PWCC expands its lending activities

[Rhotchkiss]

Originally Posted by Peter_Spaeth

I do think many people use the vault option to avoid taxes and take their cards out of the vault very quickly, and then fail to pay their state the taxes that automatically would have been collected by ebay.

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.

[Peter_Spaeth]

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.

I believe it is up to the individual to pay state use tax, I can't see how that is the vault owner's burden.

[raulus]

Originally Posted by Peter_Spaeth

I believe it is up to the individual to pay state use tax, I can't see how that is the vault owner's burden.

I’m guessing it’s just a matter of time until CA and other states get wise to the vaults and start requiring reporting to get their use tax from the collector. I just don’t see the states being willing to forego that much revenue without a fight.

[glchen]

Originally Posted by raulus

I’m guessing it’s just a matter of time until CA and other states get wise to the vaults and start requiring reporting to get their use tax from the collector. I just don’t see the states being willing to forego that much revenue without a fight.

If the Feds or states wanted to collect more taxes, it'd probably be easier for them to extend to PWCC and auction houses to send 1099s to consignors who sell over $600 like they already do for ebay.

[Rhotchkiss]

Phil, I agree with you 100% that this is likely not a good deal for the borrowers. And I also agree that it’s real good to be the lender on this one. Nevertheless, the arrangement provides liquidity for a relatively illiquid asset and I feel consenting adults should be able to transact however they choose, even if it’s more dangerous for one party. And, I believe that people should be responsible for their actions- if you are a big enough boy to buy a card and borrow against it, then don’t bitch when you lose your card to pay back the lender.

Regarding a propped up industry, this does smack of the Big Short in many ways (in a mini sense). Similarly, a super-high stock market propped up by buyers on margin loans. It most definitely appears that this will have an unhappy ending for some; I suspect most own the shiny stuff. But that’s how we learn and grow. Maybe it takes some pain to get regulation and oversight. Ultimately, these loans have utility.

[Casey2296]

Originally Posted by Rhotchkiss

Phil, I agree with you 100% that this is likely not a good deal for the borrowers. And I also agree that it’s real good to be the lender on this one. Nevertheless, the arrangement provides liquidity for a relatively illiquid asset and I feel consenting adults should be able to transact however they choose, even if it’s more dangerous for one party. And, I believe that people should be responsible for their actions- if you are a big enough boy to buy a card and borrow against it, then don’t bitch when you lose your card to pay back the lender.

Regarding a propped up industry, this does smack of the Big Short in many ways (in a mini sense). Similarly, a super-high stock market propped up by buyers on margin loans. It most definitely appears that this will have an unhappy ending for some; I suspect most own the shiny stuff. But that’s how we learn and grow. Maybe it takes some pain to get regulation and oversight. Ultimately, these loans have utility.

Agreed. Institutional lending on collectibles has been around for a long time but the asset class is more mature. It's one thing to have a Monet sitting in a Bank vault as collateral, another having a Luka Doncic sitting in an AH vault.

Sports cards as an asset class is very, very young, with that comes a lot of volatility and risk, and as an asset class leans more towards the stock market model than the Art market. How are those NFT's working out for ya'? Meme stocks? Crypto? Sometimes we're not as smart as we think we are and it's never a good idea to over leverage an asset class to buy more of the same asset class. There will be some investors that may use this tool wisely but there will be plenty who don't.

Live and learn though.

[Rhotchkiss]

Originally Posted by Peter_Spaeth

I believe it is up to the individual to pay state use tax, I can't see how that is the vault owner's burden.

I am sure there is something agency or bailment law that states could use to impose some burden on the vault. I know it’s somewhat different, but if eBay has to issue 1099s to anyone who sells more than $600 (or something like that), than I am sure “they” can find a way to make a vault collect sales taxes on item received and released within a certain period.

It’s a brave new world. It will be interesting to see how this shakes out. The states love all of this new revenue. They will fight hard to ensure it if they start losing enough to vaults.

Personally, I don’t think state sales taxes should be due on items bought for investment. We don’t pay sales tax on stock, bonds, and precious metals in many states. Why cards held for investment? We don’t “use” or consume cards.

[Peter_Spaeth]

Originally Posted by Rhotchkiss

I am sure there is something agency or bailment law that states could use to impose some burden on the vault. I know it’s somewhat different, but if eBay has to issue 1099s to anyone who sells more than $600 (or something like that), than I am sure “they” can find a way to make a vault collect sales taxes on item received and released within a certain period.

It’s a brave new world. It will be interesting to see how this shakes out. The states love all of this new revenue. They will fight hard to ensure it if they start losing enough to vaults.

Personally, I don’t think state sales taxes should be due on items bought for investment. We don’t pay sales tax on stock, bonds, and precious metals in many states. Why cards held for investment? We don’t “use” or consume cards.

I meant that under current law there is no such burden. Absent some constitutional impediment there can always be new laws and regulations.

[Kidnapped18]

I think this is great news! PWCC saw a need and filled it for their customers. I have never had a problem with PWCC and still use their platform to purchase cards most recently this week. I even have a handful of cards in the Vault. I know not all on this board agree with or deal with PWCC but I like the loan concept and cards as collateral.

FWIW PWCC collects state taxes when you pay for the items and have them shipped to you.

[Peter_Spaeth]

Originally Posted by Kidnapped18

I think this is great news! PWCC saw a need and filled it for their customers. I have never had a problem with PWCC and still use their platform to purchase cards most recently this week. I even have a handful of cards in the Vault. I know not all on this board agree with or deal with PWCC but I like the loan concept and cards as collateral.

FWIW PWCC collects state taxes when you pay for the items and have them shipped to you.

As seller, but not when you buy a card off ebay and have it shipped to the vault, as I understand it.

[Schlesinj]

I know the Alt platform announced they would be offering a similar program several months ago. If I remember correctly the rate was nearly 10% and the loan to value was something like 60% of perceived value.

So now people can leverage off their house value or stock portfolio or sports collectibles or some type of unsecured loan. You can buy a fraction of a stock, baseball card or a house too. Very interesting times we live in.

[Casey2296]

Two words: Leverage and betting on the come.

It's a nice lending model and very profitable, the risk is all on you and the asset. When the chips are down they don't even have to come after you, they just lock down your asset which they already have in their possession. I'm in lending and I would love to read the fine print on this program and would probably participate in it as a lender.

You have a collection of cards that are valued at today's value but if your precious 48 Jackie drops in value I'm keeping your card and you owe me money and I'll come get it.

Same model as mortgage backed securities in 2008, or putting 20k in card purchases on you credit card and not doing the math. My vote is no if you want to sleep at night.

[raulus]

Originally Posted by Casey2296

Two words: Leverage and betting on the come.
.

Makes me wonder how much in these loans is outstanding.

Certainly if there’s a lot out there, then that just further raises the odds that a significant downturn leads to forced liquidations and a downward spiral.

[Casey2296]

Originally Posted by raulus

Makes me wonder how much in these loans is outstanding.

Certainly if there’s a lot out there, then that just further raises the odds that a significant downturn leads to forced liquidations and a downward spiral.

It's a fools errand.

[Republicaninmass]

Originally Posted by Peter_Spaeth

It won't happen unless someone makes it happen. Who is that someone?

Originally Posted by Schlesinj

I know the Alt platform announced they would be offering a similar program several months ago. If I remember correctly the rate was nearly 10% and the loan to value was something like 60% of perceived value.

So now people can leverage off their house value or stock portfolio or sports collectibles or some type of unsecured loan. You can buy a fraction of a stock, baseball card or a house too. Very interesting times we live in.

This will have the same effect as "negative AM" loans and 100% financing did on the housing market, which led to great financial crisis. I just don't think it will wreak havoc any further than the hobby itself. Although a little different to the hype when I was collecting in the 80s, it certainly does rhyme.

[Casey2296]

[QUOTE=Schlesinj;2261823If I remember correctly the rate was nearly 10% and the loan to value was something like 60% of perceived value.[/QUOTE]

That would be my model, although 60% might be a little high. You can also do a deep dive and offer 8% on Ruth, Gehrig, Cobb, etc. and 12% on the shiny stuff, adjusting the ltv accordingly.

[mrreality68]

It could make the collecting market interesting and it could lure alot of people to their vault that might not normally go to them.

For example. Collectors like me tend to miss out on some great items that we need to have (really I want but we are addicted). Sadly not liquid enough and miss out alot and I know i can pay things back most times fast but I cannot buy the item do to lack of funds. IF I put it in their vault. WHICH I AM NOT CURRENTLY CONSIDERING. I would have the funds available so if a "must have" came available I could get it and not miss out.

That could be a strong incentive.

[raulus]

Originally Posted by mrreality68

Sadly not liquid enough and miss out alot and I know i can pay things back most times fast but I cannot buy the item do to lack of funds.

Unless I’m misunderstanding the offer, you would still need to put 40% down up front. Obviously 40% is less than 100%, but for nice pieces that don’t come cheap, it might be similarly challenging to come up with 40% as to come up with 100%.

If you’re not buying from PWCC directly, it’s also unclear to me whether PWCC would front you the cash to buy it from someone else. If you’re buying an item from another auction house, then I suspect you would need to pay 100%, have it shipped to the vault, and then you could borrow the 60% against it.

Bottom line is that I’m not sure that it solves the problem of coming up with the cash to pay for the item in the first place.

Now, if you had a bunch of items in the vault, and you wanted to go out and buy some more, then borrowing against the items in the vault definitely could solve the problem of coming up with cash to make the original purchase for your new item(s).

[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.

[oldjudge]

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.

Thinking back to my tax class that is tax evasion. Tax avoidance is good, tax evasion is breaking the law.

tax avoidance—An action taken to lessen tax liability and maximize after-tax income. tax evasion—The failure to pay or a deliberate underpayment of taxes.

[BobC]

Originally Posted by oldjudge

Thinking back to my tax class that is tax evasion. Tax avoidance is good, tax evasion is breaking the law.

tax avoidance—An action taken to lessen tax liability and maximize after-tax income. tax evasion—The failure to pay or a deliberate underpayment of taxes.

Absolutely correct Jay. Had often told clients, tax evasion is a crime, but tax avoidance is your constitutional and God given right. LOL

In Ryan's defense, I'm guessing he just mixed up the terminology and was referring to the idea of people using a vault purposely to get out of paying sales tax. And doing so by almost immediately pulling out cards they had sent to a vault and having them sent to their residence.

However, as Peter later pointed out, I don't believe it would be the vault company's responsibility to ever collect and remit sales taxes to any state on behalf of a card's owner. The vault company only provides a storage service, and to my knowledge has nothing to do with actual sale or purchase of items, nor in the handling of any monies involved in such sales. In the case of PWCC and Goldin, who both provide vault services, I believe their vault operations are set up as/in completely different business entities from their auction/sales businesses. It would be stupid business practice to have their different operations all in one single entity, and I don't think either of them are stupid by any means. As Peter stated, it would most likely be considered a use tax owed by the individual who bought the card and then took it out of a vault right away to add to their personal collection at their home. How a state is going to find out about such individuals who may may be abusing this practice, remains to be seen.

[Snowman]

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.

When I tried to have cards from my vault sent to my home address in CA, PWCC told me they would have to charge me sales tax unless I could provide them with a CA state resale permit.

[Peter_Spaeth]

Originally Posted by Snowman

When I tried to have cards from my vault sent to my home address in CA, PWCC told me they would have to charge me sales tax unless I could provide them with a CA state resale permit.

Interesting. PWCC isn't making a sale, so I am surprised they feel obligated to do that. I thought sales tax was only collected in connection with a sale.

[Mark17]

Originally Posted by Peter_Spaeth

Interesting. PWCC isn't making a sale, so I am surprised they feel obligated to do that. I thought sales tax was only collected in connection with a sale.

Suppose Biff, in Portland Oregon, registers an LLC called "The Weigh Station, LLC." The service he provides collectors and investors is, he weighs their collectibles.

So, you live in CA and ask PWCC to send your $100,000 worth of stuff. PWCC says they'll need to collect about $8,000 for the state of CA for sales tax. You say, no, you want it sent to Biff in Oregon, which has no sales tax. Biff receives your stuff, weighs it, charges you $50.00 plus the cost of shipping, and sends you your stuff along with a note saying how much it weighs. He collects no sales tax since he wasn't involved in a sale - he simply rendered a service (just like PSA does when they grade cards.)

If Biff can weigh and ship 20 packages a day, he can make something north of $250k a year. And all he needs is to live near a post office, or Fedex or UPS outlet, and have a bathroom scale.

[raulus]

Originally Posted by Snowman

When I tried to have cards from my vault sent to my home address in CA, PWCC told me they would have to charge me sales tax unless I could provide them with a CA state resale permit.

There you go. Even the good folks at PWCC are above aiding and abetting tax evasion.

And if it also happens to mean that now you're locked into their system, then I guess they won't complain too much about it.

[Mark17]

Originally Posted by Snowman

When I tried to have cards from my vault sent to my home address in CA, PWCC told me they would have to charge me sales tax unless I could provide them with a CA state resale permit.

If that's the case, then people have a substantial disincentive to remove their items from the vault. I can see investors deciding to just leave their inventory there, for PWCC to eventually sell for them, rather than having a major AH sell them, factoring in the hit when removed from PWCC's vault.

As far as borrowing money using inventory in the vault as collateral, I wonder what would (will) happen when the market on a lot of stuff takes a corrective dip. Capital calls to restore the collateral percentage?

[Peter_Spaeth]

Originally Posted by Mark17

If that's the case, then people have a substantial disincentive to remove their items from the vault. I can see investors deciding to just leave their inventory there, for PWCC to eventually sell for them, rather than having a major AH sell them, factoring in the hit when removed from PWCC's vault.

As far as borrowing money using inventory in the vault as collateral, I wonder what would (will) happen when the market on a lot of stuff takes a corrective dip. Capital calls to restore the collateral percentage?

You would think PWCC would not necessarily use current market prices to value collateral, but who knows.

[Peter_Spaeth]

Originally Posted by Snowman

When I tried to have cards from my vault sent to my home address in CA, PWCC told me they would have to charge me sales tax unless I could provide them with a CA state resale permit.

I wonder how many people are using the vault on the assumption they won't have to pay sales tax, ever, unless they volunteer it.

Has this happened to anyone else? As a friend points out to me, wouldn't this be a huge story in the hobby if the vault no longer avoided sales tax?

[Leon]

Originally Posted by Peter_Spaeth

I wonder how many people are using the vault on the assumption they won't have to pay sales tax, ever, unless they volunteer it.

Has this happened to anyone else? As a friend points out to me, wouldn't this be a huge story in the hobby if the vault no longer avoided sales tax?

There would be no more vault.
.

[Peter_Spaeth]

Originally Posted by Leon

There would be no more vault.
.

That's why Travis' comment really surprised me. I mean even if it's only California requiring PWCC to collect taxes on items it ships out of the vault, that is huge.

[Peter_Spaeth]

https://www.youtube.com/watch?v=PSxihhBzCjk

[raulus]

Not sure if the same deal is being offered to everyone, because the website lists one set of terms, and over email they're telling me some different details.

But over the last couple of days, I've exchanged emails with the lending team, and for those interested, these are the details I've received to date:

The original email details:

• Vault Loans – PWCC offers loans on a portfolio's conservative market value, using their trading card assets as collateral. We loan up to 40% of asset value at an interest rate of 1% per month in a 60-day term with optional renewal. A 1% origination fee may apply on these.
• Cash Advances – You can request a cash advance for up to 50% of the conservative market value of items you’re sending to auction. (more possible upon approval)

My queries over email (and their responses):

Q: Quick question for you about the 60-day loan term outlined below. What does optional renewal mean?

A: It means you can re-up the loan with new terms or you can pay it off in full.

Q: Is it a mutual option, or is it at my sole option?

A: Your sole option.

Q: You mentioned “new terms”. Does this mean that the interest rate get re-priced at then-prevailing rates if I re-up the loan?

A: No response yet.

Some commentary from me:

Obviously for a borrower who is borrowing on a 60-day loan, the paranoia is that the lender won't extend your loan, at which point either you need to come up with the cash to pay it off, or else they sell your cards. Or alternatively, if they do extend the loan, they will only extend it at onerous rates and terms. I'm not planning to use this product myself, but for those who do, I'd be interested in your experience, particularly around renewing the loan when the 60-day term is up.