Auction Houses and Sales Tax

[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.