Hertiage Auction Net Effective Rate

[frankbmd]

Ed, your HANER* is my EBP**

*Heritage Auction Net Effective Rate

**Effective Buyer's Premium

http://www.net54baseball.com/showthread.php?t=188256

[BobC]

In regards to one of the OP's comments in his opening post, Heritage didn't necessarily have to build a physical location in Illinois, or any other state, to suddenly become liable for collecting and remitting sales tax on sales within that particular state. Every state that imposes sales tax has their own unique rules that can cause that company to have what is known as "nexus" for the imposition of sales tax liability on sales within their state.

Physical presence in any state, under current law, is pretty much a mortal lock that the company is subject to sales tax laws but, not the sole factor. Depending on the state, having representatives/employees in-state, use of agents, simply having activity above a certain level, making deliveries in company vehicles or attending trade shows, amongst other things, can cause a company to have "nexus" for sales tax purposes in a particular state.

In Illinois in particular, there's actually a definition by which an out-of-state seller doing telemarketing into the state may be deemed to be a "retailer" for Illinois sales tax purposes and thereby subject to Illinois sales tax.

Sales tax liability and collection laws has been in a flux for years now as more states keep trying to increase their tax revenues in any way possible, especially if they can increase taxes on out-of-state companies. There's even a group known as the Multi-State Tax Compact which is working to make the sales/use tax laws more universal across all the states in the U.S. A good number of the states already belong to and agree with the Compact and it is ultimately thought that one day, all the states will be buy-in and be party to some form of this universal agreement. This would possibly include having all companies be liable for collecting and remitting sales tax in all states, even if there is no physical or other presence in these other states.

I know a lot of people look upon the sales tax as an extra cost and try to not pay it but, it is mandated and part of the laws in pretty much every state that if you don't get charged sales tax by the seller, you are required to voluntarily remit and file a use tax return in some form with the state you're in. As states become more and more aggressive in tax collection efforts in the future, don't be surprised when large, highly visible companies like Heritage end up charging sales tax to pretty much everybody. I think it is more a question of when, not if, we're all going to have to pay sales tax on major auction house winnings.

BobC

[bobbyw8469]

I know a lot of people look upon the sales tax as an extra cost and try to not pay it but, it is mandated and part of the laws in pretty much every state that if you don't get charged sales tax by the seller, you are required to voluntarily remit and file a use tax return in some form with the state you're in. As states become more and more aggressive in tax collection efforts in the future, don't be surprised when large, highly visible companies like Heritage end up charging sales tax to pretty much everybody. I think it is more a question of when, not if, we're all going to have to pay sales tax on major auction house winnings.

These are used items though. Technically, wasn't the sales tax paid when the items were purchased? Can the government tax something indefinitely?

[Griffins]

Originally Posted by bobbyw8469

These are used items though. Technically, wasn't the sales tax paid when the items were purchased? Can the government tax something indefinitely?

yup, every time a sale is made.


In California, at least, it's sales and USE tax. I've got a lot of photographer friends that have bought equipment via mail order in order to save the tax, only to be audited and have to remit the tax on that purchase, plus penalties and interest. An auditor told me they often look for insurance payouts on stolen gear and then audit the insured. I don't think CA is unique in this way.

In regards to Heritage, they have an office about 10 blocks from me, but I can't remit payment or pick up items there. Still, the mere presence means that I effectively have to pay about 30% above my bid. I just factor that in, and consequently don't win much from them.

Another local auction house just told me to give them a friends address out of state. I was shocked they would advocate blatant fraud (probably shouldn't have been) but there is no way it's worth it. Better to just suck it up and figure it into the bid.

[BobC]

As another poster said, it doesn't matter if this is simply the re-sale of a used item or not. Sales tax is basically collected on the sales of all tangible, personal property, which is exactly what a baseball card is, tangible, personal property. And as another poster added in, there are some states that have not yet cracked down on companies like Heritage to force them to collect sales tax on sales to customers within their respective states but, as I alluded to, those days may be ending sometime in the not too distant future. The poster who mentioned Use Tax in Californian is correct, there is a Use Tax provision in California, and that pretty much goes hand-in-hand with every state that has a sales tax provision. The idea is that if for whatever reason you buy something where the seller doesn't charge you sales tax, you are pretty much covered by the Use Tax part of that state's laws and supposed to voluntarily remit the use tax and file some kind of return yourself to report it.

This Use Tax and the actual rules and how they collect it can vary from state to state. In Ohio, where I'm from, they actually have a line on the Ohio individual income tax return where you are supposed to report and remit the Use Tax on items you purchased during the tax year, and pay it in with your income taxes. Nobody ever does it but, when you sign that return and send it in, or e-file it, you are saying, under threat of perjury, that you have nothing due. Illinois, where the OP is from, also has a somewhat similar Use Tax provision in their tax laws. In Illinois they have a 6.25% sales/use tax rate that the OP should calculate and pay in to the state on his Heritage winnings, if they didn't charge him sales tax themselves. There is a separate form he could do this with or, he could also calculate and remit the Use Tax as part of his individual Illinois income tax return, and that is just if he only incurs nominal use taxes owed for the entire year. In Illinois, once your Use Tax liability in a year hits $600, you're supposed to start remitting the Use Tax monthly.

Make no mistake, with all the electronic records and files that are now kept by auction houses and even Ebay, if the states want to start cracking down on Use Taxes, they easily can. Anyone who sells a lot on Ebay already knows that they will receive a 1099 showing their sales proceeds for the year once they reach $20,000 in sales, and 200 or more transactions, in a calendar year. Ebay has all of the seller's and buyer's addresses and data on hand and I imagine can pretty easily come up with how much any one of us bought off Ebay, and what, if any, sales tax we paid on those items we got. That 1099 info also goes right to the IRS so they know to look for that seller to include internet sales on their next tax return. There are a lot of people on here that sell on Ebay that don't meet those $20,000/200 transaction limits, and thus don't report their Ebay sales on their tax returns. But that could change tomorrow if the IRS just comes out and says something like make the 1099 reporting threshold $600 or more in annual sales and 1 or more transactions. Same thing in regard to sales/use taxes. The IRS doesn't need to wait for a new law to pass, they just need to change the threshold for reporting requirements and force Ebay and auction houses to turn over the information they need to come after more people. The only real reason they probably haven't done anything like that yet is because all the companies that would then have to report this and send out forms to the buyers and sellers have been telling Congress it is too much work and data for them to go through. And of course there is the added burden on the IRS and state taxing authorities themselves then to gather this information and then use it for income and sales/use tax purposes. That only works for so long though and eventually the government sees that the technology has gotten to the point where it isn't a burden anymore, and then we're all stuck with it.

BobC

[pokerplyr80]

If they do start cracking down maybe shows will become more popular again. Saving a 20% BP plus 8 or 9% on sales tax makes a big difference, especially on the bigger cards. Not to mention being able to see the card first and take it home the same day.

It's pretty hard to compete against collectors in states that don't have sales tax. That one extra bid they save at the end of an auction is often the difference between winning or losing a card. I've lost a few Memory Lane or Heritage auctions by one bid because once I factor in CA tax it's over my max.

[buymycards]

If you set up at card shows in Wisconsin, you are supposed to display a state sales tax permit and collect sales tax. I haven't heard of anyone actually trying to collect sales tax at a show, but I do have an up to date permit with me when I set up. My brother sets up at flea markets and he has seen Wis Dept of Revenue agents coming to flea markets and checking permits.

[bcornell]

[REMOVED] This forum is done.

[sreader3]

Originally Posted by bcornell

I think this is probably true. In the meantime, however, Heritage is still not charging sales tax to buyers in some states while they collect taxes from buyers in TX, NY, CA, IL and everywhere else they have a place of business. If I'm in Wyoming, for example, I'm not getting socked with a 7-10% additional fee for the same item. Not so fair, is it?

I'm loathe to comment, but there are always two remedies to "unfairness": Make EVERYONE do X or make NO ONE do X. One could just as easily eradicate this particular perceived injustice by insisting that NY, CA and IL change their laws rather than insisting that the remaining states change theirs.

[glchen]

Is this true for any auction house, not just Heritage? REA charges residents sales tax if you live in New Jersey. Memory Lane charges sales tax for California residents. Huggins and Scott does the same if you live in Maryland. This "net effective rate" isn't specific to Heritage. All auction houses abide by the same rules. The only difference for Heritage is that they have offices in more states, and therefore have to charge tax to all of these states where they have a physical presence.

[bcornell]

[REMOVED] This forum is done.

[BobC]

Hi Bill,

It is not the IRS that deals with sales tax, that is a state issue solely, at least as of now until someone tries to enact a national sales tax. Still, I don't disagree with you that currently the states aren't coming after small sellers and dealers because like the IRS, they don't always have the resources and the time. However, as I pointed out, with all the technological and digital advances occurring these days, it may not be too long before they can.

You are correct that Ebay has fought, and won, about nor having to collect sales tax on all sales activity on their site. That just means that they can't make Ebay responsible overall for sales tax collection and remittance. If you ever notice, you'll occasionally see a seller on Ebay that notes residents of a certain state(s) has to also include sales tax on their auction winnings or purchases. On Ebay, there is still the idea that it is just a forum for sellers and therefore, it is up to the individual seller to have to determine if they are liable for the sales tax, and then charge, collect and remit it accordingly. If you take a look at Amazon, you'll see a different story. Amazon acts as more of the overall seller and controller of transactions on their site, unlike Ebay, it is a true online retailer. Amazon also has been arguing for years now with various states that they have no physical presence or "nexus" in many of them that would otherwise require that they charge, collect and remit sales taxes. And they have continued to keep losing those arguments as to what actually constitutes "physical presence" within a state. The Supreme Court originally settled the argument for sales tax as requiring a "physical presence" in a state before the internet took off and muddled the idea what exactly constitutes such "physical presence" in the internet age. Here is an article from a couple years back talking about some of the issues and how Congress is even getting involved.

http://www.ocregister.com/articles/s...retailers.html

There is now something like 22 or 23 states that have required/forced Amazon to collect and remit sales taxes to them, and that number will only continue to go up so that eventually all online retailers like Amazon and Overstock are probably going to be collecting sales tax in every state that has one. For years, all the classic bricks and mortar retailers have been screaming about the unfair advantage Amazon and other online retailers have because they aren't forced to collect sales tax.

And at that point, all these online retailers will also start screaming, like the bricks and mortar retailers have been, that it is an unfair advantage that Ebay doesn't have to collect sales taxes in every state like they do. Now again, since Ebay operates differently than Amazon and other online retailers in supposedly only providing the forum for their sellers, they can get away with it and not themselves be directly liable for the sales taxes but, their sellers are still subject to sales tax laws. So what is there then to stop the states from going after Ebay, threatening them for being complicit in assisting their sellers to evade sales/use taxes, and using that leverage to force them to be the ones to collect and forward not the sales tax itself but, the data that is needed for those same states to then better police the collection and remittance of sales and use taxes? Ebay already has every buyer's name and address. How difficult do you think it would be for them to have to go back to all their customers and tell them that to maintain their accounts in the future they are now being forced to also sign and file a W-9 form giving their social security or FEIN number and business status to Ebay in order to continue buying on the site. And then, just like all the W-2s and 1099s these states already get from businesses across the country, they force Ebay to send them an electronic list of every customer, and the total of their purchases each year, that they can then cross reference against their tax records to make sure all those buyers properly remitted the Use Tax they were supposed to send in since they didn't get charged Sales Tax when they originally purchased their items on Ebay.

Oh yes, Ebay will still continue to lobby and fight this but, if you have all the bricks and mortar retailers, now along with all the online retailers, on the other side lobbying about EBay's unfair advantage, who do really think wins that battle of the pocket books?

And as for the argument that these are too small for the IRS to bother with, again, it is the states going after this not the IRS. The IRS has already forced Paypal to send them information on "large" Ebay sellers and others using Paypal to collect for their sales once they hit $20K in collections, and 200 or more transactions, in a single year. Here's the thing, that revenue being reported does not allow the IRS to easily determine what, if any, tax is due. The sellers need to file a return, including the costs of goods sold and all other operating expenses, to then determine what profit may have been earned, and then include that information, along with everything else a seller has tax-wise, on their federal tax return. Yes, that can be very involved and a lot of trouble and work for virtually nothing by the IRS. That is why they set the threshold at a minimum of $20K in collections, so they would only get information on larger retailers where there may actually be some tax due that it would make it worthwhile for the IRS to go after.

The same isn't true for sales/use tax though. That calculation is pretty simple, sales amount times the rate.....period! There are no offsetting costs of goods sold or other operating expenses. So if Ebay is made to send a list of what you bought off Ebay last year to your state so they could do a quick sales/use tax calculation and see if you paid any use tax, how difficult do you think that really is to police? The states aren't going to be the ones doing all the work, they'll make Ebay do it for them and provide them with the electronic files in a format they can work with.

And as for the states not doing this because it would be politically unfavorable, well that is simple also. All the states do is tell everyone they need money and that there are people currently who are not properly paying their taxes, in this case Use Taxes, and because of that we're either going to have to go after them or, raise everyone's taxes some other way, say through state income taxes. I know a lot of people buy things off Ebay but, do you really think they'll outnumber everyone else who doesn't want to see their state taxes raised in some way so others can continue to not pay the state Use Tax they are already supposed to be paying?

I'm not saying this is going to happen tomorrow, next week, next year or even within the next few years but, as time passes and technology continues to improve, it likely will happen at some point in the future.

As another poster noted, this could actually help to make shows and flea markets and such a more popular venue again. No electronic sales and records, cash transactions, etc. Time will tell...................

BobC