Auction Houses and Sales Tax

[Fred]

Originally Posted by BobC

3. The "seller's permit thingy" is more often than not called a sales tax exemption certificate. A buyer/customer who meets one of the allowable exceptions/reasons in the particular state they are in for not having to pay sales or use tax can fill one out and give it to the seller, and the seller doesn't have to charge and collect sales tax on that item from them then.

BobC,

Thank you for that information. If an auction house is collecting the sales tax then how do we know it's actually sending it to the state to which I reside? I know that's probably a pretty stupid question but adding an extra 6-10% to the bottom line could be easily accomplished.

Now about item #3. I think it's horseshit that people with resale permits can get by without paying sales tax because it puts them at an advantage (uneven playing field of sorts) with the rest of the bidders. To me, either everyone is subjected to it or nobody should have to pay it. This is an auction, yes, it's a sale but not a "traditional" sale.

[CW]

11. Bottom line: taxes suck.

[BobC]

Originally Posted by CW

11. Bottom line: taxes suck.

As they say in new Orleans.......true dat!!!

[itslarry]

Originally Posted by Fred

BobC,

Thank you for that information. If an auction house is collecting the sales tax then how do we know it's actually sending it to the state to which I reside? I know that's probably a pretty stupid question but adding an extra 6-10% to the bottom line could be easily accomplished.

Now about item #3. I think it's horseshit that people with resale permits can get by without paying sales tax because it puts them at an advantage (uneven playing field of sorts) with the rest of the bidders. To me, either everyone is subjected to it or nobody should have to pay it. This is an auction, yes, it's a sale but not a "traditional" sale.

Can you imagine how expensive everything would get if resellers had to pay sales tax and pass it on to end consumer?
Life isn't fair, get a permit.

[Republicaninmass]

Originally Posted by itslarry

Can you imagine how expensive everything would get if resellers had to pay sales tax and pass it on to end consumer?
Life isn't fair, get a permit.

An exemption cert is pretty much a guaranteed audit, so if your book are up to snuff, no reason not to have one. Unless you dont like headaches from hell

[Leon]

Originally Posted by Republicaninmass

An exemption cert is pretty much a guaranteed audit, so if your book are up to snuff, no reason not to have one. Unless you dont like headaches from hell

I had a sales tax certificate exemption for many years and never got audited. I suspect most others are the same way too.

And BobC above hits the nail on the head except for the reality that Sales TAX IS a cost (realized price or not) to everyone without an exemption and part of the equation of buying a card. If it isn't then where can I get my money back? It is a an increment of bidding, in essence. (at least to me)

[Republicaninmass]

Originally Posted by Leon

I had a sales tax certificate exemption for many years and never got audited. I suspect most others are the same way too.

And BobC above hits the nail on the head except for the reality that Sales TAX IS a cost (realized price or not) to everyone without an exemption and part of the equation of buying a card. If it isn't then where can I get my money back? It is a an increment of bidding, in essence. (at least to me)

Good to know

Sent from my SM-N950U using Tapatalk

[ricktmd]

Great information from Bob. I do want to add that having a resale permit is for people running a business selling baseball cards or at least a part time dealer. In California (and likely other states) the last thing you would ever want is an audit from The State Board Of Equalization if you have been buying stuff with a permit for your own collection. The State Board of Equalization is unforgiving and their audits the most comprehensive. They may also share their information with the IRS or Franchise Tax Board. It is better just to pay the tax and the point of sale and factor that into your bidding. While I do agree it gives the dealer with a permit an edge in the bidding process the dealer with the resale permit has to charge/pay tax either at the point of purchase or when they sell the item. So theoretically it evens out in the end if the dealers abide by the sales tax laws

[BobC]

Originally Posted by ricktmd

Great information from Bob. I do want to add that having a resale permit is for people running a business selling baseball cards or at least a part time dealer. In California (and likely other states) the last thing you would ever want is an audit from The State Board Of Equalization if you have been buying stuff with a permit for your own collection. The State Board of Equalization is unforgiving and their audits the most comprehensive. They may also share their information with the IRS or Franchise Tax Board. It is better just to pay the tax and the point of sale and factor that into your bidding. While I do agree it gives the dealer with a permit an edge in the bidding process the dealer with the resale permit has to charge/pay tax either at the point of purchase or when they sell the item. So theoretically it evens out in the end if the dealers abide by the sales tax laws

What Rick said.

Truth is, you don't want any state's sales tax division to come looking at you if possible. Some states can be worse than others, but all states are looking for revenue and if they suspect they can get some from you, they will try.

I have personally handled sales tax audits in both Ohio and New York state over the years, and advise many a client of sales and use tax rules and issues, including the completion of exemption certificates for single and multiple states. Sales tax rules and laws vary from state to state and believe me, an audit for sales tax in any state is not fun!!!

[BobC]

Originally Posted by Leon

I had a sales tax certificate exemption for many years and never got audited. I suspect most others are the same way too.

And BobC above hits the nail on the head except for the reality that Sales TAX IS a cost (realized price or not) to everyone without an exemption and part of the equation of buying a card. If it isn't then where can I get my money back? It is a an increment of bidding, in essence. (at least to me)

Leon, I've heard your thoughts on sales taxes before and don't disagree with you. i wasn't saying and never said sales taxes aren't an actual component cost to be factored into any purchase decision, I was merely stating that from a sales tax perspective they are not technically part of the "realized price" of an item because the final "realized price" is what the sales tax is computed and collected on.

You want to separately list and state the sales tax apart from the "realized price", otherwise a state could try to charge you sales tax on the sales tax. For example, if you went into a store and they simply charged you $1.00 for an item without showing a separate amount for sales tax, which they then reported to the state as a $0.93 sale with the remaining $0.07 for the sales tax, the state could technically come back and say the seller owes sales tax on the entire $1.00 "realized price", not just the $0.93 they reported as the sales amount. Because in that case the seller didn't separately break out the sales tax from the "realized price" of $1.00. That was the distinction I was tying to make for everyone so they don't keep saying the sales tax is part of the "realized price", as that implies that sales tax should be charged and collected on the sales tax they are saying is included in the "realized price".

You also noted that you were eligible for a sales tax exemption for many years and never got audited, which as I said is pretty much the norm. Glad to hear someone else chime in that having given someone a sales tax exemption certificate is not a guarantee they will get audited.

[BobC]

Originally Posted by Republicaninmass

An exemption cert is pretty much a guaranteed audit, so if your book are up to snuff, no reason not to have one. Unless you dont like headaches from hell

Giving a seller you are buying from a tax exemption certificate is not a guarantee that you will be audited. Remember, the exemption certificate is only given by the buyer to the seller. There is no copy of the exemption certificate that is filed or sent to the state(s) by either party. The state has no way of knowing you ever gave someone an exemption certificate, unless they ever have a cause or reason to audit and inspect the records of the party you're buying from. If the seller didn't charge you sales tax on a purchase because you gave them an exemption certificate, a state sales tax agent inspecting the seller's records will likely ask the seller to show proof as to why they didn't charge and collect sales tax from certain customers. They'll simply ask to see all the valid, signed exemption certificates they were given by those purchasers/customers they didn't charge sales tax to. This is the point where a state sales tax agent would see the name of someone who gave a sales tax exemption certificate to that seller. And yes, if they wanted to, the state agents could follow up and contact the various purchases about their exemption certificates as well. Chances are the state agents will not start contacting every purchaser that gave that seller an exemption certificate, especially if the amount of exempt sales is relatively small. State sales tax auditors operate like most everyone in real life and follow a cost-benefit pattern. If there wasn't a large amount of non-taxable sales reported for a particular buyer to begin with, they're not about to expend a large amount of time and resources to question it and actually contact that particular sales tax-exempt buyer or start looking at them as an audit prospect either. Sales tax agents are people also, and they go in to look at the seller they are assigned to review, get their job done and then get out and on to their next assignment as quick as they can. They are not necessarily there to also review and audit the purchasers/customers who claimed exemptions with that seller. Of course, that isn't to say that if they suspect or see something funny or suspicious that they wouldn't consider contacting a particular buyer to follow-up with them. It is just not very likely.

[BobC]

Originally Posted by itslarry

Can you imagine how expensive everything would get if resellers had to pay sales tax and pass it on to end consumer?
Life isn't fair, get a permit.

It would be disaster to our economy and make many everyday items ridiculously expense, and some things virtually un-affordable to the average person.

And to an earlier poster about how an auction sale is not a "traditional" sale, what difference does that make? It doesn't matter because the sales tax laws include auctions in the definition of a taxable sale. Are you suggesting that auction sales should be excluded from being subject to sales tax? That makes no sense, a sale is a sale, no matter how the parties end up arriving at the final price. And if you wanted to exempt such "non-traditional" sales from sales tax, can you imagine the ends that people and businesses would go to and try to sell everything in such a non-traditional way so they could avoid sales taxes and gain an advantage over their competitors? States would end up losing more revenue and eventually clamp down on it like they are now doing with online, out-of-state retailers.

[BobC]

Originally Posted by Fred

BobC,

Thank you for that information. If an auction house is collecting the sales tax then how do we know it's actually sending it to the state to which I reside? I know that's probably a pretty stupid question but adding an extra 6-10% to the bottom line could be easily accomplished.

Now about item #3. I think it's horseshit that people with resale permits can get by without paying sales tax because it puts them at an advantage (uneven playing field of sorts) with the rest of the bidders. To me, either everyone is subjected to it or nobody should have to pay it. This is an auction, yes, it's a sale but not a "traditional" sale.

Hate to say it, but once you pay the sales it is really out of your control whether or not the seller actually follows through and properly remits the sales tax to the state like they are supposed to. Suffice it to say that as the buyer, you have paid what you're supposed to and are of the hook. As for the seller that charges and collects sales tax and then purposely does not remit the tax and keeps it for themselves............I would not want to be them when the state(s) finds out they are just keeping the money. That can technically be considered theft as the seller is in a fiduciary capacity of collecting and remitting the sales tax on behalf of the state(s). That is not their money and they are basically stealing it from the citizens of the state(s) it was supposed to go to.

And as for the advantage that people who are eligible to have sales tax exemptions have in bidding against those that do not, I can't disagree with you, they do have an advantage to some degree. Remember though that the exemption is in place so we all don't get hit with unbelievable charges when we try to buy certain things, for example automobiles. All the car manufacturers end up buying parts, processing and services that go into their final, finished automobiles. Even when you buy from your local car dealer, don't forget the dealer is not the manufacturer and they must buy the cars themselves before reselling them to you. So if there was no sales tax exemption for sales of equipment or materials used in the manufacturing process, or from sales of finished products to wholesalers and re-sellers, can you imagine what the final cost of a new car would be if we add in all the sales taxes charged over and over again in the manufacturing and sales process? The final costs on a multitude of items we buy and use daily would be unbelievably higher because we would all be paying the accumulated sales tax from all the activities to develop and create those end products. Therefore, these exemptions are critical to our current economy and financial well-being.

However, I did say they only have an advantage to some degree because sales taxes at most are in the 7%-8%-9% range, depending on the state. if you are a collector going up against a dealer buying something to resell for a profit, he/she may not have to pay the sales tax like you would. But if they are truly buying that item with the intention of re-selling it to make a living, I don't think a 7%-8%-9% advantage would be enough of a margin for them to end up making any profit. Theoretically, the individual collector bidding against a dealer will end up paying more for an item than the dealer because despite the dealer not having to pay sales tax, the dealer will not be willing to pay full retail for the item because they need to make a profit off it, and they're probably going to need a 20%-50% discount, or more, to be able to sell and cover their costs and also make enough to live on.

The one group that does end up with somewhat of an advantage are those collectors who are also dealers/sellers, at least part of the time. And from what I've seen and heard of a lot of members on this board, that can be a fairly large number of people. If a collector occasionally sells cards to help fund their collecting, there's nothing stopping them from going out and getting a vendor's license in whatever state they are in and properly charging, collecting and remitting sales tax for sales they occasionally make. In that case they can properly claim an exemption from sales tax for any purchases they make. There is no law that says they have to then sell the items they purchase within any set amount time for it to still qualify for the sales tax exemption. So someone in that position could technically buy something they have no intention of selling anytime soon, but because they do make at least occasional sales and properly handle the sales tax, they can simply claim that item purchased is part of their inventory and it can sit there in their collection for pretty much as long as they want then.