CA's New Tax Scheme and FFLs

[halifax]

CA is considering a new tax scheme that would shift the sales tax to a business tax. All CA businesses would be taxed on gross revenues and the state sales tax would be dropped (but not any local/district sales taxes). Services and labor will now be taxed via the businesses. This is usually called a Value Added Tax (VAT).


California Commission on the 21st Century Economy


I'm not numbers guy but wouldn't this just drive CA businesses that currently must compete with online businesses further into obscurity?

How is this going to work for or against your your gun shop?

[PatriotnMore]

I bet VAT tax is looking very appealing to CA.

[cackinthebox]

wouldn't dropping the sales tax increase the likely hood of someone buying something in state? but i guess that would only work if the VAT was applied to all states.

but aside from that, with no sales tax, i be much more likely to buy something in state from a brick and mortar store than buy on the internet out of state to avoid the tax, especially guns, sales tax usually being the tipping point that draws me to an out of state transfer.

[cackinthebox]

so the way it is now...lets say i pay a mechanic $5000 to rebuilt my engine (parts aside), the state gets nothing for $5000 worth of labor?

why can't we just have casinos

[pat038536]

companies that operate both inside and outside of California would be assessed on a portion of their total sales volumes, not just the business they do within the state.

Somehow I don't see a company like... Microsoft giving up any portion of its total sales volume for anything sold outside of CA. Its just not the state's business how much a company earns outside its borders.

[tenpercentfirearms]

If they just charge me for VAT, then I will just raise my prices and pass it on to you.

[halifax]

If they just charge me for VAT, then I will just raise my prices and pass it on to you.

Would you be adding VAT to out-of-state transfers?

[Rule .308]

"I'm from the government and I am here to help you" yeah right! This will not bode well for anybody in this state except the politicians. In light of todays current state of the economy you don't really think they are looking for ways to ease your tax burden do you? I own and operate an auto repair shop, my income is split 50/50 between parts and labor and now they want to tax labor too, my sales tax will double and just as 10% Wes pointed out, I am going to pass it along to you, I have to if I want to stay in business.

[blackberg]

so the way it is now...lets say i pay a mechanic $5000 to rebuilt my engine (parts aside), the state gets nothing for $5000 worth of labor?

why can't we just have casinos

state income tax...
-bb

[yzErnie]

If they just charge me for VAT, then I will just raise my prices and pass it on to you.

Based on my understanding of the proposal, Wes is absolutely correct. Any of us who own a business would have to do that to remain in business. It would depend on what the percentages they charge the business but in all honesty, I don't foresee the bottom line to the customer changing. It is just the states different way of saying the word TAX.

[yzErnie]

Would you be adding VAT to out-of-state transfers?

I would think that is dependant on the wording of the proposal. If they are going to charge a Cali business a VAT "tax" based only on profits then I would say it would need to be added to any sale.

[FK300]

http://taxprof.typepad.com/taxprof_blog/files/northwest_energetic_services_llc.pdf

These cases are based on "FEES" instead of a tax on profits and the state has lost in court and in appeals.