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Get the latest facts on the new NY SAFE gun laws that effect you!

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FFL Charging tax on transfers


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24 replies to this topic

#1 Paté

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Posted May 17 2012 - 11:18 AM

Here's the text and the source that may end the debate. It appears that they are not allowed to even charge tax on the FFL fee since it's required.


April 13, 2012
New York State Department of Taxation and Finance
Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION PETITION NO. S111229B

The Department of Taxation and Finance received a Petition for Advisory Opinion from name
and address redacted. The Petitioner is a New York Federal Firearms Licensee (FFL). The Petitioner
asks whether he is required to collect New York State sales or use tax when, pursuant to various
Federal, State and local legal requirements, he is authorized to transfer a gun purchased from an out-ofstate
FFL (the Seller) to the purchaser (the Buyer). In addition, the Petitioner asks whether the fees
that he charges for certain administrative tasks that he is required to execute before transferring the gun
to the buyer, including having a background check done by the FBI through the National Instant
Criminal Background Check System (NICS), are receipts subject to New York State sales tax.
We conclude that the Petitioner, for purposes of a gun purchased out-of-state under the facts
provided, is not required to collect New York State sales tax on the sale of the gun to the Buyer by a
third party, and the Petitioner’s fee for his administrative services (including contacting NICS for the
purpose of their executing a background check) in conjunction with the transfer of the gun to the Buyer
is not subject to New York State sales tax.

Facts
The Petitioner is a New York FFL and is a New York sales tax vendor, as the Petitioner has
receipts from the sale of his own guns from his inventory in New York State. The Petitioner submitted
the following facts.

The Buyer who is a resident of New York State purchases a gun from an out-of-state FFL (the
Seller) and pays the Seller directly for the sale price of the gun.1 The Petitioner does not know whether
New York State sales tax is collected by the Seller on the sale. Because the federal Gun Control Act
(GCA) prohibits transporting a gun across state lines (with certain exceptions not relevant herein), any
gun purchased out-of-state by a New York resident who is not an FFL must be shipped to an FFL
located in New York, who will contact NICS so that they may perform the required background check
on the Buyer before the gun is conveyed to the Buyer. There is no charge to Petitioner for the
background check. The gun is generally shipped by common carrier to a New York FFL, such as
Petitioner, selected by the Buyer, typically near the Buyer’s place of residence. Once the Petitioner
receives the gun sold out-of-state to the Buyer, the Petitioner verifies the serial number of the gun,
1 The Petitioner is not part of the sales contract between the Buyer and the Seller, so no purchase contract was provided
with the Petition. For the purposes of this Advisory Opinion, we assume that the out-of-state Seller transfers title to the
gun to the purchaser at the time of sale. We also do not know to what extent the out-of-state Seller has contact with the
State or the extent to which the out-of-state Seller has agents or affiliates acting on its behalf in New York. The
obligation of the out-of-state Seller to collect tax was not raised by the Petitioner, and cannot be addressed on the facts
provided with the Petition.
TSB-A-12( 8 )S
Sales Tax
April 13, 2012

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TSB-A-12( 8 )S
Sales Tax
April 13, 2012
contacts the NICS so that they may perform the required background check on the Buyer, and
establishes that the Buyer meets any other applicable legal requirement to possess the gun. If the
Buyer is approved by NICS and meets the other legal requirements to possess the gun (waiting periods,
etc.), the Petitioner prepares a bill of sale entering “$0 consideration - customer paid out-of-state.” The
Buyer presents the bill of sale and other required paperwork prepared by the Petitioner to the local
licensing authority, such as the sheriff, who will enter the gun on the Buyer’s permit. Only then may
the Petitioner legally transfer the gun to the Buyer. The Petitioner charges the Buyer a fee for the
services he provides on the Buyer’s behalf.

The Petitioner has no contractual arrangement with the Seller and does not receive any
consideration for the sale or any other compensation from the Seller. The Petitioner may have no
knowledge of the consideration paid by the Buyer for the gun, and he doesn’t know if any sales and
use tax was collected by the Seller. If the Buyer fails the background check, the Petitioner will either
ship the gun back to the Seller (on the Buyer’s behalf and at the Buyer’s expense) or the Petitioner may
sell it on a consignment basis for the Buyer. In either case, the Petitioner does so at the direction of the
Buyer. The Buyer will be subject to the Petitioner’s fee for the services only if he is approved by the
background check and the other services are completed.

Analysis
The Petitioner first asks whether he is required to collect tax at the time he transfers the gun to
the Buyer under the facts above. With certain exceptions that are not relevant, the federal GCA makes
it unlawful for any person other than a licensed importer, licensed manufacturer, licensed dealer, or
licensed collector to transport into or receive in the state where he resides any gun purchased by such
person outside the state where he resides.2 However, a person who purchases a gun from an out-ofstate
seller may take legal possession of the gun, if an arrangement is made with an FFL in the
purchaser’s state of residence to perform certain legal requirements, such as a background check,3
before transferring the gun to a buyer in his home state.

New York State imposes a tax upon the receipts from every retail sale of tangible personal
property, except as otherwise provided in Article 28 of the Tax Law.4 A “retail sale” is a sale of
tangible personal property to any person for any purpose….”5 Tax Law section 1101(B)(5) defines
“Sale, selling or purchase” as “any transfer of title or possession or both, exchange or barter, rental,
lease or license to use or consume…conditional or otherwise, in any manner or by means whatsoever
for a consideration.” The tax is imposed on the customer, but is required to be collected by a person
required to collect tax “when collecting the price.”6 “Persons required to collect tax” include every
vendor of tangible personal property or services and certain persons who are under a duty to act for the
vendor, such as a corporate officer.7 Subparagraph (i) of the definition of vendor in Tax Law section
1101(B)( 8 ) specifies certain persons making sales in the State. Subparagraph (ii) of that definition
gives the Commissioner discretion to treat as a vendor “any salesman, representative, peddler or
2 18 USCS §922(a)(3)
3 18 USCS §922(a)(3) and §922(B)(3).
4 Tax Law §1105(a)
5 Tax Law §1101(B)(4).
6 Tax Law section 1132(a)(1).
7 Tax Law §1131(1)

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TSB-A-12( 8 )S
Sales Tax
April 13, 2012
canvasser as the agent of the vendor, distributor, supervisor or employer under whom he operates
(emphasis added) and from whom he obtains tangible personal property sold by him or for whom he
solicits business….” The Petitioner does not qualify as a vendor under subparagraph (i) of the
definition of vendor because the Petitioner did not sell the gun or collect the sales price nor does he
qualify to be treated as a co-vendor under subparagraph (ii) because he did not operate under the
Seller, he did not solicit business for the Seller, and he did not obtain property from the Seller that he
(Petitioner) sold. Because Petitioner does not qualify as a vendor for purposes of closing the transfer
of the gun purchased out-of-state, he is not a person required to collect the New York sales tax for this
sale. The Buyer, however, would be responsible for any sales tax due on the gun purchase.
The Petitioner is required by federal law to record transactions pertaining to any guns in his
possession.8 It is presumed that all receipts for tangible personal property received pursuant to Tax
Law sections 1105 subdivisions (a), (B), ©, and (d) are subject to tax.9 Thus, the Petitioner has the
burden of proving that any receipt is not subject to tax. He must retain the $0 bill of sale in his records
and also sufficient records to substantiate upon audit by the Department that he was not required to
collect tax.

The Petitioner’s remaining question is whether the fee charged for administrative tasks that he
performs pursuant to the federal GCA and required prior to transferring the gun to the Buyer is subject
to sales tax. Sales tax is also imposed on the receipt from every sale of certain enumerated services as
are specified in the Tax Law.10 However, asking the NICS to complete a background check (for which
Petitioner is not charged), creating the records necessary for Federal regulatory purposes, and ensuring
that any State or local legal requirements are similarly met are not among the enumerated services that
are subject to sales tax. Thus, Petitioner is not required to collect the sales tax on his fees.

http://www.tax.ny.go...ales/a12_8s.pdf

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#2 Gary_Hungerford

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Posted May 17 2012 - 11:38 AM

Pat:
   Excellent post. Thanks.
Gary

#3 Lemming

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Posted May 17 2012 - 11:39 AM

Pate,

THere you go, ruining all the fun of wild speculation with hard fact.  What's up with that?  ;)

#4 wreckhog

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Posted May 17 2012 - 11:41 AM

Awesome

#5 phumb

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Posted May 17 2012 - 12:29 PM

the only one I ever knew to do that was brian in bohemia

#6 wreckhog

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Posted May 17 2012 - 12:32 PM

Do what? Per the original post, FFLs are not even supposed to collect $2 and change on a $25 xfer.

#7 Paté

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Posted May 17 2012 - 12:36 PM

Brian used to charge full tax on the gun.

#8 Mad Russian

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Posted May 17 2012 - 01:16 PM

Brian used to charge full tax on the gun.


Then he owes a lot of people refunds!

#9 VolkoSupply

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Posted May 17 2012 - 01:22 PM

when we started doing this a few years ago, our accountant advised us we should be collecting sales tax on the transfer fee (the magic $2.16 that is stuck in my head).  

This is a new ruling, and I'll forward to the accountant.  Thanks for bringing it up.

Cheers,
Vick

#10 Paté

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Posted May 17 2012 - 01:29 PM


Then he owes a lot of people refunds!


I'm thinking that refunds are the least of his worries at the present time.

#11 sojourner

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Posted May 17 2012 - 02:12 PM

And to think I had paid sales tax on all those FFL transfers over the years at T&T...WOW!

#12 Gun Smoke

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Posted May 17 2012 - 02:12 PM

I was charged tax on every ffl transfer I have evenr done what bs!

#13 fish1024

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Posted May 17 2012 - 02:13 PM

There is another local that charges full tax on the purchase price.  

#14 Paté

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Posted May 17 2012 - 02:21 PM

This is the reason I posted it. We now have something that we can show the FFL. They can chose to ignore it and lose business, but that's their choice.

#15 NRATC53

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Posted May 17 2012 - 02:27 PM


Then he owes a lot of people refunds!


NYS Dept of Taxation visited him and told him he must collect (not charge) sales tax on purchase price.He dutifully did so and sent it in. NYS owes folks that refund...

#16 PeterM1990

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Posted May 17 2012 - 02:32 PM

I was charged tax on every ffl transfer I have evenr done what bs!


I've been duped too!

#17 Lemming

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Posted May 17 2012 - 02:52 PM


NYS Dept of Taxation visited him and told him he must collect (not charge) sales tax on purchase price.He dutifully did so and sent it in. NYS owes folks that refund...


Technically, even if NYS returned the money, then we'd still owe them the taxes anyway, would we not?  I'm sure from the State's perspective regardless of who collects the sales tax it needs to be paid.  This is why periodically NY goes stalking license plates at Ikea in NJ.

#18 phumb

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Posted May 17 2012 - 03:22 PM

Do what? Per the original post, FFLs are not even supposed to collect $2 and change on a $25 xfer.


yes, I was talking about the purchase price...was never worried about the 2 bux.....

Fish, please share with us the other ffl that would charge tax on the gun value????

#19 Gun Smoke

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Posted May 17 2012 - 04:24 PM

Its more the principal I called south shore last week and they told me there fee went up to $50. How can one place charge double what the others do? I feel like they are greedy, its not about the $5 (although every dollar counts right now) its about the fact I can go to volko as a non lif member and get a $25 transfer (members are $15 I think). Or I can take it with no vasoline and pay $50-75 other places and they want to charge me tax on top. I am a bit salty about my interaction with sss and a few other local store's they charge over msrp for there stock and then want to jack up the fee so that it doesnt make sense to have it transfered.

#20 Captain Will

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Posted May 17 2012 - 04:42 PM

Its more the principal I called south shore last week and they told me there fee went up to $50. How can one place charge double what the others do? I feel like they are greedy, its not about the $5 (although every dollar counts right now) its about the fact I can go to volko as a non lif member and get a $25 transfer (members are $15 I think). Or I can take it with no vasoline and pay $50-75 other places and they want to charge me tax on top. I am a bit salty about my interaction with sss and a few other local store's they charge over msrp for there stock and then want to jack up the fee so that it doesnt make sense to have it transfered.


Then try Hunter Sports, just down the road IIRC  $30.


And the NYD DTF has NO FRIGGING IDEA what they are doing, legal opinion or no.  As aservice, one would ber rewquired to collect tax on the transfer fee (taxable services). Meanwhile, I know a couple of court reporting agences that have made MILLIONS and have not collecxted tax on a single dime of it. also a service businerss, but they did not have the Dept of Consumer Protection demanding they register as a sales trax vendor, so why bother?

My favorite is the "clothing with buttons of precious or semi precious materials or imitation precious or semi precious materials" erxclusion. So, those buttons on my blazer, are they brass (not semi precious) or are they imitation gold? Is the white acetate button on my shirt imitation mother of pearl, or white acetate? Are the brown plastic buttons imitation tortoise shell?


They make RIDICULOUS F'n rules NOBODY can follow thus guaranteeing that anybody they audit will getr hung out to dry, fear tactic BS. They FINALLY made a capital improvement certificatre the burden of the homeowner, so guess what? I don't think I'll be collecting another dime for them, guess what the first thing I'm presenting to John Q Homeownrer is from now on??







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