When CA FFLs should collect SALES TAX from consumers.

[kemasa]

Since an in-state transfer is not required to go through a FFL under Federal law, no sales tax would be required as long as it is an occasional sale and not from a business, as well as the FFL not being involved in finding the buyer/seller or the price.

The issue of new/used (depending on your definition) does not matter, it is just who owns it. Is a firearm which was purchased new from a dealer and which has never been shot outside of the factory new or used? Some say new, others say new. Many feel that being fired is what makes a firearm used. There is no real term for a firearm which has been transferred, but never actually used.

[CifaldiPrecision]

Originally Posted by kemasa

Since an in-state transfer is not required to go through a FFL under Federal law, no sales tax would be required as long as it is an occasional sale and not from a business, as well as the FFL not being involved in finding the buyer/seller or the price.

The issue of new/used (depending on your definition) does not matter, it is just who owns it. Is a firearm which was purchased new from a dealer and which has never been shot outside of the factory new or used? Some say new, others say new. Many feel that being fired is what makes a firearm used. There is no real term for a firearm which has been transferred, but never actually used.

I was using new and used incorrectly. My meaning was it already had state sales tax paid on it. My understanding is an item once sales tax has been paid on it will not have it charged tax again. That was my meaning but it only clouded the situation.


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[kemasa]

It does not matter how many times an item has had sales tax collected on it, all that matters is how it is transaction and whether that transaction is subject to sales tax.

A FFL selling a consignment firearm has to collect sales tax on it. If the FFL buys a firearm from a customer and then sells it, sales tax has to be collected on it. A PPT is subject to sales tax if the FFL finds the buyer/seller or gets involved in the price.

If a person in a state which has no sales tax buys a firearm and moves to CA, then later sells it as a PPT, it would not be subject to sales tax unless the FFL gets involved finding the buyer/seller or with the price.

Oh, if a person out of state buys a firearm and sends it to a CA resident as a gift, it is not subject to CA sales tax.

[CifaldiPrecision]

No clue where I heard that info. But thanks kemasa.


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[kemasa]

Originally Posted by IronWorksTactical

No clue where I heard that info. But thanks kemasa.

Most likely from customers :-).

[CifaldiPrecision]

Wrong thread moved to the right one.


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[CifaldiPrecision]

Lol yeah tapatalk was smarter than me one that one.


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[kemasa]

I thought that I would attach the following response from the BOE which mentions collecting sales tax if the FFL gets involved in a PPT.

DPF09-06-134_noname.pdf

[M1NM]

Originally Posted by grammaton76

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.

[kemasa]

Declaring income is different than a FFL having to collect sales tax.

If he person did not pay anything for it, there is no sales tax.

[gemini1]

Question.
Buying an off roster pistol online, and will be sent to an FFL who will SSE the pistol. CA FFL quoted $100. for all fees including DROS. When I asked about any other fees/taxes, and FFL stated that was it, and said he'll leave the sales tax up to me to submit.
So how do I take care of the sales tax? Is the FFL going to do something to hide the transaction?

[halifax]

You pay it as Use tax on your 540 but, in fact, the CA dealer is responsible for it.

[kemasa]

As said, you can pay it, but the BOE requires that the FFL collect it. Even if you pay it, if they are audited, they might have a serious problem.

Depending on the FFL, you might do them a favor by informing them of their responsibility. It could ruin their day, week, month, year, decade, etc. if they BOE notices. Some FFLs might not like to be told (you can lead a horse to water ...).

[gemini1]

So if the FFL collects the sales tax, then I dont need to worry about a use tax?
Now since this is an FFL obligation, does that free them up from any penalties if I paid the use tax? what if I also failed to file a use tax?

[kemasa]

Correct, if the FFL collects the sales tax, as they are required to, you don't have to pay the use tax.

I doubt that the BOE would check to see if you paid, plus even if you paid, there is no proof that what you paid was for that item, instead of another item. Due to that and since they are required to pay the sales tax, I doubt that it would make any difference if you paid or not.

In theory, the BOE could go after you for tax evasion for failing to pay.

[emgee00]

Tagged

[jjjjeremy]

I'm reviving this thread because I didn't see an answer to my question in here, maybe things have changed since the last post? Anyway, my question is:

If I buy a gun online and pay sales tax to the seller in another state, do I have to pay sales tax AGAIN in California?

[kemasa]

If the seller in another state has a presence in CA, then they would collect CA sales tax and you would not pay CA sales tax again, although the seller would be responsible for collecting the sales tax on the transfer fee.

An out of state business should not collect their own state sales tax. While it gets confusing and while you pay, you are really not buying the firearm. It is really a business to business sale, which is exempt from sales tax. Then your local FFL is "selling" the firearm to you, which means it is subject to sales tax.

[ugimports]

Originally Posted by kemasa

If the seller in another state has a presence in CA, then they would collect CA sales tax and you would not pay CA sales tax again, although the seller would be responsible for collecting the sales tax on the transfer fee.

An out of state business should not collect their own state sales tax. While it gets confusing and while you pay, you are really not buying the firearm. It is really a business to business sale, which is exempt from sales tax. Then your local FFL is "selling" the firearm to you, which means it is subject to sales tax.

I think customers get screwed when they are physically in that state.. pay at the counter and then that dealer ships to CA. I doubt many POS systems are setup to exclude sales tax on firearms that are then shipping to another state.

[kemasa]

Originally Posted by ugimports

I think customers get screwed when they are physically in that state.. pay at the counter and then that dealer ships to CA. I doubt many POS systems are setup to exclude sales tax on firearms that are then shipping to another state.

I had a customer with that problem. It took some time, but got it resolved. One way to deal with it is to walk out and call them. The problem is that they don't get that it is no different if they walk in vs. calling or over the Internet. If they can do Internet sales, then they can do it, but you have to lead them at times.

[painkiller]

So how is sales tax calculated on a firearm custom made but being sold as a 'factory second'due to small imperfections?is it up to the maker to determine the value and include it in said gun?

[Gowking]

If there is no invoice provided the dealer will use fair market value unless the buyer can show otherwise. So in the example you describe it would behoove the buyer to insure that an invoice showing the discounted price is shipped with the firearm.

[painkiller]

Thank you mad river..I've had my eye on a custom ar for some time and the maker made me a bolt action bout 7 years ago and after many emails and phone calls he said a customer returned it due to an issue.they confirmed it wasn't to specs so if I want it it'll be discounted just to make a sale and not be stuck with it

[kemasa]

Originally Posted by painkiller

So how is sales tax calculated on a firearm custom made but being sold as a 'factory second'due to small imperfections?is it up to the maker to determine the value and include it in said gun?

It is what it sold for. It should be a real receipt/invoice though. Without a receipt/invoice which is real, you could have a problem.

[painkiller]

What worries me is the dealer having an issue with said invoice,because being a long time customer pre Boe involvement,the guy thought (a)he could sell it and (b)give a long time customer a good deal on a custom piece with some small flaw

[ugimports]

Originally Posted by painkiller

What worries me is the dealer having an issue with said invoice,because being a long time customer pre Boe involvement,the guy thought (a)he could sell it and (b)give a long time customer a good deal on a custom piece with some small flaw

I don't follow, sorry.

What invoice would the dealer have a problem with?
Who is a long time customer of who and what does "pre BOE involvement" mean?
The guy - who is this? and he could sell what?

I'm confused on who the manufacturer is, who the dealer is, and if there is any other 3rd party in this conversation. Can you be more specific somethin like:

I'm trying to buy an Aero Precision Blem. I'm a long time customer of Aero Precision and they are going to give it to me for $40. I will be transferring through Dealer A. Will he accept the invoice of $40 from Aero Precision?

--
or something like that.. I can't follow the part of your conversation I quoted above.

[Wyseguy]

I've read through this thread, but I want to make certain that what I do is right.
If a buyer in California wins an auction from an auction house (not Gunbroker) is the item subject to CA taxes?
I believe the items are on consignment.
In case anyone is familiar with the company, it's Morphy's Auctions.

[ugimports]

Yes subject to sales tax. If it's an auction house in CA they will collect it and you'll see it on bill of sale. If auction house outside of CA they usually will not.

I have received from Bonhams & Butterfields within CA and they collect sales tax (so I don't).

Consignment items are charged sales tax.

[dexter9]

I have a question regarding When CA FFLs should collect SALES TAX from consumers for In State Private Party Transfers between individuals that are not able to complete the transaction FTF. I could not find the answer to this situation here. This is the hypothetical situation:

* The Seller agrees to ship the firearm (long rifle in this case) to Buyers FFL
* Buyers FFL agrees to accept the firearm, provided the Seller can produce a copy of valid CA drivers license. Since the seller cannot be present at the time of DROS, Buyer FFL says he must charge a sales tax on the transaction though.

Question: Should the Buyer FFL doing the Transfer/DROS of the firearm be collecting sales tax for a private party sale he had no part in, just because the Seller could not be present and shipped the firearm to Buyer FFL? Seller in NorCal and Buyer in SoCal. Firearm CA Compliant registered in the State of CA


Thanks in advance for responses, but please only respond if you know 100% what the laws dictate. If I missed the thread that answers this question, please direct me to it.

[ugimports]

If the seller doesn't provide proof that this is an occasional private sale then the buyer's FFL is correct. There is a thread that quotes the BOE code, but I don't have it handy. It might even be earlier in this one.

[dexter9]

Thank you for the quick reply. I did recall seeing numerous times the exclusion of sales tax for private individuals making occasional sales, which this is.

What I could not find was that if the Seller is not present (in person) with the Buyer at time of DROS, then a Sales Tax is to be collected by the FFL. I thought and understood this was only due for In and Out of State Dealer Sales (or if an FFL introduced the parties/facilitated the transaction), or Private Party Out of State Sales.

[ugimports]

Your transaction isn't the same as a CA PPT. While using the same words it isn't the special case of PPT only $35 fee etc.. That being said, someone sending me an ID is not proof to me that this is a private individual making occasional sales.

How do I know he didn't win the firearm in a storage auction and this is part of him selling it off for profit? Without proof to back it up (documentation) is why I said I would have to charge sales tax.

This has nothing to do with the person being present with the buyer. I have had local customers were the seller/buyer knew each other. Seller dropped off firearm on Monday and filled out paperwork because he was leaving town, but his buddy came on Friday. It was still processed correctly as a California PPT - no sales tax, $35 fee.

BTW: the documentation I use which so far during at least an IRS audit was not an issue is here: http://www.ugimports.com/docs/UGI_Personal_Sale.pdf

I tell all my customers purchasing from in state private parties that I need this if the firearm is shipped to me or I will need to collect sales tax. The onus is on them to make sure I get it after I send the info to the seller initially. Some seller's haven't sent it. In my mind it's because they are not doing occasional sales. I had one specific seller say he didn't sign it because it wasn't true for his transaction. I did not ask what business he was in.

[dexter9]

Thanks again. I understand why FFL's need to cover themselves. Your Personal Sales Form provides for that. Not sure why more don't adopt something like that.

I would think if Sellers Original DROS doc showing Date/Name/Address providing Length of Sellers Ownership and corroborating Valid Drivers License should be sufficient proof of a true CA private party transaction.

[ugimports]

Originally Posted by dexter9

Thanks again. I understand why FFL's need to cover themselves. Your Personal Sales Form provides for that. Not sure why more don't adopt something like that.

I would think if Sellers Original DROS doc showing Date/Name/Address providing Length of Sellers Ownership and corroborating Valid Drivers License should be sufficient proof of a true CA private party transaction.

I must have missed it, but I never saw a reference to the original DROS document being sent with the firearm. Still, that just shows a transfer occurred at a dealer, but not the nature of the transaction.

Further expanding on the example I provided around a storage unit; a transaction would still occur between storage unit business -> storage unit winner which would produce a DROS. I don't know (since I haven't done one) if it shows up as a PPT or Dealer Sale. Just because the storage unit winner holds onto that for 2 years (or whatever length of time you referenced) before he decides to sell for profit wouldn't make me assume a copy of the DROS = private sale. The BOE may not even comprehend what the DROS document means if I were to tell them "see this means it's an occasional private sale". it's much more clear for my documentation purposes to use the letter since it makes the transaction pretty black and white.

[kemasa]

The only thing that documents that it is a private sale, an occasional sale and not from a business it a letter stating that. A person could buy a firearm by a PPT and then sell it for a profit numerous times and a copy of one DROS form would mean nothing. The person could be a FFL.

There is also the case of a C&R firearm being sold from out of state to a CA C&R FFL holder which can be exempt from sales tax. The BOE letter should be posted in this thread somewhere.

[kemasa]

BTW, sales tax issues are a pain. Some FFLs incorrectly think that a CA PPT is always exempt from sales tax, but that is not the case. Likewise, some FFLs think that if the firearm is shipped it is subject to sales tax, but that is not the case either. The answer is often "it depends".

Without documentation, it is assumed that it is subject to sales tax because getting it wrong by not collecting sales tax when it is due it expensive.

As a side note, it seems that many CA FFL retailers don't know that if they sell and ship a firearm to another CA FFL for transfer, as the CA retailer they owe the sales tax on the transfer fee, even if they don't know what it is.

So don't be surprised that all the issues are not known.

[foxtrotuniformlima]

Looking for a clarification -

If I buy a used shotgun from an individual in another state, does the CA FFL collect use tax ?

[ugimports]

Originally Posted by foxtrotuniformlima

Looking for a clarification -

If I buy a used shotgun from an individual in another state, does the CA FFL collect use tax ?

They collect sales tax, yes.

Used/new doesn't matter either.

[kemasa]

Originally Posted by foxtrotuniformlima

Looking for a clarification -

If I buy a used shotgun from an individual in another state, does the CA FFL collect use tax ?

It would be sales tax, not use tax, since it is going through a dealer. In general sales tax applies, but there are cases where it would not be subject to sales tax, such as if it was a C&R from a private party and an occasional sale and you have a C&R FFL.

[foxtrotuniformlima]

Not C&R -

Should I have the seller include a invoice of sorts to calculate the tax ?