Hertiage Auction Net Effective Rate

[Edwolf1963]

Won one lot last night on Hertiage and got the invoice this morning below. Doing the simple math on the final cost to me, makes the total fee percentage back to me at 33.8% :mad:

I haven't been able to be very aggressive in any bidding with Heritage since they sent out their tax advisories to many/many states including me in Illinois. Though I have not seen or read of any physical location they have here or built within the last year or so, I got the advisory note as did several others in other states. (Funny how they built physical locations in no less than 10 states all at once.) It is what it is and I have watched Hertiage since the advisory letter knowingly. Obviously with that knowledge also means that I've had to factor in over 30% now (give or take depending on amount of bid/how S&H factors in as a percentage) lower than I might otherwise vs other AHs at (approx.) 14% to 24% net effective buyer rates.

As a consignor, that's a consideration that weighs heavily and leaves me to feel I would never use them as that's just too big of a cut to incur. Whomever consigned this E94 SGC40 Davis took in $220 (assuming no consignor fees - which I doubt) on a card I thought should have easily topped out at $400+ given current market. Certainly as the buyer I'm happy I was able to catch it at this price (even with the net effective buyer rate) - but as both consignor and buyer of late, it still makes me wonder if the consignor in this case is pleased with that ROI .. and/or where I will go to sell or consign in the future.

[edjs]

Ed,

I swear, I was sitting with that card open, debating back and forth in my mind "should I bid, no, maybe, should I?" I watched the timer count down to zero, that was how much I liked that card. Congrat's.

Ed

[Edwolf1963]

Ed, thanks – yeah, great card/great price (even with the net effective buyer rate) I was really surprised, I threw that bid in some time ago and didn't expect it to last without being bumped. I was even prepared to take it higher within the range I thought it probably should go for. Perhaps it was lost on the radar of other very nice cards they had close over the last couple days? No complaints on that front – just hard to be competitive usually with Heritage given the net rate it will end up coming back on me.

Thanks for your note/feedback!

[frankbmd]

Ed, your HANER* is my EBP**:D

*Heritage Auction Net Effective Rate

**Effective Buyer's Premium

http://www.net54baseball.com/showthread.php?t=188256

[BobC]

In regards to one of the OP's comments in his opening post, Heritage didn't necessarily have to build a physical location in Illinois, or any other state, to suddenly become liable for collecting and remitting sales tax on sales within that particular state. Every state that imposes sales tax has their own unique rules that can cause that company to have what is known as "nexus" for the imposition of sales tax liability on sales within their state.

Physical presence in any state, under current law, is pretty much a mortal lock that the company is subject to sales tax laws but, not the sole factor. Depending on the state, having representatives/employees in-state, use of agents, simply having activity above a certain level, making deliveries in company vehicles or attending trade shows, amongst other things, can cause a company to have "nexus" for sales tax purposes in a particular state.

In Illinois in particular, there's actually a definition by which an out-of-state seller doing telemarketing into the state may be deemed to be a "retailer" for Illinois sales tax purposes and thereby subject to Illinois sales tax.

Sales tax liability and collection laws has been in a flux for years now as more states keep trying to increase their tax revenues in any way possible, especially if they can increase taxes on out-of-state companies. There's even a group known as the Multi-State Tax Compact which is working to make the sales/use tax laws more universal across all the states in the U.S. A good number of the states already belong to and agree with the Compact and it is ultimately thought that one day, all the states will be buy-in and be party to some form of this universal agreement. This would possibly include having all companies be liable for collecting and remitting sales tax in all states, even if there is no physical or other presence in these other states.

I know a lot of people look upon the sales tax as an extra cost and try to not pay it but, it is mandated and part of the laws in pretty much every state that if you don't get charged sales tax by the seller, you are required to voluntarily remit and file a use tax return in some form with the state you're in. As states become more and more aggressive in tax collection efforts in the future, don't be surprised when large, highly visible companies like Heritage end up charging sales tax to pretty much everybody. I think it is more a question of when, not if, we're all going to have to pay sales tax on major auction house winnings.

BobC

[bobbyw8469]

I know a lot of people look upon the sales tax as an extra cost and try to not pay it but, it is mandated and part of the laws in pretty much every state that if you don't get charged sales tax by the seller, you are required to voluntarily remit and file a use tax return in some form with the state you're in. As states become more and more aggressive in tax collection efforts in the future, don't be surprised when large, highly visible companies like Heritage end up charging sales tax to pretty much everybody. I think it is more a question of when, not if, we're all going to have to pay sales tax on major auction house winnings.


These are used items though. Technically, wasn't the sales tax paid when the items were purchased? Can the government tax something indefinitely?

[bcornell]

[REMOVED] This forum is done.

[Griffins]

These are used items though. Technically, wasn't the sales tax paid when the items were purchased? Can the government tax something indefinitely?


yup, every time a sale is made.


In California, at least, it's sales and USE tax. I've got a lot of photographer friends that have bought equipment via mail order in order to save the tax, only to be audited and have to remit the tax on that purchase, plus penalties and interest. An auditor told me they often look for insurance payouts on stolen gear and then audit the insured. I don't think CA is unique in this way.

In regards to Heritage, they have an office about 10 blocks from me, but I can't remit payment or pick up items there. Still, the mere presence means that I effectively have to pay about 30% above my bid. I just factor that in, and consequently don't win much from them.

Another local auction house just told me to give them a friends address out of state. I was shocked they would advocate blatant fraud (probably shouldn't have been) but there is no way it's worth it. Better to just suck it up and figure it into the bid.

[BobC]

As another poster said, it doesn't matter if this is simply the re-sale of a used item or not. Sales tax is basically collected on the sales of all tangible, personal property, which is exactly what a baseball card is, tangible, personal property. And as another poster added in, there are some states that have not yet cracked down on companies like Heritage to force them to collect sales tax on sales to customers within their respective states but, as I alluded to, those days may be ending sometime in the not too distant future. The poster who mentioned Use Tax in Californian is correct, there is a Use Tax provision in California, and that pretty much goes hand-in-hand with every state that has a sales tax provision. The idea is that if for whatever reason you buy something where the seller doesn't charge you sales tax, you are pretty much covered by the Use Tax part of that state's laws and supposed to voluntarily remit the use tax and file some kind of return yourself to report it.

This Use Tax and the actual rules and how they collect it can vary from state to state. In Ohio, where I'm from, they actually have a line on the Ohio individual income tax return where you are supposed to report and remit the Use Tax on items you purchased during the tax year, and pay it in with your income taxes. Nobody ever does it but, when you sign that return and send it in, or e-file it, you are saying, under threat of perjury, that you have nothing due. Illinois, where the OP is from, also has a somewhat similar Use Tax provision in their tax laws. In Illinois they have a 6.25% sales/use tax rate that the OP should calculate and pay in to the state on his Heritage winnings, if they didn't charge him sales tax themselves. There is a separate form he could do this with or, he could also calculate and remit the Use Tax as part of his individual Illinois income tax return, and that is just if he only incurs nominal use taxes owed for the entire year. In Illinois, once your Use Tax liability in a year hits $600, you're supposed to start remitting the Use Tax monthly.

Make no mistake, with all the electronic records and files that are now kept by auction houses and even Ebay, if the states want to start cracking down on Use Taxes, they easily can. Anyone who sells a lot on Ebay already knows that they will receive a 1099 showing their sales proceeds for the year once they reach $20,000 in sales, and 200 or more transactions, in a calendar year. Ebay has all of the seller's and buyer's addresses and data on hand and I imagine can pretty easily come up with how much any one of us bought off Ebay, and what, if any, sales tax we paid on those items we got. That 1099 info also goes right to the IRS so they know to look for that seller to include internet sales on their next tax return. There are a lot of people on here that sell on Ebay that don't meet those $20,000/200 transaction limits, and thus don't report their Ebay sales on their tax returns. But that could change tomorrow if the IRS just comes out and says something like make the 1099 reporting threshold $600 or more in annual sales and 1 or more transactions. Same thing in regard to sales/use taxes. The IRS doesn't need to wait for a new law to pass, they just need to change the threshold for reporting requirements and force Ebay and auction houses to turn over the information they need to come after more people. The only real reason they probably haven't done anything like that yet is because all the companies that would then have to report this and send out forms to the buyers and sellers have been telling Congress it is too much work and data for them to go through. And of course there is the added burden on the IRS and state taxing authorities themselves then to gather this information and then use it for income and sales/use tax purposes. That only works for so long though and eventually the government sees that the technology has gotten to the point where it isn't a burden anymore, and then we're all stuck with it.

BobC

[pokerplyr80]

If they do start cracking down maybe shows will become more popular again. Saving a 20% BP plus 8 or 9% on sales tax makes a big difference, especially on the bigger cards. Not to mention being able to see the card first and take it home the same day.

It's pretty hard to compete against collectors in states that don't have sales tax. That one extra bid they save at the end of an auction is often the difference between winning or losing a card. I've lost a few Memory Lane or Heritage auctions by one bid because once I factor in CA tax it's over my max.

[buymycards]

If you set up at card shows in Wisconsin, you are supposed to display a state sales tax permit and collect sales tax. I haven't heard of anyone actually trying to collect sales tax at a show, but I do have an up to date permit with me when I set up. My brother sets up at flea markets and he has seen Wis Dept of Revenue agents coming to flea markets and checking permits.

[sreader3]

I think this is probably true. In the meantime, however, Heritage is still not charging sales tax to buyers in some states while they collect taxes from buyers in TX, NY, CA, IL and everywhere else they have a place of business. If I'm in Wyoming, for example, I'm not getting socked with a 7-10% additional fee for the same item. Not so fair, is it?

I'm loathe to comment, but there are always two remedies to "unfairness": Make EVERYONE do X or make NO ONE do X. One could just as easily eradicate this particular perceived injustice by insisting that NY, CA and IL change their laws rather than insisting that the remaining states change theirs.

[glchen]

Is this true for any auction house, not just Heritage? REA charges residents sales tax if you live in New Jersey. Memory Lane charges sales tax for California residents. Huggins and Scott does the same if you live in Maryland. This "net effective rate" isn't specific to Heritage. All auction houses abide by the same rules. The only difference for Heritage is that they have offices in more states, and therefore have to charge tax to all of these states where they have a physical presence.

[bcornell]

[REMOVED] This forum is done.

[BobC]

Hi Bill,

It is not the IRS that deals with sales tax, that is a state issue solely, at least as of now until someone tries to enact a national sales tax. Still, I don't disagree with you that currently the states aren't coming after small sellers and dealers because like the IRS, they don't always have the resources and the time. However, as I pointed out, with all the technological and digital advances occurring these days, it may not be too long before they can.

You are correct that Ebay has fought, and won, about nor having to collect sales tax on all sales activity on their site. That just means that they can't make Ebay responsible overall for sales tax collection and remittance. If you ever notice, you'll occasionally see a seller on Ebay that notes residents of a certain state(s) has to also include sales tax on their auction winnings or purchases. On Ebay, there is still the idea that it is just a forum for sellers and therefore, it is up to the individual seller to have to determine if they are liable for the sales tax, and then charge, collect and remit it accordingly. If you take a look at Amazon, you'll see a different story. Amazon acts as more of the overall seller and controller of transactions on their site, unlike Ebay, it is a true online retailer. Amazon also has been arguing for years now with various states that they have no physical presence or "nexus" in many of them that would otherwise require that they charge, collect and remit sales taxes. And they have continued to keep losing those arguments as to what actually constitutes "physical presence" within a state. The Supreme Court originally settled the argument for sales tax as requiring a "physical presence" in a state before the internet took off and muddled the idea what exactly constitutes such "physical presence" in the internet age. Here is an article from a couple years back talking about some of the issues and how Congress is even getting involved.

http://www.ocregister.com/articles/sales-310334-tax-retailers.html

There is now something like 22 or 23 states that have required/forced Amazon to collect and remit sales taxes to them, and that number will only continue to go up so that eventually all online retailers like Amazon and Overstock are probably going to be collecting sales tax in every state that has one. For years, all the classic bricks and mortar retailers have been screaming about the unfair advantage Amazon and other online retailers have because they aren't forced to collect sales tax.

And at that point, all these online retailers will also start screaming, like the bricks and mortar retailers have been, that it is an unfair advantage that Ebay doesn't have to collect sales taxes in every state like they do. Now again, since Ebay operates differently than Amazon and other online retailers in supposedly only providing the forum for their sellers, they can get away with it and not themselves be directly liable for the sales taxes but, their sellers are still subject to sales tax laws. So what is there then to stop the states from going after Ebay, threatening them for being complicit in assisting their sellers to evade sales/use taxes, and using that leverage to force them to be the ones to collect and forward not the sales tax itself but, the data that is needed for those same states to then better police the collection and remittance of sales and use taxes? Ebay already has every buyer's name and address. How difficult do you think it would be for them to have to go back to all their customers and tell them that to maintain their accounts in the future they are now being forced to also sign and file a W-9 form giving their social security or FEIN number and business status to Ebay in order to continue buying on the site. And then, just like all the W-2s and 1099s these states already get from businesses across the country, they force Ebay to send them an electronic list of every customer, and the total of their purchases each year, that they can then cross reference against their tax records to make sure all those buyers properly remitted the Use Tax they were supposed to send in since they didn't get charged Sales Tax when they originally purchased their items on Ebay.

Oh yes, Ebay will still continue to lobby and fight this but, if you have all the bricks and mortar retailers, now along with all the online retailers, on the other side lobbying about EBay's unfair advantage, who do really think wins that battle of the pocket books?

And as for the argument that these are too small for the IRS to bother with, again, it is the states going after this not the IRS. The IRS has already forced Paypal to send them information on "large" Ebay sellers and others using Paypal to collect for their sales once they hit $20K in collections, and 200 or more transactions, in a single year. Here's the thing, that revenue being reported does not allow the IRS to easily determine what, if any, tax is due. The sellers need to file a return, including the costs of goods sold and all other operating expenses, to then determine what profit may have been earned, and then include that information, along with everything else a seller has tax-wise, on their federal tax return. Yes, that can be very involved and a lot of trouble and work for virtually nothing by the IRS. That is why they set the threshold at a minimum of $20K in collections, so they would only get information on larger retailers where there may actually be some tax due that it would make it worthwhile for the IRS to go after.

The same isn't true for sales/use tax though. That calculation is pretty simple, sales amount times the rate.....period! There are no offsetting costs of goods sold or other operating expenses. So if Ebay is made to send a list of what you bought off Ebay last year to your state so they could do a quick sales/use tax calculation and see if you paid any use tax, how difficult do you think that really is to police? The states aren't going to be the ones doing all the work, they'll make Ebay do it for them and provide them with the electronic files in a format they can work with.

And as for the states not doing this because it would be politically unfavorable, well that is simple also. All the states do is tell everyone they need money and that there are people currently who are not properly paying their taxes, in this case Use Taxes, and because of that we're either going to have to go after them or, raise everyone's taxes some other way, say through state income taxes. I know a lot of people buy things off Ebay but, do you really think they'll outnumber everyone else who doesn't want to see their state taxes raised in some way so others can continue to not pay the state Use Tax they are already supposed to be paying?

I'm not saying this is going to happen tomorrow, next week, next year or even within the next few years but, as time passes and technology continues to improve, it likely will happen at some point in the future.

As another poster noted, this could actually help to make shows and flea markets and such a more popular venue again. No electronic sales and records, cash transactions, etc. Time will tell...................

BobC

[Leon]

BobC
If all of that happens then people will navigate the waters just like they do today. Since there is no perfect system there will always be ways to exploit it if one wants to. And "exploit" doesn't always have to be a bad/illegal thing. Ask Warren Buffet about his tax rate..(as I am sure you know) :)

[Exhibitman]

There seems to be quite a bit of inaccurate information in this thread. Here is how it works on the ground:

Use tax and sales tax are the same thing: the difference is just over who sends the money to the state. Sales tax is transmitted ("remitted") by the seller, who either collects it from the buyer or absorbs it; use tax is remitted by the buyer.

I have a CA resellers permit, which requires me to collect and remit sales tax on in-state sales. When I list an item on eBay I list the sales tax rate for the state in the eBay listing tool. When a CA resident buys a card from me eBay adds the sales tax to the total the seller has to pay. I get the money. At the end of the year (I don't meet the volume threshold for quarterly returns and payments) I file a return electronically with the Board of Equalization where I list the amounts of CA and total sales I had and the utility on the state's web site calculates the tax. I then pay the tax that I collected or should have collected to the state.

There is also a line item on the sales tax return for use tax. I track the items I buy for my collection from AH's, eBay and the like as to which I have not paid sales tax, and I put them on a spreadsheet. At the end of the year when I do my sales tax return I pay the use tax. Is the system perfect? No. I probably miss some items over the year but I do my best to get it right.

Here's the thing everyone who is having kittens over paying the taxes on their card buys need to remember: if you scoff at the law and pay nothing and you are caught, you are lucky if you pay penalties and interest. A pure tax scofflaw can be referred out for criminal prosecution (Leona Helmsley, Wesley Snipes). That will really wreck your day. If you do your best to track and pay and you get audited and the auditor finds a mistake, you pay the tax and interest and penalties but the matter ends there. In the long run, it is better to pay the taxes you owe when you owe them and not sweat an extra several points on a freakin' baseball card, because if paying the taxes you owe on a card is a make or break financial issue for you, you need to step away from the bar and admit you have a problem.

[egbeachley]

Great posts on this thread, if taxes interest or concern you. They should.

So wouldn't the legal avoidance of sales taxes, averaging about 7% per state, be accomplished through making your card collecting hobby your card collecting business? That way you could get a tax exemption certificate and not pay taxes upon purchases. What would be the minimum amount of activity to be considered a business? Could you buy cards "for your personal collection" but also have them for sale at a high price to be considered your business. Is this what 707 cards does :-) ?

[BobC]

Eric,

That is a good question. Generally you do not pay sales tax on an item when you buy it as a component part of something else, or if you buy something strictly for resale.

For example, General Motors does not make every single part they use in putting together their cars. When they buy a part from an outside company the generally file what is known as a Tax Exemption Certificate with the party they are buying from indicating that they are not the end user of that part and are therefore exempt from having sales tax charged to them. Otherwise, every time they purchased something for their vehicles, they would have to tack on the additional sales tax they paid, and you know that sales tax cost would ultimately get included and added on to the purchase price that you or I pay when we buy one of their vehicles. Of course, at that time, you or I as the final, ultimate user of the car would also have to pay sales tax on the entire purchase price of the vehicle. If General Motors had to pay sales tax on every item they bought to put into a car that you and I ultimately buy, we would end up effectively paying sales tax on the sales tax that was charged to GM. That could make the cost of things increase dramatically so, the final idea and practice is that only the final, end consumer pays sales tax on the entire cost of an item. That way we don't end up paying sales tax on previously charged sales tax for components and things purchased as part of something we're buying. The same concept works when you buy something as a dealer or wholesaler. Since the dealer or wholesaler is not the end consumer, they would generally be exempt from sales tax collection.

Here's the kicker though. To be exempt from paying the sales tax in the first place, you normally have to fill out and provide the seller with a sales tax exemption certificate of some kind, acceptable to the taxing authority for the state(s) you are in. This may also require you to be registered for a vendor's license or other sale tax registration in that same state(s) to do this also, and will likely require you to then be filing some kind of sales tax return yourself. See, if you claim to be buying items for resale, you can get out of paying the sales tax to the seller but, when you then resell the item, now you are supposed to be subject to charging and collecting sales tax from the persons you're selling to. Unless they also give you an exemption certificate saying they aren't subject to sales tax either. If you sold something to someone who told you they were sales tax exempt, without getting the proper exemption certificate from the buyer, if you ever get questioned about it by some state's sales tax authority, you could end up being responsible for the sales tax (plus interest and penalties) for not having properly collected and remitted the sales tax like you were supposed to.

Again, these laws vary from state to state but, generally follow the same concepts and rules for the most part. And there are exceptions. This area of tax is too broad and vague to be able to give a simple, one answer covers all, response in a thread like this that will answer everyone's questions. Just be aware that sales and use taxes are out there and that they are not going away.

BobC

[dabigyankeeman]

Could someone give me a good explanation of USE tax - this is a tax on cards I BUY??? I am unfamiliar with this concept although I have seen snippets over the last few years of people mentioning something like this.

I am not a dealer, and my buys over a year arent super high but can add up some years. I dont understand the concept of paying tax in my state for something I buy from another state (if thats what this tax is). I have paid sales tax occassionally to sellers on Ebay who are in my state.

[packs]

I bought a card from an AH once for $30 and had to pay $15 in fees and shipping.

[BobC]

Arnie,

If you check the laws in the state you live in, you'll see that if there is a sales tax, it is generally referred to as a sales/use tax. It is basically the same thing with the difference being, who actually collects and pays the sales tax to the state. Sales tax is generally paid by the seller, and use tax by the buyer.

Typically a sales tax is collected when someone sells an item of tangible, personal property to the final end user/consumer. Just like when you walk into a Walmart and buy a pair of socks, they'll hit you with sales tax. Walmart has a physical presence and what they call "nexus" within that state because they have a store and employees there. In that case, the state requires Walmart to obtain a license/permit/whatever to sell within their state and to collect and remit the sales tax on items sold. If you go online instead and buy that pair of socks off the internet from some outfit that only has a store/warehouse on the other side of the country, chances are they don't have a physical presence in your state and, therefore, don't have the "nexus" in your state that requires them to charge and collect sales tax from you on that pair of socks, and to then send it to the state. This is where the counterpart of the sales tax laws, called use taxes, kicks in. Just because you didn't get charged sales tax on the socks you bought online doesn't mean the state isn't entitled to the sales tax on that purchase. In most states that have sales tax, they also have a use tax which basically requires the buyer to voluntarily calculate and pay in the sales tax to the state that they would have otherwise owed had they bought the socks at a regular store.

Sales and use tax laws are solely a state issue, not a federal tax issue. So the actual rules can vary from state to state, with different exemptions, rates and quirks. Each state will also then have their own mechanism for charging and collecting the use tax they are owed but, it is pretty much up to the purchaser to be honest and calculate and pay the tax when it is due. In reality, most individuals ignore this use tax requirement and assume it either doesn't apply to them or that they are entitled to some kind of exemption because they aren't a business or they only do it occasionally and/or the amounts are too small. To my knowledge, there really isn't an overall de minimus amount that exempts someone from owing use tax in most states. To check, just do an internet search for the state you live in and look at "use tax requirements" or "regulations". You should get a lot of links showing up to look at and better explain the use tax requirements for your particular state.

BobC

[BobC]

And Arnie,

Cards are no different than socks, they are pieces of tangible, personal property so yes, they are most likely subject to sales AND use taxes in the state you live in.

BobC

[Republicaninmass]

...and they take forever to ship

paid with paypal immediately on 5/15, shipped yesterday!

[Bicem]

They do take forever to ship compared to other AH's. Also Ground over Air is annoying.

[scooter729]

I once called Heritage to complain that it had been nearly two weeks since my instant payment was made, and my item hadn't shipped yet. They told me they could ship it that day, but it would be an extra $15 for the rush shipping. (It would still go out ground, but they would ship it that day.) Yeah, no.

It did end up shipping the same day, but not exactly great service for folks that spend a lot of money with them.

[Stonepony]

I wonder if they get irritated with the slow shipping to themselves on the items they bid on and won?

[Paul S]

I wonder if they get irritated with the slow shipping to themselves on the items they bid on and won?

LOL, this belongs in the existential section of the Sorta Needy Sounding AH thread. http://www.net54baseball.com/showthread.php?t=223047