Auction Houses and Sales Tax

[RedsFan1941]

shipping also plays a role in determining final cost. might as well add that to the price realized too.

[The Nasty Nati]

Yeah sales tax on Heritage auctions are killer.

[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

[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)

[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.