PWCC expands its lending activities

[BobC]

Originally Posted by Rhotchkiss

That is tax avoidance, and those people could get in trouble. Also, it would make sense if the vault was required to collect and pay over state taxes for items removed from a vault and sent to a tax state within X months of receipt. I don’t know if such a law/requirement exists.

We've discussed this before. To my knowledge no state has a period of time in their sales and use tax laws for this specific situation. However, I had mentioned once before how California has a specific 1 year threshold for vehicles brought into California. Bought it less than a year before bringing it into CA and you owe CA the difference between the sales tax you would have paid them had you originally bought the vehicle in CA, less whatever sales tax you did pay to another state when you bought it. Own the vehicle a year or more before bringing it into CA, and CA gets no sales/use tax.

So the concept of moving assets you own from one state to another doesn't necessarily and/or automatically trigger sales/use tax being owed to the state you're moving them into. If you leave cards in a vault for a reasonable period of time before taking them out and to your home, your resident state will likely not come looking for sales/use tax on those cards. We just haven't had this issue come up in any courts yet, to my knowledge, nor had any state spell out in their statutes how long you'd have to leave the cards in a vault for before you could then safely bring them home without any sales/use tax being due your resident state. At least not yet.

[oldjudge]

Originally Posted by BobC

We've discussed this before. To my knowledge no state has a period of time in their sales and use tax laws for this specific situation. However, I had mentioned once before how California has a specific 1 year threshold for vehicles brought into California. Bought it less than a year before bringing it into CA and you owe CA the difference between the sales tax you would have paid them had you originally bought the vehicle in CA, less whatever sales tax you did pay to another state when you bought it. Own the vehicle a year or more before bringing it into CA, and CA gets no sales/use tax.

So the concept of moving assets you own from one state to another doesn't necessarily and/or automatically trigger sales/use tax being owed to the state you're moving them into. If you leave cards in a vault for a reasonable period of time before taking them out and to your home, your resident state will likely not come looking for sales/use tax on those cards. We just haven't had this issue come up in any courts yet, to my knowledge, nor had any state spell out in their statutes how long you'd have to leave the cards in a vault for before you could then safely bring them home without any sales/use tax being due your resident state. At least not yet.

It seems like it would be very easy for states with sales tax on collectibles to close this loophole.

[BobC]

Originally Posted by oldjudge

It seems like it would be very easy for states with sales tax on collectibles to close this loophole.

Not necessarily. The idea of charging sales tax on an item being shipped to a buyer is that the sales tax is charged based on where an item is ultimately to be stored or used. It is different from when you actually walk into a store and buy something and take physical possession of the item right there. In that case it doesn't matter what state you may actually live in, you pay sales tax to the state where you physically took possession of an item, based on where the store you bought it from is located. If you were on vacation in say Oregon, and bought some mementoes, collectibles, and such, and then took everything back home with you, to say California, you aren't going to be met at the CA border by one of its sales tax agents demanding you pay CA sales tax on items you're now bringing back into your home state. You wouldn't owe any use tax to CA as you already paid the applicable sales tax to the state the store you bought and took possession of the items you purchased was in, even if it was Oregon that has no sales tax.

There is no law anywhere that says you have to keep everything at your home residence. So if you do decide to have cards you buy sent and kept at an out of state location, that is perfectly acceptable, and something I don't think any state can change by simple legislation. And to then move items from one state to another shouldn't automatically cause the owner to suddenly owe sales taxes on items moved, should it? To argue otherwise could end up opening a huge can of worms. Like for example anytime someone moves from one state to another, and takes all their belongings with them, are they now going to be subject to having all their belongings inspected by someone from the state they are moving into, and potentially getting assessed a sales/use tax on all their belongings they brought with them? That would go over with the voting public like a ton of crap, but is intrinsically the same as storing your cards in one state, and then deciding later to move them elsewhere. And since supposedly not everyone using a vault is doing so just to evade sales taxes, passing any legislation that potentially proves detrimental to them likely won't be viewed in a kind light either. It is not entirely as black and white a question as one may initially think.

[Lorewalker]

Originally Posted by BobC

Not necessarily. The idea of charging sales tax on an item being shipped to a buyer is that the sales tax is charged based on where an item is ultimately to be stored or used. It is different from when you actually walk into a store and buy something and take physical possession of the item right there. In that case it doesn't matter what state you may actually live in, you pay sales tax to the state where you physically took possession of an item, based on where the store you bought it from is located. If you were on vacation in say Oregon, and bought some mementoes, collectibles, and such, and then took everything back home with you, to say California, you aren't going to be met at the CA border by one of its sales tax agents demanding you pay CA sales tax on items you're now bringing back into your home state. You wouldn't owe any use tax to CA as you already paid the applicable sales tax to the state the store you bought and took possession of the items you purchased was in, even if it was Oregon that has no sales tax.

There is no law anywhere that says you have to keep everything at your home residence. So if you do decide to have cards you buy sent and kept at an out of state location, that is perfectly acceptable, and something I don't think any state can change by simple legislation. And to then move items from one state to another shouldn't automatically cause the owner to suddenly owe sales taxes on items moved, should it? To argue otherwise could end up opening a huge can of worms. Like for example anytime someone moves from one state to another, and takes all their belongings with them, are they now going to be subject to having all their belongings inspected by someone from the state they are moving into, and potentially getting assessed a sales/use tax on all their belongings they brought with them? That would go over with the voting public like a ton of crap, but is intrinsically the same as storing your cards in one state, and then deciding later to move them elsewhere. And since supposedly not everyone using a vault is doing so just to evade sales taxes, passing any legislation that potentially proves detrimental to them likely won't be viewed in a kind light either. It is not entirely as black and white a question as one may initially think.

Hey Bob,

Just thinking out loud but while there is no law that says that everything we buy has to be sent and kept in our homes, it is clear most, some, many of the purchases that are going to vaults are not necessarily staying at the vaults. The vaults are a brief stopping point for the purchase which the buyer has every intention of taking physical possession of as soon as possible. I think that is where the gray area may not be so gray.

How that could be enforced, I dunno and since the vault concept is relatively new and I have no statistics on what percentage of the items that are shipped to them stay with them. It is entirely possible the tax evasion practice is not material enough to be worth the effort. I also think it would would be complex to track purchases (entering and leaving the vaults) even if that was the burden of each vault to do on a quarterly basis.

Chase

[BobC]

Originally Posted by Lorewalker

Hey Bob,

Just thinking out loud but while there is no law that says that everything we buy has to be sent and kept in our homes, it is clear most, some, many of the purchases that are going to vaults are not necessarily staying at the vaults. The vaults are a brief stopping point for the purchase which the buyer has every intention of taking physical possession of as soon as possible. I think that is where the gray area may not be so gray.

How that could be enforced, I dunno and since the vault concept is relatively new and I have no statistics on what percentage of the items that are shipped to them stay with them. It is entirely possible the tax evasion practice is not material enough to be worth the effort. I also think it would would be complex to track purchases (entering and leaving the vaults) even if that was the burden of each vault to do on a quarterly basis.

Chase

Hi Chase,

And exactly why I'm saying it isn't so easy and clear. For now, probably not enough dollars to make it worthwhile for states to try going after these vaults. The states are still basking in the glow and sales tax windfall created with the SCOTUS decision in the South Dakota vs, Wayfair case from back in 2018. And remember, the vaults aren't doing anything wrong. It is the individuals that own the cards who are responsible and potentially liable in these cases. And whereas states don't mind pushing against big companies, like Wayfair and Amazon, when it comes to sales tax law changes like in that 2018 SCOTUS decision, this issue would be pushing against individuals and going after use tax they owe. States don't have the time and resources to go after all those people for the somewhat nominal amounts each of them would potentially owe. And for the states to change sales tax laws to somehow make vaults, AHs, or other online sellers responsible in this particular case would entail some rather profound changes to sales tax laws in general, and could even lead to issues and conflicts between states. Also, big companies don't vote, people do. Tax authorities potentially going after all the individuals in a state (who can vote) usually doesn't make them very happy with elected officials who let those tax authorities come after them. The SCOTUS decision didn't really change any sales tax laws. All it did was redefine the definition of when a seller was responsible to collect and remit sales tax on sales to customers in a particular state, which is known as "nexus".

[raulus]

Originally Posted by BobC

Not necessarily. The idea of charging sales tax on an item being shipped to a buyer is that the sales tax is charged based on where an item is ultimately to be stored or used. It is different from when you actually walk into a store and buy something and take physical possession of the item right there. In that case it doesn't matter what state you may actually live in, you pay sales tax to the state where you physically took possession of an item, based on where the store you bought it from is located. If you were on vacation in say Oregon, and bought some mementoes, collectibles, and such, and then took everything back home with you, to say California, you aren't going to be met at the CA border by one of its sales tax agents demanding you pay CA sales tax on items you're now bringing back into your home state. You wouldn't owe any use tax to CA as you already paid the applicable sales tax to the state the store you bought and took possession of the items you purchased was in, even if it was Oregon that has no sales tax.
.

I’m pretty sure this is exactly the situation why use tax exists - for people buying stuff in low or no sales tax states and then taking it home with them to high sales tax states.

You’re not met at the border by a tax agent.

But the law does say that you owe use tax.

It’s just that no one actually ever pays it.

[BobC]

Originally Posted by raulus

I’m pretty sure this is exactly the situation why use tax exists - for people buying stuff in low or no sales tax states and then taking it home with them to high sales tax states.

You’re not met at the border by a tax agent.

But the law does say that you owe use tax.

It’s just that no one actually ever pays it.

Mmmmmmm, not exactly. Under old laws, sales tax was only collected by sellers who had a physical presence in a state in which they made a sale. That physical presence gave them what is known as "nexus" in that particular state then to be responsible for collecting and remitting sales tax on sales to customers in that state. This was from back in the days before the internet and online sales. So back then, if you bought something through a catalog or magazine from an out of state seller who had no physical presence in your state, they had no sales tax nexus in your state and wouldn't charge you sales tax. And then under the "use tax" part of your state's sales and use tax laws, you were supposed to send what you should have been charged as sales tax on that purchase to your state yourself as "use tax". But virtually no individuals ever do. Truth is, the states primarily use the "use tax" part of sales tax laws to go after big businesses that would buy machinery, equipment, and such, and have it shipped to them from out of state suppliers with no sales tax nexus in the state the items were being shipped to.

However, when you go into a store and buy something there, that is where you physically take possession and ownership of an item, and that location is where the sales tax is based on and paid, not where you might live or be taking the purchased item to. You cannot generally charge someone sales tax twice on the same item, and all the states with sales taxes have agreed to not allow such a double tax to happen. It would be impossible to keep track of anyway. In some states the sales tax is not uniform, and rates can vary by county or region. So if you go visit a friend or relative one county over (that also has a lower sales tax rate), and on the way back you stop and buy some carryout food and drinks in that lower sales tax county to then take home and eat, do you really think any state sales tax agent in their right mind is going to tell you to figure out the additional sales tax you would have paid had you stopped and bought that carryout food in your home county, and be sure to then send that difference to your state as "use tax"? Probably not if they want to keep their job.

And going from state to state is pretty much the same thing. Granted, if you go to the next state to buy say a living room set because they have a lower sales tax rate, your home state might be interested in that because it is probably a more expensive purpose. But the thing is, to my knowledge no state has written into their sales and use tax statutes any de minimus or threshold amount under which they say to not bother with any "use tax" and over which they say you have to calculate and pay any "use tax". The states just don't bother normally even trying to enforce the "use tax" on individuals because of how impossible it is to track and figure it out.

[raulus]

Originally Posted by BobC

Mmmmmmm, not exactly. Under old laws, sales tax was only collected by sellers who had a physical presence in a state in which they made a sale. That physical presence gave them what is known as "nexus" in that particular state then to be responsible for collecting and remitting sales tax on sales to customers in that state. This was from back in the days before the internet and online sales. So back then, if you bought something through a catalog or magazine from an out of state seller who had no physical presence in your state, they had no sales tax nexus in your state and wouldn't charge you sales tax. And then under the "use tax" part of your state's sales and use tax laws, you were supposed to send what you should have been charged as sales tax on that purchase to your state yourself as "use tax". But virtually no individuals ever do. Truth is, the states primarily use the "use tax" part of sales tax laws to go after big businesses that would buy machinery, equipment, and such, and have it shipped to them from out of state suppliers with no sales tax nexus in the state the items were being shipped to.

However, when you go into a store and buy something there, that is where you physically take possession and ownership of an item, and that location is where the sales tax is based on and paid, not where you might live or be taking the purchased item to. You cannot generally charge someone sales tax twice on the same item, and all the states with sales taxes have agreed to not allow such a double tax to happen. It would be impossible to keep track of anyway. In some states the sales tax is not uniform, and rates can vary by county or region. So if you go visit a friend or relative one county over (that also has a lower sales tax rate), and on the way back you stop and buy some carryout food and drinks in that lower sales tax county to then take home and eat, do you really think any state sales tax agent in their right mind is going to tell you to figure out the additional sales tax you would have paid had you stopped and bought that carryout food in your home county, and be sure to then send that difference to your state as "use tax"? Probably not if they want to keep their job.

And going from state to state is pretty much the same thing. Granted, if you go to the next state to buy say a living room set because they have a lower sales tax rate, your home state might be interested in that because it is probably a more expensive purpose. But the thing is, to my knowledge no state has written into their sales and use tax statutes any de minimus or threshold amount under which they say to not bother with any "use tax" and over which they say you have to calculate and pay any "use tax". The states just don't bother normally even trying to enforce the "use tax" on individuals because of how impossible it is to track and figure it out.

So let’s say for a moment there’s a business involved in large dollar transactions on behalf of customers who reside in a high sales tax state. And that business is even so cheeky as to actively advertise to customers to use their service to avoid paying sales tax. Let’s assume for a moment that for a particularly tax-happy state, the lost revenue adds up to 5% of the state budget for any given year.

Query:

1) what are the odds that the state will care?
2) what are the odds that the state will go after the business whose marketing message entices customers to evade sales tax?
3) what kind of penalties and interest might be applied to that situation that the state would seek to recoup from the business that deliberately aided and abetted their customers in evading those sales taxes?
4) what are the criminal penalties that might apply to the business so involved?

Maybe the state won’t care. And maybe no one will ever have to pay in such a situation. But it seems like the risk of the above possibilities has to be a nonzero number. And once that ball gets rolling with the right politician who gets wind of it or the right newspaper that decides to highlight the obvious and flagrant practices here, it could start to pick up momentum fast.

[UKCardGuy]

Originally Posted by raulus

So let’s say for a moment there’s a business involved in large dollar transactions on behalf of customers who reside in a high sales tax state. And that business is even so cheeky as to actively advertise to customers to use their service to avoid paying sales tax. Let’s assume for a moment that for a particularly tax-happy state, the lost revenue adds up to 5% of the state budget for any given year.

Query:

1) what are the odds that the state will care?
2) what are the odds that the state will go after the business whose marketing message entices customers to evade sales tax?
3) what kind of penalties and interest might be applied to that situation that the state would seek to recoup from the business that deliberately aided and abetted their customers in evading those sales taxes?
4) what are the criminal penalties that might apply to the business so involved?

Maybe the state won’t care. And maybe no one will ever have to pay in such a situation. But it seems like the risk of the above possibilities has to be a nonzero number. And once that ball gets rolling with the right politician who gets wind of it or the right newspaper that decides to highlight the obvious and flagrant practices here, it could start to pick up momentum fast.

In the scenario you've outlined...nobody "evaded" taxes, they avoided them. Tax evasion is illegal. Tax avoidance is every citizen's right. Nobody is under any obligation to pay more tax than they owe. If the current taxation systems allow someone to pay a lower sales tax in another state....they'd be silly not to avail themselves of the better price.