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  #1  
Old 11-17-2018, 08:13 AM
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Default Auction Houses and Sales Tax

Does anyone know the rules on auctions and sales tax?

How many auction houses charge sales tax on top of the total hammer (including buyer's premium)?

Does anyone know the amount of sales tax that is supposed to be collected?
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Old 11-17-2018, 08:18 AM
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Unfortunately, universal answers. Simplest answer, it all depends on where you live and where the auction house has a presence.
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  #3  
Old 11-17-2018, 08:30 AM
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Quote:
Originally Posted by x2drich2000 View Post
Unfortunately, universal answers. Simplest answer, it all depends on where you live and where the auction house has a presence.
I believe, also: And how much business an AH does in your state (a nexus is created); and it’s not where you live, but the shipping address (which is usually where you live or work)
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Old 11-17-2018, 12:29 PM
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Quote:
Originally Posted by Fred View Post
Does anyone know the rules on auctions and sales tax?
Unless you have a seller's permit or whatever they are called, you are supposed to be paying (via your federal tax return) your applicable local sales tax on all purchases you make that are from outside your home state.

Quote:
How many auction houses charge sales tax on top of the total hammer (including buyer's premium)?
All charge sales tax for the states in which they have a physical presence. For most that is just one state but in Heritage's case it is many.

Quote:
Does anyone know the amount of sales tax that is supposed to be collected?
Varies from state to state but once the most recent legislation is enforced your rate will be based on your state's sales tax rate unless you have a seller's permit thingy which makes the purchase exempt from sales tax being charged.

I am not an expert on this. I have been interested and read several threads on here repeatedly to get an understanding. I hope that I do understand it now. Again, to point out this is not a new tax structure. For many years the IRS has been asking us to report sales tax on all of our out of state purchases but since apparently nobody is doing it they are now trying to make it official by placing the burden on larger sellers to simply collect it on our behalf.
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Old 11-18-2018, 02:44 PM
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I guess the bottom line is that I'll have to treat the tax as if it is part of the buyers premium. If the house has a 20% BP then figure another 8% to 10% (I think they tax shipping charges also). Cripes that's a huge chunk when you consider your bid. For every hundred dollars bid then count on $130 in payment (not including the shipping).
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Old 11-18-2018, 06:34 PM
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I won a card in a recent auction. The winning bid was $240. Fees, shipping and taxes were $87.30. Almost 37% in additional charges.
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Old 11-19-2018, 06:41 AM
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I won a card in a recent auction. The winning bid was $240. Fees, shipping and taxes were $87.30. Almost 37% in additional charges.
James
Hopefully you figured that into the equation. Kind of makes me think there has to be a better mousetrap.
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Old 11-19-2018, 06:16 PM
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Heritage is now/will be charging in all 50 states

This new sales tax requirement is due to a recent Supreme Court ruling that decided states can now require online retailers to collect sales tax on their behalf. We apologize for any inconvenience, this requirement will apply to all 50 states by the end of the year. Thank you for your email, please let us know if we can be of any further assistance.
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Old 11-19-2018, 06:44 PM
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Should the taxes added at the end of the auction also be considered part of the final realized price? I believe it should because, although it's not a direct part of the auction, it is a factor in determining the final cost.

I suppose it would be hard to know the final tax portion for all auctions because there are differences in the taxes collected for the different geographic locations.
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Old 11-19-2018, 07:17 PM
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Anyone familiar with how it works if you are shipping to a state like Oregon with no sales tax but from a state with tax?


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Old 11-19-2018, 07:19 PM
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shipping also plays a role in determining final cost. might as well add that to the price realized too.
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Old 11-19-2018, 08:22 PM
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Yeah sales tax on Heritage auctions are killer.
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Old 11-21-2018, 07:50 PM
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A lot of you guys responding are not accurate on what you're saying. Let me clear up a few inconsistencies/misstatements:


1. Sales and Use Taxes are exclusively state taxes, they are not paid to the IRS and the federal government. There is no national sales tax.

2. Sales and Use Taxes are no longer exclusively based on having a physical presence in a particular state. The recent Supreme Court case has now made it possible for states to use a measure based on the amount of sales activity a seller has in a particular state to make them subject to having to collect sales tax on sales to customers in that state. Here's a link to a good article explaining the impact.

http://www.forbes.com/sites/kpmg/201.../#13b815329d71

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.

4. It is not the IRS that has been asking for sales reports on out of state sales for many years. i think you are confusing this with the 1099-K reporting that is required by the IRS for reporting of online sales through sites and companies like Paypal. Those reports include ALL sales, not just out of state sales, and that is done so the IRS can collect income tax on the seller's business, not determine sales taxes due to a particular state.

5. Some states do ask for taxpayers that reside in their state to report and pay the sales tax they should have paid to sellers who reside outside their state and were not required to collect sales tax from them. When the buyer ends up paying the sales tax on such purchases themselves, it is referred to as a "use tax" not a sales tax. Technically the same thing at the same tax rates, only difference being who actually remits the tax to the state. Such states usually include the request to report and pay "use taxes" as part of their state income tax return filed by all state residents then. And this requirement varies from state to state.

6. As for factoring in sales or use tax as part of, or like an additional buyer's premium, I guess so if you want to look at it that way. However, the sales or use tax is not actually not part of the price. And as for whether or not it is charged on things like the buyer's premium or shipping charges, you'd have to look at the applicable sales and use tax laws for the state in which the purchaser resides to determine what exactly the sales or use tax is calculated on. Like pretty much everything else, this can vary from state to state.

7. The comment that Heritage is now charging sales tax in all 50 states is actually incorrect. There are five states that do not have a sales or use tax in place: Alaska, Delaware, Montana, New Hampshire & Oregon. If you live in one of those states and win something from Heritage which they then mail to you and also charge you sales tax on, I would immediately be on the phone asking what sales tax they are charging you and to whom they are sending the sales tax to.

8. Also, Heritage doesn't technically have to be collecting sales tax in all the other 45 states that do have sales and use tax laws in effect right now. Not every state has laws similar to what South Dakota has on their books relative to sales volume and activity that would cause them to be subject to collecting the tax from sales to residents of such states. And unless Heritage then had an actual physical presence in such states (employees, offices, inventory, assets), until those states re-write their sales and use tax laws to include language similar to what South Dakota enacted, Heritage technically isn't required to start collecting sales tax in such states yet. I would guess that since the Supreme Court ruling was made, it is considered an eventuality that all the other states will eventually pass similar legislation to South Dakota's that haven't done so already. Thus a firm the size and sales volume of Heritage will end up having to eventually start collecting sales tax on sales to residents of all 45 states that have such taxes. And rather than only starting to collect sales tax on those states that currently have the proper laws on their books, they probably figured it was easier and more equitable to just start collecting sales tax in all those states now. It is probably easier for them to just set up the system to start collecting the sales tax now for every state than to piecemeal it as each state changes their laws down the road.

9. Sales tax is NOT part of the final realized price of an item. If it were, then the state would try to collect sales tax on the sales tax. To better explain, say you live in a state that charges sales tax on an item bought from a certain out-of-state seller, but does not also charge sales tax on the shipping charge. If the seller lumps the shipping charge in as part of the final realized price, they would technically be required to charge and collect sales tax on that shipping cost also. To be able to exclude the shipping costs from sales tax, the seller would need to separately state and list such shipping costs so they could be excluded from sales tax.

10. If the buyer lives in a non-sales tax state such as Oregon, anything purchased by an Oregon resident from an out-of-state seller online and through the mail should not have any sales tax charged to them on the purchase, even if the seller is in a state that does have sales and use taxes on their books. Sales and use taxes are only charged based on where the sale takes place. In the case of online/catalog type sales, the buyer's resident state is where the sales are charged to as that is where the item being purchased is ultimately being shipped to. Now if that same Oregon resident were to instead of buying an item online and having it shipped to them go across the border into say Washington state and actually walk into the store or location where the seller is located and pick the item up there and walk out the door with it, in that case the purchaser would pay sales tax, but to the state of Washington. Doesn't matter what state you live in, when you buy an item in person at some store or location and take it with you right then, the sale is concluded at the point of purchase, which is wherever you are at at that time of purchase.

Hope this helps some of you to understand this a little better. it is a somewhat complicated issue and to determine exactly how it may effect you, you need to look at the specific sales and use tax laws for the state in which you reside.

BobC
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Old 11-21-2018, 08:25 PM
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Quote:
Originally Posted by BobC View Post

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.
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Old 11-21-2018, 08:31 PM
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11. Bottom line: taxes suck.
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Old 11-22-2018, 05:31 AM
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Quote:
Originally Posted by Fred View Post
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.
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Old 11-22-2018, 06:28 AM
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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
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Old 11-22-2018, 06:34 AM
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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)
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Old 11-22-2018, 06:41 AM
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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

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Old 11-22-2018, 08:43 AM
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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

Last edited by ricktmd; 11-22-2018 at 08:44 AM.
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Old 11-23-2018, 11:00 PM
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Originally Posted by Fred View Post
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.
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Old 11-23-2018, 11:01 PM
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11. Bottom line: taxes suck.
As they say in new Orleans.......true dat!!!
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Old 11-23-2018, 11:18 PM
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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.
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Old 11-23-2018, 11:52 PM
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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.
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Old 11-24-2018, 01:20 AM
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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.
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Old 11-24-2018, 01:40 AM
BobC BobC is offline
Bob C.
 
Join Date: Apr 2009
Location: Ohio
Posts: 3,275
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Originally Posted by ricktmd View Post
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!!!
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