Auction Houses and Sales Tax

[BobC]

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