State Taxes Deductibility

[Yoda]

This will be obvious to all those who are knowledgeable about our outdated and confusing tax code. I went to see my accountant for preparation of my 1040 and received some unexpected and welcome news. As many might recall, I have waged an unsuccessful battle against paying state income tax to AHs on charges imposed where I am not resident, ie. any state but Florida. This has been principally directed towards one predominant AH in Texas. i have been stonewalled at every turn.

Anyhow, I learned that I can deduct state taxes as part of acquisition cost, which I had not realized prior. This should save me some tax dollars...most welcome.

I also have to wonder if these taxes paid in the past have gone into an escrow account and sent to Florida or ended up in general operating funds.

[D. Bergin]

You mean "Sales Tax" I assume?

[Leon]

RE: sales tax. I am sure he does. I always have included it in my cost basis, along with shipping. I use my landed cost for my valuations.

and a card that was a BST purchase a few years back...
.

[Yoda]

Leon, sure, I meant sales tax. Just got a little excited about the possibility of saving a few bucks and mad at myself for not recognizing their deductibility sooner.
Florida does indeed impose a 6% sales tax but, of course, nothing for out of state transactions, as they shouldn't. The AH in question has an office here in Palm Beach, but that shouldn't matter since the point of sale has been in Texas.

And I sure hope that Florida received all the sales tax I have been charged over many years.

[D. Bergin]

As of a couple years ago or so, point of sale doesn't much matter anymore for a company the size of Heritage.

[BobC]

Originally Posted by D. Bergin

As of a couple years ago or so, point of sale doesn't much matter anymore for a company the size of Heritage.

Dave,

Point of sale absolutely matters, especially when it comes to sales taxes, and is generally considered to be where the transfer of possession/ownership actually takes place. When you walk into your local store to buy something, you take possession of it right then and there, and that is your point of sale. But when you buy something via mail order or online, it doesn't become yours where you take possession of it till it is actually delivered to you and you open the mail and have the item in hand.

This is exactly why having delivery of Ebay sales confirmed is such a big deal. A seller technically retains ownership and responsibility for an item until it is actually delivered to a buyer. And that is pretty much the general rule for ALL domestic US sales.

[BobC]

Originally Posted by Yoda

Leon, sure, I meant sales tax. Just got a little excited about the possibility of saving a few bucks and mad at myself for not recognizing their deductibility sooner.
Florida does indeed impose a 6% sales tax but, of course, nothing for out of state transactions, as they shouldn't. The AH in question has an office here in Palm Beach, but that shouldn't matter since the point of sale has been in Texas.

And I sure hope that Florida received all the sales tax I have been charged over many years.

John,

I answered this for you before. Since the auction is handled remotely online, and the items are shipped to you at your Florida residence, the point of sale where you actually take possession of the items you won is at your house, where you opened your mail. It is not in Texas where Heritage is headquartered, and your items supposedly sent from.

That is also why no matter where you live, if you walk into a store and buy an item there, and take possession of it at that time, that store location becomes your point of sale. Not where you live, nor where the headquarters of the store you just bought an item from is located.

[BobC]

Originally Posted by Yoda

This will be obvious to all those who are knowledgeable about our outdated and confusing tax code. I went to see my accountant for preparation of my 1040 and received some unexpected and welcome news. As many might recall, I have waged an unsuccessful battle against paying state income tax to AHs on charges imposed where I am not resident, ie. any state but Florida. This has been principally directed towards one predominant AH in Texas. i have been stonewalled at every turn.

Anyhow, I learned that I can deduct state taxes as part of acquisition cost, which I had not realized prior. This should save me some tax dollars...most welcome.

I also have to wonder if these taxes paid in the past have gone into an escrow account and sent to Florida or ended up in general operating funds.

John,

The Florida sales tax that Heritage has charged and collected from you in the past had better be getting sent to Florida for Heritage's sake. If it was discovered that Heritage was charging you sales taxes which they then just kept to use and pay their own bills, Florida, as well as any other states they were supposed to be remitting sales taxes to, would not look upon that very kindly once such a practice was discovered. You yourself have no issues and concerns since you paid the sales tax that was due. Heritage however, operates in somewhat of a fiduciary capacity and it technically operates as an agent for those states in which it is required to charge, collect, and remit sales taxes. It is part of what they have to do in order to be permitted the right to operate in any particular state. That sales tax money is not Heritage's, or any AH that collects sales taxes, to just do with as they please.
At least not if they want to continue operating without any problems in that particular state.

[D. Bergin]

Heritage collecting Sales Tax is likely something they would rather not have to do. It's a money losing proposition. Likely cost them plenty on the accounting end, and any fees that any merchant processing company deducts from that portion of sales, is a direct loss, since you can't charge somebody a collection fee on top of the sales tax collection.

Unless (to get on my own soapbox ), you are Ebay, and you've figured out how to charge what's essentially a "Sellers Fee", on the entire sale, including Shipping and any collected Sales Tax. The higher a states sales tax rates are, the more money Ebay collects for itself, for that transaction.

[BobC]

Originally Posted by D. Bergin

Heritage collecting Sales Tax is likely something they would rather not have to do. It's a money losing proposition. Likely cost them plenty on the accounting end, and any fees that any merchant processing company deducts from that portion of sales, is a direct loss, since you can't charge somebody a collection fee on top of the sales tax collection.

Unless (to get on my own soapbox ), you are Ebay, and you've figured out how to charge what's essentially a "Sellers Fee", on the entire sale, including Shipping and any collected Sales Tax. The higher a states sales tax rates are, the more money Ebay collects for itself, for that transaction.

It is technically not a loss, but a cost of doing business, just like paying the rent or an employee's salary. But you are correct in that probably no business wants the hassle of dealing with sales taxes if they had a choice. But they don't, and collecting and remitting sales taxes is a requirement they must perform in return for the right to operate and do business in various states.

And as for Ebay charging a fee to sellers for sales tax collected on their behalf, I'm sure they view that as a way to charge and recoup the costs the sellers would otherwise directly incur if Ebay wasn't doing this sales tax collection and remittance for them.

There is no specific law or rule anywhere that I'm aware of that would prohibit any auction house from also charging sellers, and even the buyers, a commission/fee on any sales tax collected as part of the auction as well. It's just that there is a lot of competition among AHs, and the first AH to do something like that would get negative publicity and likely lose some bidders and consignors. Ebay doesn't have anywhere near the volume or level of competition that AHs do, and can easily ignore everyone else and pretty much just do what they want.