Tax on DROS

[crazy]

The FFL could have prevented this whole thread if he wrote on the receipt.

DROS $25.00
Dealer Fee $5.00

See above, but that's not my gripe.

[halifax]

I'm not expecting anything. I got one answer that seemed like the correct one, then things went in twelve directions. There is no one answer on this thread. I wanted to clarify what happened with my purchase to get the answer I am looking for.

This is your original post:

I was charged tax on the DROS for a stripped AR lower. I don't think this is correct. Anyone have an answer for me?

The answer to your OP was immediate and clear: The DROS is not taxable. What more did you want unless you were trolling for yet another "HANG THE SOB DEALER" frenzy. (Hint: If that is what you wanted, you should have posted in the General Gun Discussions forum NOT the FFL's Forum)

Did I respond to your reply about something not even remotely related to this discussion. No. Maybe you can share some of your wisdom and explain how your post contributes anything to the discussion. I didn't buy software and my lower didn't come with 20 hours of training. Neither did the DROS. I would normally ignore you, but not today.

Here's your lovely contribution.



Thanks for all your help.

My response was to these posts (one of which I quoted) which had already become part of the discussion:

Tax is also to be charged on FFL transfer fees according to the BOE even though it is just a service.

Ditto.
Tax is not to be charged on labor, services (other than utilities, as you are receiving a "product"), or fees....


...unless you are the State of California, then you can charge tax on criminal fines and call it a penalty assessment, and tax on vehicle registration and call it a licensing fee, and on underpayment of income tax withholdings and call it a surcharge

You asked a simple question and it was answered. What more was there to "discuss"? Be specific this time.

[Matt@EntrepriseArms]

Wow, where have I been? I think we need to start charging people sales tax on transfers asap! The BOE seems to have a hard one for firearms dealers lately. They have been trolling the gunshows big time.

[eltee]

OK, let me see if I get this right.

Gun from out of state store= 500.00
DROS = 25.00
FFL transfer fee = 50.00 (what FFL charges for his services)
Buyer pays tax on the $500.00 gun sale + the $50.00 service (FFL ) fee.A total of $550.00 is subject to tax based on county of transaction

PPT to PPT = no taxable amount
DROS fee = 35.00 (25.00 to Calif, 10.00 to FFL)
Buyer pays tax on the $10.00

No taxes for incidental fees such as "hand picked", shipping / handling, layaway charges, etc.

When dealer (FFL) pays his own taxes to the BOE, it will show on the return (for the transfers) no profit other than what the FFL charges for services. If the FFL is primarily a transfer dealer and not a stocking dealer, the taxes paid may look high in relation to the profit declared.

When dealer (FFL) pays his personal state and federal taxes, he can declare the taxes he paid to the BOE.

Do I have it right?

[FortCourageArmory]

Consignments sales are PPTs that are taxable events.
Walk-in PPTs are not usually taxable events.
Out-of-state transfers are taxable events.
That's the way I remember it.....

[halifax]

OK, let me see if I get this right.

Gun from out of state store= 500.00
DROS = 25.00
FFL transfer fee = 50.00 (what FFL charges for his services)
Buyer pays tax on the $500.00 gun sale + the $50.00 service (FFL ) fee.A total of $550.00 is subject to tax based on county of transaction

Correct

PPT to PPT = no taxable amount
DROS fee = 35.00 (25.00 to Calif, 10.00 to FFL)
Buyer pays tax on the $10.00

What FortCourageArmory said

No taxes for incidental fees such as "hand picked", shipping / handling, layaway charges, etc.

Difficult to answer since I haven't seen any clairification. Are those charges considered part of the "tangible goods" for which a measure of tax is due?

When dealer (FFL) pays his own taxes to the BOE, it will show on the return (for the transfers) no profit other than what the FFL charges for services. If the FFL is primarily a transfer dealer and not a stocking dealer, the taxes paid may look high in relation to the profit declared.

For sales tax purposes, I divide the total sales tax collected amount by the local sales tax rate to get the [BOE bogus] Gross Receipts and pay the sales tax on that.

When dealer (FFL) pays his personal state and federal taxes, he can declare the taxes he paid to the BOE.

Do I have it right?

I leave this one up to the accountant to sort out. Sorry.

Certainly the sales taxes paid are deductible but how much depends on which Gross Receipts you are using: Your real Gross Receipts or the BOE Bogus Gross Receipts. No double dipping. That's why I leave it to the accountant.

Don't take my responses as gospel. I've been wrong at least one other time in my life.

[halifax]

Wow, where have I been? I think we need to start charging people sales tax on transfers asap! The BOE seems to have a hard one for firearms dealers lately. They have been trolling the gunshows big time.

More info, please.

[kemasa]

OK, let me see if I get this right.

Gun from out of state store= 500.00
DROS = 25.00
FFL transfer fee = 50.00 (what FFL charges for his services)
Buyer pays tax on the $500.00 gun sale + the $50.00 service (FFL ) fee.A total of $550.00 is subject to tax based on county of transaction

Correct since it is from a business. If it comes from a person in which it is an occasional sale and the person does not have a business (and is willing to document it), then sales tax is not due.

PPT to PPT = no taxable amount
DROS fee = 35.00 (25.00 to Calif, 10.00 to FFL)
Buyer pays tax on the $10.00

Incorrect. Since the firearm is not taxable, there is no sales tax on the $10 FFL fee. This transaction is taxable if the FFL finds the buyer or negotiates the price, in which case tax is due on the FFL fee, in addition to the amount paid for the firearm (just like a consignment sale).

No taxes for incidental fees such as "hand picked", shipping / handling, layaway charges, etc.

No as far as I know, but I am not sure. If the shipping charge includes an amount which is profit, then that amount is taxable, if the firearm is taxable.

When dealer (FFL) pays his own taxes to the BOE, it will show on the return (for the transfers) no profit other than what the FFL charges for services. If the FFL is primarily a transfer dealer and not a stocking dealer, the taxes paid may look high in relation to the profit declared.

Profit is not stated in the sales tax return to the BOE, only sales. The numbers get a bit strange since they don't have a line for collecting tax on out of state purchases.

When dealer (FFL) pays his personal state and federal taxes, he can declare the taxes he paid to the BOE.

Yes, income tax is not paid on the sales tax amount collected.

Do I have it right?

Almost.

[Matt@EntrepriseArms]

More info, please.

The last few gunshows that we've attended as vendors (Crossroads of the West - Ontario & Costa Mesa, CA) the BOE has made a presence. The first time I noticed them was at the Costa Mesa show a few months ago. They had employees of the BOE go around to every single table in the show and ask to see your seller's permit. They had some sort of hand held device that they used to access their network and verify all your company's info, including if you were delinquent on your sales tax payments (which it turned out we were )

They also went at the out of state "dealers" who were selling stuff at their tables that did not have a seller's permit, and informed them they had to register and obtain one if they were going to be conducting business. There were a lot of pissed off guys, let me tell you.

When I attended the next gunshow in Ontario, as soon as I signed in with the gunshow organizers, they directed me to a table set up next to them staffed by the BOE. They had me fork over our sellers permit and they apparently recorded that we were there selling at that show.

I saw them walking around at the next gunshow after that, but they didn't have a registration table for the BOE that time.

I don't know if its a coincidence, but we later got his with a letter from the BOE stating that we owed a huge amount of money in deliquent sales taxes. The number that they stated was many tens of thousands of dollars more than we could possibly owe - I'm talking about an increase that was mind boggling.

I couldn't help but wonder if they didn't assume somehow that we raked in all sorts of sales at the shows or something and didn't report them, and assessed us with a number based on that. That is just supposition on my part, because at no point did they ever ask for our sales numbers or ask us how much inventory we brought to the shows - it just seemed like a coincidence.

[halifax]

The last few gunshows that we've attended as vendors (Crossroads of the West - Ontario & Costa Mesa, CA) the BOE has made a presence. The first time I noticed them was at the Costa Mesa show a few months ago. They had employees of the BOE go around to every single table in the show and ask to see your seller's permit. They had some sort of hand held device that they used to access their network and verify all your company's info, including if you were delinquent on your sales tax payments (which it turned out we were )

They also went at the out of state "dealers" who were selling stuff at their tables that did not have a seller's permit, and informed them they had to register and obtain one if they were going to be conducting business. There were a lot of pissed off guys, let me tell you.

When I attended the next gunshow in Ontario, as soon as I signed in with the gunshow organizers, they directed me to a table set up next to them staffed by the BOE. They had me fork over our sellers permit and they apparently recorded that we were there selling at that show.

I saw them walking around at the next gunshow after that, but they didn't have a registration table for the BOE that time.

I don't know if its a coincidence, but we later got his with a letter from the BOE stating that we owed a huge amount of money in deliquent sales taxes. The number that they stated was many tens of thousands of dollars more than we could possibly owe - I'm talking about an increase that was mind boggling.

I couldn't help but wonder if they didn't assume somehow that we raked in all sorts of sales at the shows or something and didn't report them, and assessed us with a number based on that. That is just supposition on my part, because at no point did they ever ask for our sales numbers or ask us how much inventory we brought to the shows - it just seemed like a coincidence.

Damn, that sucks. Good luck with that.

I have forgotten to bring my permit to shows in the past but never again.

[eltee]

OK, so tax is not collected from the buyer on the $10.00 "profit" an FFL makes on a PPT, but the FFL must declare the "profit" on his own taxes as income and pay taxes on that if I understand this all correctly. Therefore, on a PPT the FFL gets $10.00 for the transaction, and out of this must pay income tax?

[halifax]

OK, so tax is not collected from the buyer on the $10.00 "profit" an FFL makes on a PPT, but the FFL must declare the "profit" on his own taxes as income and pay taxes on that if I understand this all correctly. Therefore, on a PPT the FFL gets $10.00 for the transaction, and out of this must pay income tax?

Yessir

[Matt@EntrepriseArms]

The State is so hard up for money right now, they are chasing any source they can think of.

I had never been asked for a permit or had seen any BOE presence in the past 2/12 years I've been a vendor at gunshows, and according to guys who do the circuit for years, have never seen them before either.

I'll bet they will be hitting up the craft and scrapbooking shows next.

Damn, that sucks. Good luck with that.

I have forgotten to bring my permit to shows in the past but never again.