*** Supreme Court rules online gun purchases are now taxable

[TXAZ]

While their ruling covers all transactions, I can think of 2 purchases I made online that saved $$$ in sales tax.

For higher $ guns, there was a very distinct advantage in buying online, paying $50 shipping and a $25 FFL fee.
That changes today, where the Supreme Court says that states can collect sales taxes on out of state purchases.

So the question posed here, do you think that's going to drive some of your purchases to local establishments?

Will that help local gun stores?

[lamarw]

It might give me a competitive advantage. I buy a few firearms off of GunBroker from in-State sellers. I have to pay the high tax of 9 to 10%, but my competitor bidders did not. I usually drive to pick-up and save FFL and shipping feels.

With this change, now my competitive bidders will also have to pay all three meaning sales tax, FFL fees, and shipping cost.

[Aguila Blanca]

Technically, on-line purchases were always taxable in states that have sales tax, but the Supreme Court had previously ruled that the sellers weren't responsible for collecting the tax, the buyers were responsible for self-reporting it and paying it. The problem was that nobody did that.

[BarryLee]

I generally buy on-line because what I want isn't available locally. So, while this might raise the overall purchase price it probably won't impact where I make the purchase at.

[Doyle]

Aquila is correct. Now, as a practical matter it is going to be hard for states to enforce a duty-to-collect on small out-of-state gun shops. I predict change is going to come very slowly for small merchants.

[mr bolo]

I only buy guns in the local gun store and sometimes I travel to other stores within a 100 miles or so to find the best condition / best prices

I notice when I use to order a firearm there is always something about it that you never see until you have it in your hands, one time they sent me a pistol with the wrong caliber marking stamped on it, but I still kept it because it was too much trouble to send it back.

so Im used to paying sales tax.

[Brian Pfleuger]

I would surmise that this will make little or no change in the short term, beyond a lot of confusion.

First, it would require that states actually make some effort to enforce the rule. Second, it will require extensive cooperation between states.

Some gun shop in FL sells and ships a gun to some shop in CO, just for example. Who enforces the requirement for the FL shop to collect tax? Is FL going to do it? Why do they care? They'll need some way on their sales tax filing to indicate how much tax was collected on behalf of other states. That means a complete rewrite of their procedures. Colorado has different sales tax rates in different localities. Who is responsible for figuring the correct rate? What agency is going to track down the buyer for not paying the sales tax, or the seller for not collecting it?

5 states do not even HAVE sales tax. What is their incentive to cooperate with other states to burden their businesses as tax enforcement agencies for other states?

The states are just making it harder, actually. They're all passing different rules. It seems that some will have no limits, others say one transaction and you must remit sales tax. Some will have a 100 transaction threshold, while others have a dollar amount. Who's going to keep track of that? Some mom and pop gun shop in Central PennsylTucky sells 5 guns to 5 different states. They're supposed to know which states require remittance for ONE transaction, which one is only for more than $1,000 in sales and which is only if there's more than 100 transactions?

[kmw1954]

Or will retailers/venders all just start charging sales tax as if the purchase were made in person?

Couple of examples, I live on a state line so I often shop in both states but when I shop out of state they do not ask me if I am a resident, they just charge me the local sales tax.

Same as when I go shop Cabela's. The Illinois store is much closer and easier access than the one here in Wisconsin yet the Illinois sales tax is higher I still shop the closer store. Also because there is a retail location in Wisconsin if I order thru the website I get to pay both shipping and sales tax even if it is not coming from Wisconsin.

Recently I looked at ordering from Midsouth Shooting because they had a special flat $5.00 shipping on all orders and they also had very good pricing on a couple powders I use and Winchester WSP 500k. Problem was by the time I added in Hazmat fees it ate up any savings I would have had and the shipping fees put me right back at the same costs as buying local and paying the sales tax.

[2ndsojourn]

In the past, I've bought handguns in PA & had them shipped to my local FFL in NJ. There was no tax charged because it was shipped out of state. And my local FFL didn't charge any tax since the gun was already paid for.

So who charges the tax now?

[Doyle]

Or will retailers/venders all just start charging sales tax as if the purchase were made in person?

Couple of examples, I live on a state line so I often shop in both states but when I shop out of state they do not ask me if I am a resident, they just charge me the local sales tax.

Couple of points. You need to understand that sales taxes are based on "destination". I.E. where does ownership change hands. In your first question, no - that would not satisfy the needs of the destination state. In your second example - it doesn't matter where you reside because ownership is changing place completely within the bounds of the retailer's state. That state becomes the "destination" even though you live somewhere else. The exception to that is in the case of certain "big ticket" items like automobiles. In those cases there is frequently explicit regulation that provides for exemption from sales tax in the "dealer" state so that the "resident" state can pick up the sales tax.

[kmw1954]

Doyle I completely understand you explanation.

As I was trying to point out, if I order from a retailer that has a physical presence in my state I pay sales tax. If the retailer does not have presence in the state then I do not get charged but as pointed out I am by law supposed to add all online sale that I did not pay sales tax on to my state income tax form.

So for many states that collect sales tax on internet sales the problem becomes as you put it "destination". The point I was trying to make is would the states change practice from "destination" to "point of sale" and the buyer does not determine "point of destination"? I believe this is what everyone is going to struggle with.

[RickB]

FFLs in Washington state have been uncompensated state employees for about ten years, required to collect taxes when they transfer guns purchased out of state.
I used to buy guns online to avoid the 10% tax, but now, it's worth it to me to handle a gun in advance, so I shop locally.

[Doyle]

would the states change practice from "destination" to "point of sale" and the buyer does not determine "point of destination"? I believe this is what everyone is going to struggle with.

I highly doubt that would happen unless Congress itself makes it so. In looking at this decision, it is kind of vague (like all Supreme Court decisions). It allows the ND law to stand. I think part of that decision was because the ND law made specific exclusion for "small retailers". If another state were to come along and enact a similar law that did not make any kind of exclusion for small retailers, a challenge to that law may indeed be successful.

I believe that this will finally put enough pressure on Congress to create some kind of level playing field. They especially need to do something about the more than 10,000 "local" taxing districts/rates across the country. Even the big retailers would have a hard time complying with that kind of reporting.

As a frame of reference - my previous employer was the largest vendor of Sales Tax software in the country. They provide the system that many of those large retailers use to report sales tax in brick and mortor stores.

[SonOfScubaDiver]

This really isn't all that complicated to undestand. I live in Indiana. Anything I buy online that comes to my house will have to include Indiana sales tax, regardless of what state it's being shipped from. The complicated part will be for the sellers, not the buyers. They will have to charge the appropriate sales tax based on where the purchase is being made from. Customer A is from Indiana, seller charges IN sales tax. Customer B is from Illinois, seller charges IL sales tax, and so on. Businesses wanting to have an online presence will have to invest in accounting and tax software to know how much to charge and be able to remit the collected revenue to each state. What Congress will probably have to do is set a minimum yearly sales figure for the new rules to apply, or many small companies will be forced out of the online marketplace. There's also talk of new companies sprouting up to handle all the collecti ng and whatnot for online retailers. Businesses will figure out how to navigate this ruling, one way or another.

[Doyle]

Diver, it is slightly more complicated than that. As I stated above, there are more than 10,000 different taxing jurisdictions/rates in the US - not just the 45 states that have sales tax. Frequently, the difference between one tax rate and another is simply being on a different side of the street. Then, you further complicate matters in a state like LA where you have to report separately to each Parish (LA equivalent of a county). Plus, within each state there is a myriad of exemptions which must be navigated.

Let me give you just one example of an exemption wrinkle. In Florida, most groceries are exempt from sales tax. Snack items are not exempt. If a person goes into a grocery store and buys a box of breakfast bars, that sale will be exempt. However, if that same person were to go into the convenience store next door and buy a single breakfast bar off the rack, that sale would be taxable. The exact same item can be either taxed or exempt simply depending on how it is packaged.

If states don't bypass this idiocy for online retailers, they will never be successful at compliance.

[SonOfScubaDiver]

There are companies, like Amazon, that navigate such differences. Granted, they've got the resources to do it in-house. This is why there's talk about Congress exempting companies with less than X amount in onlines sales. This is also why there's talk about companies sprouting up that offer such a service to companies that aren't big enough to develop their own solutions for compliance. In other words, Congress could offer some relief for small online retailers, or software developers could devise a program companies could buy to handle the different tax structures, or companies could offer it as a service.

Yes, there is a mish mash of tax schemes that can vary from state to state, county to county, and even city to city. But that doesn't mean that all that information cannot be coded into a program that charges the appropriate tax amount (based on the buyer's address or even the address of the card being used to make the purchase) and also informs the retailer of how much to remit to the correspo nding tax authorities.

I think we'll see a mix of solutions for retailers to comply with the ruling, but I do think it will definitely result in increased sales for local brick and mortar retailers, like gun shops.

[kmw1954]

So software developers could come up with a program which businesses would have to buy, support, trouble shoot and just plain maintain and keep up to date. Good solution. Let's add another bureaucratic layer to business that is not FREE in more ways than one.

Then if an error occurs can the new small business be held for tax fraud? Tax evasion? Non-compliance?

Also if we are to exempt one but not another then who is to decide. Besides the fact that sales tax is under the control of each state, the Federal gov't. has no control or input.

[SonOfScubaDiver]

Look at it this way. How complicated is federal tax code? Pretty much about as complicated as it can get. There are rules for individuals, companies, corporations, basically anything and everone that generates income has to comply with the rules that pertain to how they earn that money. There are companies, like Turbo Tax, that have managed to put all those rules and rates into a suite of programs that help us file our income taxes. These programs work and work well.

There's no reason why the same idea couldn't apply to complying with all the sales tax laws. Obviously, it wouldn't be as cheap as TT, but it wouldn't necessarily be cost prohibitive either. They're going to have to come up with something like that or lots and lots of companies are going to go out of business.

I think complying with this ruling will prove to be difficult, especially for small online retailers. I've thought about selling amateur radio equipment through my own webstore, and I would have to get some sort of program or service to comply with this ruling. There's no way I could do it otherwise.

[ballardw]

My actual concern is that I might get hit with both the seller's regional sales tax AND my local sales tax.

And since some vendors are in areas that already deal with state and municipal, of not state, county and municipal sales taxes...

It looks like the question may no longer be the "surprise" shipping costs that sometimes happen with online stores but the surprise total sales tax bill.

[TruthTellers]

I may go ahead and buy a few guns I had on my list that were over $300, but below that, I was gonna have my local guys order for me because their transfer fee is so high.

It def hurts me on guns and gun related stuff because that was about all I ordered online. Anything else I ordered through Walmart or Amazon and they already collect sales tax.

[kozak6]

Eh, it depends.

The local selection of firearms is poor outside of the big brands, and I don't want to spend the whole day on the phone trying to track something down. If I want to buy something specific, interesting or niche, I will probably have to buy it online regardless.

From there, local prices are highly variable. Even well after the panic was over, one local gunshop had all kinds of great stuff at panic prices, several hundred dollars over MSRP. In that case, even with ~$50 shipping and transfer, I'd still save hundreds of dollars buying online. But that's an extreme case.

I think that, generally speaking, it doesn't level the playing field much. I'd probably have to order online anyways, and local prices+tax are still generally higher than online+$50 shipping&transfer+tax anyways.

[RETG]

I have read that this is for STATE sales tax collection and not for county, city collections of sales tax. Not sure, and have not seen any definite statement by someone who actually knows for sure.

If it is ONLY state sales tax then it is not that hard for any retailer to figure out the amount. However, if it includes the small local add on taxes, that is next to impossible.

Here's an example, that I had with a sales tax attached to a leased vehicle.
When I move to SE Utah, my mailing address was the nearest city. That city had an additional (approx.) 2% sale tax added to the state sales tax. However, I did NOT live in that city, I lived in the county, and was not subjected to that tax, unless I drove into the city to make a purchase.

However, GMAC, like most companies, based my sales tax on my mailing address. (I currently have a mailing address in ID that has a city that I don't live in so it is not uncommon.)

It took a few calls to GMAC to straighten it out and eventually they dropped the extra 2% on the lease payment. However, any item ordered via the internet was taxed at the rate of the city in my address; not actually where I lived. Usually it was a small amount now worth while calling about.

That is the problem, it is not state sales taxes, it is all the incidental add on taxes by all the different taxing authorities in a state.

It will be interesting to see how this works out.

This really needs to be addressed by our do-nothing congress but I'm sure they will do exactly what they are good at doing....NOTHING.

[kmw1954]

How about this.

Freedom Ammunitions/ X-Treme just filed for Chapter 11 reorganization. How is this development going to help them reorganize if they now have to add new employees or outside company to manage this tax collection effort? Raise the cost of the product to cover operating expense and then add on a sales tax? I'm sure that will boost their sales!

[TXAZ]

kmw,
Any small company that is required to collect sales tax (and not all necessarily will) will likely use a service that will manage that tax for them for a small fee I'm guessing OM 1%.
Effectively, the 5-8% bonus (less shipping costs) online buyers have been getting is likely going away, excepting companies that move to non taxing states.

As for Freedom, my understanding is Freedom started up during an Obama-induced panic buying boom and wasn't ready for the reduction in sales that followed with an ammo friendly president. Their expenses were likely higher than established competitors and couldn't stay in the black on lower volume and mounting pricing pressure ......

My guess is they're not going to survive another year with or without reorg, and it has nothing to do with tax collection.

[Brian Pfleuger]

Originally Posted by TXAZ

excepting companies that move to non taxing states.

It matters where the BUYER is, not the company. The company is expected to collect sales tax for the buyer's state.

In the short term, this particular law does only apply to larger retailers... but the Slippery Slope will apply and the states, especially NY, CA, NJ... and the other Tax and Spend states, will want every last penny. Sorry, I keep forgetting, Slippery Slope doesn't exist anymore... it's "Creeping Incrementalism" now.

Originally Posted by TruthTellers

Anything else I ordered through Walmart or Amazon and they already collect sales tax.

Unless you're in the same state as Amazon or one of their warehouses, they don't collect sales tax. Walmart does, because they're EVERYWHERE.