Posted: 3/14/2011 5:03:24 PM EDT
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My father and I run a small gunsmithing shop in Eastern TN. We are also a new FFL holder .
The question is this: We do a lot of transfers for individuals that buy guns from Gunbroker, Auction Arms, ect. My dad recently received a letter stating that we had to collect sales tax on these transfers even if the firearm was purchased out of state. I though that if the gun came into the shop paid for, and all we were doing was the transfer, we did not have to collect sales tax. Is this correct ? And, can someone provide me some proof so I can show dad ? Thanks, Scott |
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Collect sales tax on something you didnt sale???? That does not make since and it doesn't sound legal.
I've heard this from other gun shops. I asked a gun shop today and they said, "no". They won't collect the sales tax because nothing was sold by them. I really hope this isn't a policy of our new GOP gov. |
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I was asked this question via e-mail earlier today, too. Seems the TN Dept of Revenue is mounting a push to get
people to collect sales tax. The law requries that either sales or use tax must be paid on items purchased for use in TN. Most people have never heard of "use tax", and I don't know of anyone who's ever paid it, other than via sales tax returns for items used by a retail business (I've done so when I had a tax number, & also, some companies for which I worked did, too)––but not as a private individual. See this link to the TN Dept of Revenue's FAQ: http://www.tn.gov/revenue/faqs/salesandusefaq.htm#16 , specifically Q15, 16, & 17. Also, you can call them directly. They're actually very helpful in understanding what's what. They helped me straighten my sales tax situation up a couple of times when I'd inadvertently done something wrong. I've posed the question to a friend who works for TN Dept of Revenue; hopefully I'll get a better reply. David Tennessee Firearms Association TFA Forum |
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From what you are saying, it sounds like to me they were telling you that you have to collect sales tax on the transfers, and not on the total cost of the firearm. Maybe I'm misunderstanding?  I would have thought the same thing, but have had a couple of "dealers" tell me that it is tax on the purchase price. I asked one of those "dealers" how would she know the purchase price? She said: "the law says that if I cannot verify the purchase price, then I would collect the tax based on what I would have sold that gun for."
Needless to say, she has never done a transfer for me... and likely never will. FWIW - I've asked reps at Hero Gear and Guns 'n' Leather about collecting tax on transfers. Both reps said it is illegal for them to collect tax on something that someone else sold. Both of these gun shops are legit, honest, and I trust them 100%. |
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Go do a search in the WA HTF.....WA has been doing this since last summer-ish. They tax everything....
If I buy a KAC SR15 from Gun Gallery in FL for $2k and they ship it to my FFL in Cordova.....the Cordova FFL is supposed to take TN taxes on the $2k. Just like if I had bought it from a store in TN. I found out the hard way with a Springfield TRP that I traded for. The shop wanted to charge me "fair market value - $1400" I had to get the shipper to fax a note saying that it was a trade. If he hadn't done that, I would've been taxed on the $1400. This was last year, around August. I actually had another shop try and charge me taxes for a transfer that had happened over a year and half before. I did a transfer in May '09 and after I got back from Iraq in August '10, a letter stating I owed them a couple hundred dollars found it's way to me. I haven't been back to that shop since and they are a pretty big shop around here. Again, this is a fact and it is happening here. Don't think it can't happen in TN too. |
| "use tax" ok, on what value. Just doing a transfer does not mean it has been purchased. It is not the gun shops responsibility to interrogate gun owners how much they paid or if they paid. Is there a law that requires gun shops to collect a use tax or a law that requires a buyer to tell a gun shop how much it is worth. Just a letter from a state agency doesn't mean it is law. |
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It is on fair market value. You can't say you bought a SCAR for $50 bucks. If you cannot provide a receipt, then they will charge what it's fair marker value is worth.
It boggled my mind too. I haven't bought a gun from a store or done a transfer in WA since I found out about the change. You're supposed to pay taxes on anything you buy on the internet anyways. I believe you're supposed to declare it on your paperwork......most people don't. |
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Quoted: my question is, who gives the gun shops authority to ask? The state of TN? Specifically which law requires gun shops to ask? a 2 second search revealed: www.tennessee.gov/revenue/faqs/salesandusefaq.htm#15 Tenn. Code Ann. Section 67-6-101 et seq. |
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I still don't see a specific law that requires a gun shop to charge sales or use tax on the price of an item bought on the internet. The only money changing hands in the state of TN is the transfer.
It does say the buyer is responsible to pay it. Good luck with that. |
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Regardless if it does say that, I'm sure there is a way for the state or feds to ensure it is collected. I've told you, this is happening in WA right now. The gun shops have had people come through to ensure their compliance. Kinda like how certain online retailers will charge you tax even if you're not in their state.
I'm obviously not a legal scholar, but this is happening. Hopefully TN won't follow suit. |
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Also, you can call them directly. They're actually very helpful in understanding what's what. They helped me straighten
my sales tax situation up a couple of times when I'd inadvertently done something wrong. I've posed the question to a friend who works for TN Dept of Revenue; hopefully I'll get a better reply. My contact in the TN Dept of Revenue said to "call Ray Todd (615)253-0613 in Taxpayer Services. Hopefully he'll be able to clear that up for you." I'd recommend doing so, and getting an answer from the horse's...<ahem>...mouth. David Tennessee Firearms Association TFA Forum |
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I was asked this question via e-mail earlier today, too. Seems the TN Dept of Revenue is mounting a push to get people to collect sales tax. The law requries that either sales or use tax must be paid on items purchased for use in TN. Most people have never heard of "use tax", and I don't know of anyone who's ever paid it, other than via sales tax returns for items used by a retail business (I've done so when I had a tax number, & also, some companies for which I worked did, too)––but not as a private individual. I was also told this by a local FFL holder, Buford Tune @ APPS. Seems they're tired of losing tax revenue to on-line sales of ALL types & are going after it pretty GD hard. They told Buford that if he didn't show paperwork showing the tax had been paid by the buyer, HE was going to be held responsible for the tax amount. My last on-line purchase I was charged tax AND shipping fees. WTF? Where's the advantage of buying on-line then if you're going to be paying for both? 
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FWIW - I've asked reps at Hero Gear and Guns 'n' Leather about collecting tax on transfers. Both reps said it is illegal for them to collect tax on something that someone else sold. Both of these gun shops are legit, honest, and I trust them 100%. Have you asked them lately? I heard different last Thurs. night from a FFL holder. |
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I was asked this question via e-mail earlier today, too. Seems the TN Dept of Revenue is mounting a push to get people to collect sales tax. The law requries that either sales or use tax must be paid on items purchased for use in TN. Most people have never heard of "use tax", and I don't know of anyone who's ever paid it, other than via sales tax returns for items used by a retail business (I've done so when I had a tax number, & also, some companies for which I worked did, too)––but not as a private individual. I was also told this by a local FFL holder, Buford Tune @ APPS. Seems they're tired of losing tax revenue to on-line sales of ALL types & are going after it pretty GD hard. They told Buford that if he didn't show paperwork showing the tax had been paid by the buyer, HE was going to be held responsible for the tax amount. My last on-line purchase I was charged tax AND shipping fees. WTF? Where's the advantage of buying on-line then if you're going to be paying for both? Exactly. They've made it so expensive that unless you get an amazing deal, it's the same or slightly cheaper to buy local. I think it's some BS but on the other hand I can see the good of supporting local shops. As long as those shops aren't price gouging (which they typically do), I'm all for supporting them. |
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I was asked this question via e-mail earlier today, too. Seems the TN Dept of Revenue is mounting a push to get people to collect sales tax. The law requries that either sales or use tax must be paid on items purchased for use in TN. Most people have never heard of "use tax", and I don't know of anyone who's ever paid it, other than via sales tax returns for items used by a retail business (I've done so when I had a tax number, & also, some companies for which I worked did, too)––but not as a private individual. I was also told this by a local FFL holder, Buford Tune @ APPS. Seems they're tired of losing tax revenue to on-line sales of ALL types & are going after it pretty GD hard. They told Buford that if he didn't show paperwork showing the tax had been paid by the buyer, HE was going to be held responsible for the tax amount. My last on-line purchase I was charged tax AND shipping fees. WTF? Where's the advantage of buying on-line then if you're going to be paying for both? Exactly. They've made it so expensive that unless you get an amazing deal, it's the same or slightly cheaper to buy local. I think it's some BS but on the other hand I can see the good of supporting local shops. As long as those shops aren't price gouging (which they typically do), I'm all for supporting them. I'd say Tune is tired of losing sales revenue. This isn't new or unique to guns. Most (~35 or so) states are working on the "streamlined sales tax" that will require sellers to collect and remit sales tax to all participating states. Something to think about, the value of traded merchandise is not subject to tax as the dealer will later collect sales tax when the trade is sold. Also, purchases from a non-dealer have already been taxed and aren't usually subject to another round of tax (cars being an exception here). How is a dealer that is providing a transfer service (and nothing else) supposed to know what you paid? What line on the sales tax return does this go on––sales that didn't go through my register? I haven't looked at a sales tax return in the last few weeks, but I don't recall a place for this. I've seen the email from tics that came from Tune originally. It rings of sour grapes over lost sales. He does have a point on the tax, if you buy something from a merchant/dealer/etc and don't pay TN sales tax, you owe TN use tax when you bring it into TN. If you can prove you paid sales tax to another state, you only owe use tax on the difference. Since our total rate is close to the highest, you owe use tax on your GA outlet mall purchases too. My point is that dealers here can't know the taxable amount. That's why there is a consumer use tax form. Btw it's hard to type this much on a iPhone. Pls forgive any misspellings or grammatical goofs. |
| I have yet to receive any letter from the Dept. of Rev. on this issue. I see no problem with charging tax on the transfer as it is a service. I charge $20 for the tranfer and collect $10 for the good ole TBI for the phone call ($30 total). So, I have no problem collecting 9.5% sales tax (Clarksville) on $20. If I must collect tax on the item I will but if someone shows me a bill of sale stating they purchased their FG42 for $19.95 then so be it, the government gets their $1.90 on a gun thats worth $100,000+. |
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I have yet to receive any letter from the Dept. of Rev. on this issue. I see no problem with charging tax on the transfer as it is a service. I charge $20 for the tranfer and collect $10 for the good ole TBI for the phone call ($30 total). So, I have no problem collecting 9.5% sales tax (Clarksville) on $20. If I must collect tax on the item I will but if someone shows me a bill of sale stating they purchased their FG42 for $19.95 then so be it, the government gets their $1.90 on a gun thats worth $100,000+. The service isn't subject to sales tax. Why? Because it is a service. |
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I have yet to receive any letter from the Dept. of Rev. on this issue. Have you called them & asked about this? Lord knows the state gubbermint employee isn't the fastest moving thing in the world. As for the other question about how much to collect, they told Tune that they would go by MSRP if a price was not proven. The state will do a sales tax audit on a FFL & make them pay it if the FFL doesn't collect it. They also told Tune they would be accompanied with the BATFE for the audit as well. Idle threat? Who knows. Who wants to be the first test case for some power tripping bureaucrat? Step right up, the line forms to the right................... ––––––-> 
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I'd say Tune is tired of losing sales revenue. You're wrong as he's NOT a firearms dealer. He does have a FFL & does do transfers, but he's NOT a stocking dealer & doesn't sell guns per se. Not to mention he tells the truth. I've never been in his shop, so I don't know what he does/does not stock or sell. Having a FFL makes him a dealer––that's why he has the license. If he is not a firearms dealer, why is he registered with TN DOR and receiving sales tax updates on firearms? I also do not lie and find your last statement offensive. Whatever the TN DOR told him, it is NOT in the law. Maybe you've seen the full page ads in the Nashville paper regarding Amazon and sales tax? It's a similar situation that is not limited to firearms. Here are a couple of quotes from the TN Sales Tax Guide that is on the Dept of Revenue's website: Who is Liable for Sales Tax? [Tenn. Code Ann. Section s 67-6-501, 67-6-502] In Tennessee, the responsibility for sales tax rests on the dealer that provides the taxable transaction or service. Who is Liable for Use Tax? [Tenn. Code Ann. Section 67-6-203] When a user of tangible personal property does not pay sales tax to a dealer, the user becomes personally liable for the tax. This generally occurs when a user purchases articles from an out-of-state dealer not registered for Tennessee tax. Dealer is a general term used by the Department and does not refer to gun dealers specifically. Used here, a dealer is a seller that is required to register with the TN DOR and collect/remit sales tax. In an interstate where the seller is not located in TN or registered with the TN DOR, the seller is not a "dealer" for TN purposes. That is how Amazon gets around collecting taxes. The buyer still owes the tax, but now it is use tax and is based on the actual price paid––not retail. From page 22 of the sales tax guide: Most services are not subject to the sales tax. This doesn't cite TCA, but the list that follows does not include firearms transfers. No tangible property is sold, provided, or consumed in the service (firearms transfer), so it isn't taxable. |
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I've never been in his shop, so I don't know what he does/does not stock or sell. Having a FFL makes him a dealer––that's why he has the license. If he is not a firearms dealer, why is he registered with TN DOR and receiving sales tax updates on firearms? He does the occasional bulk sale of this or that such as some SP101's or J-frames. He also does some transfers. The vast majority of his time/business is training of security certifications of one sort or another. He also does the TN HCP class as well. But to walk in & say you wanted to buy something, it just isn't set up that way with his business. He also handles all the transfers for the FNRA banquets in Nashville at no charge to the customer or the FNRA. Not sure really what you're taking umbrage at............ |
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The buyer of the firearm is responsible for the USE part of the Sales & Use Tax. This has been common knowledge for years.
The dealer can be responsible for a tax on the transfer- the only services that are specifically exempt are Health & Beauty, so a transfer MAY be taxable. Just because the title has been shortened to "sales tax" doesn't mean its restricted to simple sales of items. People sell their services all the time. I would get a letter if someone told you it is taxable. I know the loal Knoxville office says they are NOT taxable- but what someone tells you over the phone won't help you if you're audited. |