I am working with a group that is getting their FFL and we have a question regarding the collecting of sales tax in Virginia for FFL transfers. If the FFL is strictly taking a gun (say someone bought it on GunBroker) and the customer is having it shipped to this FFL and the FFL just does the background check and transfer, would sales tax be charged on the transaction? Seems to me to be a service, not a sale and therefore would not be taxable. With that said, I can't get the Virginia Department of Tax to give me an answer, so wanted to reach out to this group to see if any dealers are charging sales tax for these transactions.
This FFL is not stocking or selling guns, just doing transfers. Thanks for any feedback.
I will add one more question, I assume the FFL would be required to pay sales tax on any consignments that might be brought in such as someone brings in a gun and says I will pay you 10% commission on the sale.
Virginia Sales Tax question for dealers
Re: Virginia Sales Tax question for dealers
No. Your business did not sell any product.TomT wrote: would sales tax be charged on the transaction?
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dorminWS
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Re: Virginia Sales Tax question for dealers
There doesn't necessarily have to be a sale.
Let me tell you a story:
From time to time, our company buys a new forklift truck. When it does, that forklift goes to the production department because (a) that's the most intense and critical use and needs a new forklift more, and (b) if it's bought for manufacturing, it's exempt from sales tax. The last new one then gets sent to the warehouse for use in distribution. But guess what? Every 3 years, the sales tax auditors show up, and they ask: "What did you do with your OLD forklift when you bought your new one?" When they get the answer that it got sent to the warehouse, they make us pay sales tax on the value of that forklift as of the time of the transfer. It isn't just a SALES tax; it is a SALES AND USE tax. And they take the position that when the lift is transferred from non-taxable manufacturing use to taxable distribution use, THAT IS A TAXABLE USE. Not exactly the same thing as your situation, but illustrative that there doesn't have to be a sale for there to be sales tax due. And they might stretch it to say that when you take possession of and use the gun in Virginia it is a taxable use.
Furthermore, my guess is the sales tax people will be around to audit your FFL sooner or later, and I'll bet you a dollar to a donut that they'll find a way to collect sales tax on that sale of a gun into Virginia. They may not tax the transfer by your local FFL (although it wouldn't surprise me), but if they don't, they'll tax (and collect a penalty and interest from) the transferring dealer, even if he is out of state. or perhaps they'll come after you because you live in Virginia and they can find you, and you're the one that was supposed to pay it in the end. I'd be willing to bet the only way that won't happen is if the FFL's records don't show the transaction as a transfer of property.
I don't know what the Virginia Department of Taxation's public information folks in Richmond would say, but I think there is no doubt what the auditors I have dealt with would do. They'd come after the money.
I think if I were the Virginia FFL, I'd maybe be concerned about the regulatory consequences of not having complied with all state and local laws, taxes and regulations. Isn't that a requirement for holding a federal FFL?
Let me tell you a story:
From time to time, our company buys a new forklift truck. When it does, that forklift goes to the production department because (a) that's the most intense and critical use and needs a new forklift more, and (b) if it's bought for manufacturing, it's exempt from sales tax. The last new one then gets sent to the warehouse for use in distribution. But guess what? Every 3 years, the sales tax auditors show up, and they ask: "What did you do with your OLD forklift when you bought your new one?" When they get the answer that it got sent to the warehouse, they make us pay sales tax on the value of that forklift as of the time of the transfer. It isn't just a SALES tax; it is a SALES AND USE tax. And they take the position that when the lift is transferred from non-taxable manufacturing use to taxable distribution use, THAT IS A TAXABLE USE. Not exactly the same thing as your situation, but illustrative that there doesn't have to be a sale for there to be sales tax due. And they might stretch it to say that when you take possession of and use the gun in Virginia it is a taxable use.
Furthermore, my guess is the sales tax people will be around to audit your FFL sooner or later, and I'll bet you a dollar to a donut that they'll find a way to collect sales tax on that sale of a gun into Virginia. They may not tax the transfer by your local FFL (although it wouldn't surprise me), but if they don't, they'll tax (and collect a penalty and interest from) the transferring dealer, even if he is out of state. or perhaps they'll come after you because you live in Virginia and they can find you, and you're the one that was supposed to pay it in the end. I'd be willing to bet the only way that won't happen is if the FFL's records don't show the transaction as a transfer of property.
I don't know what the Virginia Department of Taxation's public information folks in Richmond would say, but I think there is no doubt what the auditors I have dealt with would do. They'd come after the money.
I think if I were the Virginia FFL, I'd maybe be concerned about the regulatory consequences of not having complied with all state and local laws, taxes and regulations. Isn't that a requirement for holding a federal FFL?
"The Bill of Rights is what the people are entitled to against every government, and what no just government should refuse, or rest on inference." -Thomas Jefferson
Gun-crazy? Me? I'd say the gun-crazy ones are the ones that don’t HAVE one.
Gun-crazy? Me? I'd say the gun-crazy ones are the ones that don’t HAVE one.
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tinner666
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Re: Virginia Sales Tax question for dealers
Doubt it. As a service person, I do not and cannot charge my clients a sales tax for their home repairs. It would be a double taxation since I DO pay sales tax on the goods buy.
What I do pay is income tax on profits above the tax I already paid buying the material, and above the material and overhead costs.
On my retail side, when I'm selling sauces, I collect and pay the state the sales tax, minus my 'cut' which is the percentage the state deems fair payment for collecting the tax, keeping the records of sales, and sending the tax collected to them.
Take a security firm. They pay income tax based on the gross they collected, above the OH.
There! That should be clear as mud.
What I do pay is income tax on profits above the tax I already paid buying the material, and above the material and overhead costs.
On my retail side, when I'm selling sauces, I collect and pay the state the sales tax, minus my 'cut' which is the percentage the state deems fair payment for collecting the tax, keeping the records of sales, and sending the tax collected to them.
Take a security firm. They pay income tax based on the gross they collected, above the OH.
There! That should be clear as mud.
Re: Virginia Sales Tax question for dealers
Well I did finally get up with the Department of Taxation and their ruling, and they provided me with the Virginia Code, that transfer fees are taxable for Virginia Sales tax. Their reason is that the service being performed is for tangible personal property. Thanks for the responses, but it seems this is answered.