Hertiage Auction Net Effective Rate

[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

[Leon]

BobC
If all of that happens then people will navigate the waters just like they do today. Since there is no perfect system there will always be ways to exploit it if one wants to. And "exploit" doesn't always have to be a bad/illegal thing. Ask Warren Buffet about his tax rate..(as I am sure you know)

[Exhibitman]

There seems to be quite a bit of inaccurate information in this thread. Here is how it works on the ground:

Use tax and sales tax are the same thing: the difference is just over who sends the money to the state. Sales tax is transmitted ("remitted") by the seller, who either collects it from the buyer or absorbs it; use tax is remitted by the buyer.

I have a CA resellers permit, which requires me to collect and remit sales tax on in-state sales. When I list an item on eBay I list the sales tax rate for the state in the eBay listing tool. When a CA resident buys a card from me eBay adds the sales tax to the total the seller has to pay. I get the money. At the end of the year (I don't meet the volume threshold for quarterly returns and payments) I file a return electronically with the Board of Equalization where I list the amounts of CA and total sales I had and the utility on the state's web site calculates the tax. I then pay the tax that I collected or should have collected to the state.

There is also a line item on the sales tax return for use tax. I track the items I buy for my collection from AH's, eBay and the like as to which I have not paid sales tax, and I put them on a spreadsheet. At the end of the year when I do my sales tax return I pay the use tax. Is the system perfect? No. I probably miss some items over the year but I do my best to get it right.

Here's the thing everyone who is having kittens over paying the taxes on their card buys need to remember: if you scoff at the law and pay nothing and you are caught, you are lucky if you pay penalties and interest. A pure tax scofflaw can be referred out for criminal prosecution (Leona Helmsley, Wesley Snipes). That will really wreck your day. If you do your best to track and pay and you get audited and the auditor finds a mistake, you pay the tax and interest and penalties but the matter ends there. In the long run, it is better to pay the taxes you owe when you owe them and not sweat an extra several points on a freakin' baseball card, because if paying the taxes you owe on a card is a make or break financial issue for you, you need to step away from the bar and admit you have a problem.