Yet Another Tax Thread

[tenpercentfirearms]

I got an answer, but it was an old answer.

Tim from Fort Courage e-mailed me asking me for reference because of a customer who disagreed. I sent him an old e-mail I got from the BOE back in December 2005. Check this out!

Question 1:
If a person in the state of California orders a firearm from me, do I charge them sales tax even if I am not the dealer than delivers the firearm? For example, I order a pistol for you, but you live in Sacramento, I would have to send you to a local Sacramento dealer. The local Sacramento dealer will hold onto the firearm while he/she processes your ten day waiting period/background check. That dealer can charge you a fee in addition to the state mandated $25 DROS fee. Should I collect the sales tax since the customer actually bought the firearm from me?

Response:
As the retailer of the firearm in this transaction, you would be responsible for collecting and remitting the sales tax on the retail sale of the firearm. The local dealer that is actually delivering the firearm to the purchaser should collect tax on any fees the local dealer charges to the customer, except for the DROS fee imposed by the Department of Justice.

So I have my get out of jail free e-mail dated 12/9/05.

I will still let you guys know when I get my latest request for information back. God help me if it says something different!

[TripleT]

Wes,

Thanks for keeping us updated (and confused). It'll be interesting to see how they respond, this week...

[tenpercentfirearms]

I am too tired to go over this tonight, but it appears kemasa was right. The stupid thing is I had a letter that said the opposite. I should have just kept it and not bothered.

To :
Mr. Wesley J. Morris
Date :
February 18, 2010

guns@tenpercentfirearms.com

[tenpercentfirearms]

continued...

www.boe.ca.gov.

To assist with sales and use tax return filing, the Board of Equalization offers a free, web-based, electronic filing service. It is easy to use and will provide an online record of all of your returns. To learn more and to register for BOE-file, please visit our Sales and Use Tax E-File Information Center.

Copy - Incoming E-mail

[halifax]

Can we just do as Kennedy did with Khrushchev and ignore the second communique since the second one makes no sense from a practical standpoint?

[kemasa]

It would be best to be wrong in this case :-).

They are wrong in their letter in that JSC does in fact take title of the firearm as listed in the bound book. The buyer can also buy the firearm, but not transfer the firearm to themself and instead sell it to someone else.

The real problem in this case is in knowing what the transfer dealer is going to charge. For example, I give a discount to members of firearms rights organizations, which I may not know until the person shows up. What if the transfer dealer refuses to say what they charge? You also have to know before you can complete the sale, which is not always possible since sometimes the buyer may change which FFL they want it shipped to. What proof is needed to know that you are actually charging the correct sales tax?

The issue is that the BOE can not force the transfer dealer to charge the sales tax as they are not the retailer, so they force who they can to be responsible for the tax.

One thing which is funny in this case is that it would be very difficult for the BOE to track what is due since they would have to look at the paperwork of the transfer dealer, then go back to the retailer.

[ugimports]

oo the plot thickens...

My original email to BOE (before 10%s, they must like him better because he got a response sooner)

I am a firearms dealer. When I am working at a gun show handling paperwork / background checks for customers am I required to collect sales tax on my transfer fee? The customers would be paying a separate firearms company for the price of the firearm along with CA Sales Tax. I would be invoicing them separate for the cost of the service fee to handle the transfer. The background check is not taxable ($25.00 State Mandated Fee). My transfer fee ranges from $40-$200. Is my transfer fee taxable at the time even though another CA company is collecting the sales tax on the price of the firearm already?

Thank You,

Answer from BOE:

To : Mr. UG Imports
Date : February 25, 2010

sales@ugimports.com

From : Juliet Nantege
Senior Tax Auditor, MIC: 44

Reference : F10-01-163 - 0129 - 0225

Subject : Fire arm Dealer 101238726

Thank you for your recent e-mail requesting our advice regarding the proper application of the California Sales & Use Tax Law with respect to fire arm dealers. Specifically, you want to know if a transfer fee that you charge customers is subject to tax. You indicate that the customers would be paying a separate firearms company for the firearm along with the California sales tax.

The answer given is intended to provide general information regarding the application of the tax and will not serve as a basis for relief of liability under Revenue and Taxation Code section 6596.

Based on Regulation 1501, “Service Enterprises Generally,” if the true object of the contract is the service per se, the transaction is not subject to tax even though some tangible personal property is transferred.

Annotation 295.1675.600, “Service Charge for Sale of Firearms,” states that 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 the owner of a firearm and the purchaser have negotiated the terms of the sale in advance, and they 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.

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.

In summary, based on the above citations and the information provided, whether or not the transfer fee that you charge the customers is subject to tax depends on whether or not you are considered the retailer (seller) making the sale of the firearm. If the owner of the firearm brings their firearm to you to find a buyer, you are considered the consignee and therefore the retailer (seller) liable for the tax. In such a case, your transfer fee would be subject to tax as part of the sale of the firearm. However, your transfer fee is not subject to tax if the owner of the firearm and the purchaser have negotiated the terms of the sale in advance and they only bring the firearm to you to meet the statutory requirements of the penal code.

To assist with sales and use tax return filing, the Board of Equalization offers a free, web-based, electronic filing service.* It is easy to use and will provide an online record of all of your returns.* To learn more and to register for BOE-file, please visit our Sales and Use Tax E-File Information Center.

I hope this information is helpful. If you have any further questions regarding this or any other issue, please write or call our Taxpayer Information Section at (800) 400-7115. You may also visit our website at www.boe.ca.gov.

Emphasis by me...so from the letter I got...it sounds like when I'm at a Gun Show when the dealer selling the firearm walks the paperwork over to me and "they only bring the firearm to [me] to meet the statutory requirements of the penal code." then the transfer fee is not taxed. This would also seem to mean that any transfer where I am just doing the DROS is also not subject to sales tax.

[kemasa]

That is the way it really should be, but can you really use that answer based on what they said. The next question would be if the seller is remote, but in CA, and you do the transfer, since then the same would apply as you are just doing the transfer, as they ask and you are not the retailer and are not involved with the price nor finding the buyer.

It would be nice to get a consistent answer :-).

[halifax]

oo the plot thickens...

My original email to BOE (before 10%s, they must like him better because he got a response sooner)


Answer from BOE:


Emphasis by me...so from the letter I got...it sounds like when I'm at a Gun Show when the dealer selling the firearm walks the paperwork over to me and "they only bring the firearm to [me] to meet the statutory requirements of the penal code." then the transfer fee is not taxed. This would also seem to mean that any transfer where I am just doing the DROS is also not subject to sales tax.

Maybe I should write and ask the same question and we could get yet another answer (But I kind of like this one)

[ugimports]

Maybe I should write and ask the same question and we could get yet another answer (But I kind of like this one)

Can't hurt...only take you a few minutes to write up the question. I submitted mine here: http://www.boe.ca.gov/info/email.html

It'll be a month or so before they get back to you though. Maybe after we get enough I'll go in to see a live person and say "If you guys don't know this how are we supposed to?"

[rbetts]

All of this is great fuel for the fire when we finally take down this BS tax code on dealers being the "retailers" for out of state transfers. Can't we start a class action lawsuit on this. . .to get clarification on this illegal tax ????