Sales Tax - who collects?

[Bruce]

If I buy a firearm from a dealer in another part of California and he ships it to my local dealer, can the shipping dealer charge me sales tax? My local dealer says that the dealer doing the DROS is the one who charges the tax, not the shipping dealer.

[kaligaran]

I purchased a firearm from an FFL in FL and had it shipped to an FFL here in CA.

I paid FL sales tax. This was about a year ago.

At the time I did this, I was told that sales tax must be collected at one end or the other. I chose FL b/c the sales tax was 3% less.

ETA: Sorry I didn't realize this was in the FFL forum. I am not an FFL.

[echoThreeOneSix]

I purchased a firearm from an FFL in FL and had it shipped to an FFL here in CA.

I paid FL sales tax. This was about a year ago.

At the time I did this, I was told that sales tax must be collected at one end or the other. I chose FL b/c the sales tax was 3% less.

ETA: Sorry I didn't realize this was in the FFL forum. I am not an FFL.

did you do that with a CA driver's license or were you a FL resident?

[ammoparadise]

If I buy a firearm from a dealer in another part of California and he ships it to my local dealer, can the shipping dealer charge me sales tax? My local dealer says that the dealer doing the DROS is the one who charges the tax, not the shipping dealer.

I actually asked this question to BOE and here's the response (in short the ORIGINAL IN-STATE DEALER IS RESPONSIBLE)

My Question to BOE (we are in Orange County)
We transfer a firearm from an in-state dealer for a customer in Orange County. If the dealer did not collect sales tax, are we liable to collect it before we facilitate the transfer of the firearm? Since the firearm was sold online, at which point in this transfer process is the sale technically taking place, and at which point (original dealer or transferring dealer) is sales tax collected? Who would be ultimately liable for collecting the sales tax?

Response
When the sale is from an in-state dealer, the in-state transferring dealer is not considered the retailer of the firearm and is instead merely providing a service. As such, the in-state (original) dealer who made the firearm sale is responsible to collect and remit the tax to the Board. Again, the sale does not technically take place until the customer receives the firearm or title transfers, whichever occurs first. However in this case, the original dealer, when engaged in business in this state, is deemed the retailer and has the duty to collect the tax on the invoice price of the firearm, plus the service fee, even if paid directly to the transferring dealer by the customer in addition to the Department of Justice fee if passed on to the customer.

RTC section 6007, provides, in part, 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.

Regulation 1706, Drop Shipments, Subdivision (b) states a drop shipment generally involves two separate sales. The true retailer contracts to sell tangible personal property to a consumer. The true retailer then contracts to purchase that property from a supplier and instructs that supplier to ship the property directly to the consumer. The supplier is a drop shipper. A drop shipper that is a retailer engaged in business in this state is reclassified as the retailer and is liable for tax as provided in this regulation. When more than two separate sales are involved, the person liable for the applicable tax as the drop shipper is the first person who is a retailer engaged in business in this state in the series of transactions beginning with the purchase by the true retailer.

The following annotation may provide additional guidance.
495.0843, “Deliveries by California Firearm Dealers for Out-of-State Retailers.” California residents order firearms from out-of-state retailers and the retailers ship the firearms to an authorized California firearm dealer for delivery to the customer. The California firearm dealer charges a fee to register each firearm in California.
When the California firearm dealer completes the registration paperwork and delivers a firearm to a California purchaser for an out-of-state retailer not registered with the Board as a retailer engaged in business in this state, it is presumed that the firearm dealer is the retailer of the firearm under the second paragraph of section 6007. In such a case, the firearm dealer would owe sales tax on the total amount of the retail sales price of the gun to the customer, including the Department of Justice fee if passed on to the customer, and including any service charge made by the firearm dealer.
If the firearm dealer establishes to the satisfaction of the Board that the out-of-state retailer was engaged in business in this state under section 6203, its deliveries for that retailer will not be considered taxable retail sales by the firearm dealer, even if the out-of-state retailer has not registered with the Board as a retailer engaged in business in this state. In such cases, as well as in situations in which the retailer is in fact registered as a retailer engaged in business in this state, the out-of-state retailer has a duty to collect the use tax under section 6203. The retailer should collect use tax on the invoice price of the firearm, plus the service fee, even if paid directly to the firearm dealer by the customer. Also, the Department of Justice fee passed onto the customer should be included in the measure of tax. 12/7/95. (Am. 99–2).
(Note: On and after January 1, 1999, the Department of Justice fee is not includible in the measure of tax, but all other charges remain subject to 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.
I hope this information is helpful. If you have any further questions regarding this or any other issue, please write or call our Customer Service Center at 1-(800) 400-7115. You may also visit our website at www.boe.ca.gov.

Cliffs: You really should go back up and read all of it if you have this question and are a dealer in CA.

[kaligaran]

did you do that with a CA driver's license or were you a FL resident?

I am a CA resident with a CA driver's license.

Hopefully ammoparadise's very detailed response gives you the info you want.

[kemasa]

If I buy a firearm from a dealer in another part of California and he ships it to my local dealer, can the shipping dealer charge me sales tax? My local dealer says that the dealer doing the DROS is the one who charges the tax, not the shipping dealer.

As said, the CA retailer is the one who has to pay the sales tax, whether they collect it is their choice, but they owe it. What many CA FFL don't realize is that if the ship a firearm to another CA FFL, they owe the sales tax on the transfer FFL's fee, even though they might not know what it is.

Your FFL is wrong. Only when the seller is outside of CA and does not have a presence in CA would the CA FFL doing the transfer be responsible for the sales tax.

I purchased a firearm from an FFL in FL and had it shipped to an FFL here in CA.

I paid FL sales tax. This was about a year ago.

At the time I did this, I was told that sales tax must be collected at one end or the other. I chose FL b/c the sales tax was 3% less.

This is incorrect. CA sales tax is owed on the total cost of the firearm, including shipping. Out of state sales tax should not be paid because it is basically a business to business sale. If that FFL gets audited, they will owe the sales tax, interest and penalties.

[kaligaran]

This is incorrect. CA sales tax is owed on the total cost of the firearm, including shipping. Out of state sales tax should not be paid because it is basically a business to business sale. If that FFL gets audited, they will owe the sales tax, interest and penalties.

Interesting.

So even though I purchased the firearm from an out of state FFL (paid that FFL directly), it's still considered a business to business sale just because I had it shipped to an FFL here?

That's not as expected. Oh well, this was a year or two ago so I'm not concerned. Just curious.

[kemasa]

Yes, it is still a business to business transaction and the BOE requires the FFL to pay the sales tax.

It is not the buyer's problem, but the FFL's problem.

[kaligaran]

Yes, it is still a business to business transaction and the BOE requires the FFL to pay the sales tax.

It is not the buyer's problem, but the FFL's problem.

Thanks for taking the time to answer.

[Fate]

CA sales tax is owed on the total cost of the firearm, including shipping.

Shipping is not taxable.

[halifax]

Shipping is not taxable.

If it's part of the total cost of goods, it is. Shipping, Credit Card fees, whatever costs it took to get the merchandise into your business are considered part of the retail price and are taxable.

[kemasa]

Shipping is not taxable.

If the item were to be sent DIRECTLY to the person, then shipping would not be taxable, but that is not the case for a firearm which is shipped to the FFL, even though the FFL is acting as the agent of the buyer.

Instead of just making statements, which happen to be false, and which could cause problems for people since they might actually believe you, perhaps you should look at the BOE codes and other material in which you would find that in this case shipping is actually subject to sales tax in certain cases. There are numerous references on this matter, such as with other items in which the item can be shipped directly to the person or to the retail location. If the item is shipped to the retail location, the shipping is subject to sales tax, whereas if it is shipped directly to the person, it is not.

[Fate]

If the item were to be sent DIRECTLY to the person, then shipping would not be taxable, but that is not the case for a firearm which is shipped to the FFL, even though the FFL is acting as the agent of the buyer.

Instead of just making statements, which happen to be false, and which could cause problems for people since they might actually believe you, perhaps you should look at the BOE codes and other material in which you would find that in this case shipping is actually subject to sales tax in certain cases. There are numerous references on this matter, such as with other items in which the item can be shipped directly to the person or to the retail location. If the item is shipped to the retail location, the shipping is subject to sales tax, whereas if it is shipped directly to the person, it is not.

Alrighty then. I stand corrected.