: If CCR 1827 (b) (1) exempts me from having to collect use
tax on this transaction, isn't my $30 transfer fee untaxable as there is
no tangible personal property sold on an invoice for my transfer fee and
the California mandated DROS fee?
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  #2  
Old 11-07-2007, 8:13 PM
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Wes,

Excellent...Thank you.

The questions are exactly the ones we discussed. I am happy to hear the response to some and still not certian on others.

This should help everyone understand exactly what they are responsible for. I look forward to hearing the answer to Gene's questions as I believe he has the correct interpertation. As you know I don't believe you are responsible to collect tax use or sales on the transfer posed in Question #1 & #2.

Thanks again

Last edited by glockman19; 11-08-2007 at 9:20 PM..
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  #3  
Old 11-07-2007, 8:16 PM
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Wes
Thanks for validating my and other members points and feelings that these things weren't taxable events.

SO how do you go about refunding the tax you collected on the PPT's in the last few months ?

Just kidding.

Would you mind posting the name of the person that answered the letter and sent the reply ?

thanks

Last edited by SemiAutoSam; 11-07-2007 at 8:19 PM..
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  #4  
Old 11-07-2007, 8:23 PM
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The jury is still out on the retailer collection. Private transactions are clearly exempt.

If a customer wants his tax back, I gave it to the BOE and they can collect it back from them.
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  #5  
Old 11-08-2007, 12:06 AM
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since you are charging $30 for a service rendered isnt there tax on that?

and in order to make it a round number are you actually charging X + tax comes out to $30?

i think you are no more responsible for out of state purchase tax anymore than a ups man delivering packages from out of state

you are the delivery boy
it is the responsibility of the purchaser to pay the appropriate sales tax you are not required to be a got dang revenuer (sorry channeling uncle jesse)

and it doesn't seem like it is any of the transferor's buuisness what kind of super deal the person got for the item sounds like a privacy issue

the dmv charges tax on the sale price of the item not the blue book value
so untill they make a law that the purchace price is in the dros then it seems to me that the item was a gift as far as you are concerned

Last edited by bohoki; 11-08-2007 at 12:09 AM..
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  #6  
Old 11-08-2007, 1:49 AM
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i mentioned the same exact thing last month to a dealer and they chewed me out for it. not one but three dealers. I even told them straight out that they're ripping me off or do not know the law. To say the least I passed up on a winchester model 70 24" and ended up with a ruger. Still pretty upset about the whoe ordeal.

glad you found this out ten%! kudo's to you! I
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  #7  
Old 11-08-2007, 5:14 AM
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Default

Guys, we already have numerous threads where people try to use common sense instead of reading the tax law. It doesn't matter what you think or what you think the law says, you need to go read the tax code for yourself.

Remember, the BOE is still claiming I am the retailer when you order a firearm from another retailer out of state. We have yet to prove this wrong. Again, what you think means nothing compared to the tax code. If you want to quote tax code and say why you think the BOE's interpretation is wrong, that is fine. Otherwise, leave your common sense out of it because it doesn't apply to a tax code that was set up to make money.
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Old 11-08-2007, 6:19 AM
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Quote:
Originally Posted by tenpercentfirearms View Post
Guys, we already have numerous threads where people try to use common sense instead of reading the tax law. It doesn't matter what you think or what you think the law says, you need to go read the tax code for yourself.

Remember, the BOE is still claiming I am the retailer when you order a firearm from another retailer out of state. We have yet to prove this wrong. Again, what you think means nothing compared to the tax code. If you want to quote tax code and say why you think the BOE's interpretation is wrong, that is fine. Otherwise, leave your common sense out of it because it doesn't apply to a tax code that was set up to make money.

It's not just tax codes. I've been working with Federal and State laws and regulations for many years. One of the first things I learned was that logic and common sense will only get you in trouble when interpreting those laws or regulations.
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Old 11-08-2007, 7:09 AM
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Services are not subject to sales tax, only tangible goods. It's should say right there on the application for a CA Sellers Permit.
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Old 11-08-2007, 7:16 AM
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Quote:
Originally Posted by Stanze View Post
Services are not subject to sales tax, only tangible goods. It's should say right there on the application for a CA Sellers Permit.
Correct. Wes your $30 service would not need to be taxed since it would fall under non-taxable labor. The only time a service is taxable is when you are creating something new from something old. Example: buying old clothing refurbishing it and reselling it. Hence creating a new article from an old article.

http://www.boe.ca.gov/pdf/pub108.pdf




ETA:Well then again, it may fall under taxable since the buyer cannot do the paper work himself.

Last edited by DB2; 11-08-2007 at 7:30 AM..
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Old 11-08-2007, 9:38 AM
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Wes, thank you for posting those up and clearing up a lot of things.

Quote:
Originally Posted by xYourLocalAR15x View Post
i To say the least I passed up on a winchester model 70 24" and ended up with a ruger. Still pretty upset about the whoe ordeal.
Haha, no comment...
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Old 11-08-2007, 12:38 PM
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then i guess you should ask the person how much they paid for the item as to charge appropriate sales tax

i'm sure there are going to me some $1 firearms but its not your duty to verify
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Old 11-08-2007, 8:08 PM
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Quote:
Originally Posted by Black Majik View Post
Wes, thank you for posting those up and clearing up a lot of things.



Haha, no comment...




I shot it today... I hit the bulleyes once but that doesnt mean anything because the other rounds were rather all over the place.

at 100 yards I was able to group 2 shots almost on top of each other. I think that might have been luck though.
going to let my father have a try at it to really test it out ahha.
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Old 11-08-2007, 9:10 PM
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The CA Board of Equalization has an office in the Wedge International Tower on Louisiana St. in downtown Houston, Texas. (The company I work for has their corporate headquarters in the same building.)

With all the oil companies having offices there and so much equipment and supplies purchased in Texas for the Kern County oil fields they want to make sure that they get their pound of flesh.
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Old 07-05-2008, 8:16 AM
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Quote:
Originally Posted by DB2 View Post
Correct. Wes your $30 service would not need to be taxed since it would fall under non-taxable labor. The only time a service is taxable is when you are creating something new from something old. Example: buying old clothing refurbishing it and reselling it. Hence creating a new article from an old article.

http://www.boe.ca.gov/pdf/pub108.pdf




ETA:Well then again, it may fall under taxable since the buyer cannot do the paper work himself.
As far as the transfer fee on a gun I bring in from out of state, my transfer fee is taxable. The $50 I charge for a transfer is actually not labor. It is considered as part of the cost of your retail sale. You can read the publication you linked to and see that for yourself.

Quote:
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.
That is how the BOE gets away with claiming I have to collect sales tax on your out of state retail sale when I deliver it. They are claiming I am making the actual sale and so I have to collect the sales tax. When I add my $50 transfer fee to the firearm, that is part of your sales price. So it must be taxed.

Again, I don't agree with it because I never saw that money. I have no real way of knowing how much you paid unless there is a receipt with the transaction. However, it is what the BOE has instructed me to do and it isn't worth me being responsible for your sales tax to risk being wrong.
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