Calif. sales tax exemption - occasional sale

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Subject Author Date Calif. sales tax exemption - occasional sale Mark Bole 08-09-2009  Re: Calif. sales tax exemption - occasional sale D. Stussy 08-10-2009  Re: Calif. sales tax exemption - occasional sale Alan 08-10-2009  Re: Calif. sales tax exemption - occasional sale Wallace 08-10-2009  Re: Calif. sales tax exemption - occasional sale Mark Bole 09-10-2009  Re: Calif. sales tax exemption - occasional sale Tom Russ 09-11-2009  Re: Calif. sales tax exemption - occasional sale removeps-groups@yahoo.com 09-14-2009  Re: Calif. sales tax exemption - occasional sale Stuart A. Bronstein 09-14-2009  Re: Calif. sales tax exemption - occasional sale removeps-groups@yahoo.com 09-14-2009  Re: Calif. sales tax exemption - occasional sale Stuart A. Bronstein 09-14-2009  Re: Calif. sales tax exemption - occasional sale Bob Sandler 09-14-2009  Re: Calif. sales tax exemption - occasional sale Stuart A. Bronstein 09-15-2009  Re: Calif. sales tax exemption - occasional sale removeps-groups@yahoo.com 09-15-2009  Re: Calif. sales tax exemption - occasional sale removeps-groups@yahoo.com 09-15-2009  Re: Calif. sales tax exemption - occasional sale Robert Sandler 09-15-2009  Re: Calif. sales tax exemption - occasional sale Mark Bole 09-15-2009  Re: Calif. sales tax exemption - occasional sale Stuart A. Bronstein 08-11-2009
Posted by Mark Bole on August 9, 2009, 7:27 pm Please log in for more thread options I find what looks to me like some possibly circular or undefined language regarding this, just curious if I'm making a mountain out of a molehill... Scenario: California resident has a collection of items acquired for personal use over many years -- for example, comic books, toys, records, or video tapes. Now he begins to sell the items via a website, say E-Bay or something similar. The website collects a listing commission from the seller for each item sold. The seller invoices the buyer directly and ships the item directly. For the seller, this is a hobby, he doesn't particularly care if he ever sells everything, it's just an alternative to way to clear out his garage without just tossing or giving away the items. In fact, it's basically a virtual, on-line garage sale. Suppose he sells anywhere from 10-40 items in the first year, at an average of $5/item plus shipping costs. Is he required to collect sales tax from residents of California? Would the answer change if he sold 100 items at an average of $10/item (sales tax if all sold in California would be $92)? In other words, what is the cutoff, especially when he doesn't really know in advance how many items he will sell, or when? Would the answer be any different if he set up his own web site to list the items? Finally, assuming the owner paid CA sales tax himself when most of these items were originally purchased, but many years ago at a much lower rate than the current one, how would that affect the ultimate result, if at all? >>>>>> From BOE Pub 61 <<<<<<<<<<<<<< "OCCASIONAL SALES — A sale by (and purchase from) a person who is not engaged in a business requiring a seller’s permit is exempt from sales and use taxes. These types of sales are “occasional” sales (some states have similar exemptions for “casual” sales). Generally, a person who makes three or more sales for substantial amounts in any period of 12 months is required to hold a seller’s permit. A person who makes a substantial number of sales for relatively small amounts is also required to hold a seller’s permit. [...] A person holding two garage sales with no other sales in any 12 month period in which the garage sales are held are regarded as making exempt occasional sales." >>>>>> CA Rev. Tax. Code <<<<<<<<<<<<<< "6006.5. "Occasional sale" includes all of the following: (a) A sale of property not held or used by a seller in the course of activities for which he or she is required to hold a seller's permit or permits or would be required to hold a seller's permit or permits if the activities were conducted in this state, provided that the sale is not one of a series of sales sufficient in number, scope, and character to constitute an activity for which he or she is required to hold a seller's permit or would be required to hold a seller's permit if the activity were conducted in this state." (this sounds like a circular definition of who is required to have a seller's permit to me...) -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by D. Stussy on August 10, 2009, 5:04 pm Please log in for more thread options > I find what looks to me like some possibly circular or undefined > language regarding this, just curious if I'm making a mountain out of a > molehill... > > Scenario: California resident has a collection of items acquired for > personal use over many years -- for example, comic books, toys, records, > or video tapes. Now he begins to sell the items via a website, say E-Bay > or something similar. The website collects a listing commission from > the seller for each item sold. The seller invoices the buyer directly > and ships the item directly. > > For the seller, this is a hobby, he doesn't particularly care if he ever > sells everything, it's just an alternative to way to clear out his > garage without just tossing or giving away the items. In fact, it's > basically a virtual, on-line garage sale. > > Suppose he sells anywhere from 10-40 items in the first year, at an > average of $5/item plus shipping costs. Is he required to collect sales > tax from residents of California? Would the answer change if he sold > 100 items at an average of $10/item (sales tax if all sold in California > would be $92)? In other words, what is the cutoff, especially when he > doesn't really know in advance how many items he will sell, or when? > Would the answer be any different if he set up his own web site to list > the items? > > Finally, assuming the owner paid CA sales tax himself when most of these > items were originally purchased, but many years ago at a much lower rate > than the current one, how would that affect the ultimate result, if at all? > > >>>>>> From BOE Pub 61 <<<<<<<<<<<<<< > > "OCCASIONAL SALES — A sale by (and purchase from) a person who is not > engaged in a business requiring a seller’s permit is exempt from sales > and use taxes. These types of sales are “occasional” sales (some states > have similar exemptions for “casual” sales). Generally, a person who > makes three or more sales for substantial amounts in any period of 12 > months is required to hold a seller’s permit. A person who makes a > substantial number of sales for relatively small amounts is also > required to hold a seller’s permit. [...] A person holding two garage > sales with no other sales in any 12 month period in which the garage > sales are held are regarded as making exempt occasional sales." > > >>>>>> CA Rev. Tax. Code <<<<<<<<<<<<<< > > "6006.5. "Occasional sale" includes all of the following: > (a) A sale of property not held or used by a seller in the course > of activities for which he or she is required to hold a seller's > permit or permits or would be required to hold a seller's permit or > permits if the activities were conducted in this state, provided that > the sale is not one of a series of sales sufficient in number, > scope, and character to constitute an activity for which he or she is > required to hold a seller's permit or would be required to hold a > seller's permit if the activity were conducted in this state." > > (this sounds like a circular definition of who is required to have a > seller's permit to me...) A literal reading is that sales via eBay are not exempt under the "garage sale" rule, and his frequency of sales exceeds the "occasional sale" rule. Even though these are used items where sales tax has already been paid once, they may not be exempt from sales tax again. Maybe he should hold a real garage sale instead of online sales. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Alan on August 10, 2009, 5:22 pm Please log in for more thread options Mark Bole wrote: > I find what looks to me like some possibly circular or undefined > language regarding this, just curious if I'm making a mountain out of a > molehill... > > Scenario: California resident has a collection of items acquired for > personal use over many years -- for example, comic books, toys, records, > or video tapes. Now he begins to sell the items via a website, say E-Bay > or something similar. The website collects a listing commission from > the seller for each item sold. The seller invoices the buyer directly > and ships the item directly. > > For the seller, this is a hobby, he doesn't particularly care if he ever > sells everything, it's just an alternative to way to clear out his > garage without just tossing or giving away the items. In fact, it's > basically a virtual, on-line garage sale. > > Suppose he sells anywhere from 10-40 items in the first year, at an > average of $5/item plus shipping costs. Is he required to collect sales > tax from residents of California? Would the answer change if he sold > 100 items at an average of $10/item (sales tax if all sold in California > would be $92)? In other words, what is the cutoff, especially when he > doesn't really know in advance how many items he will sell, or when? > Would the answer be any different if he set up his own web site to list > the items? > > Finally, assuming the owner paid CA sales tax himself when most of these > items were originally purchased, but many years ago at a much lower rate > than the current one, how would that affect the ultimate result, if at all? > > >>>>>> From BOE Pub 61 <<<<<<<<<<<<<< > > "OCCASIONAL SALES — A sale by (and purchase from) a person who is not > engaged in a business requiring a seller’s permit is exempt from sales > and use taxes. These types of sales are “occasional” sales (some states > have similar exemptions for “casual” sales). Generally, a person who > makes three or more sales for substantial amounts in any period of 12 > months is required to hold a seller’s permit. A person who makes a > substantial number of sales for relatively small amounts is also > required to hold a seller’s permit. [...] A person holding two garage > sales with no other sales in any 12 month period in which the garage > sales are held are regarded as making exempt occasional sales." > > >>>>>> CA Rev. Tax. Code <<<<<<<<<<<<<< > > "6006.5. "Occasional sale" includes all of the following: > (a) A sale of property not held or used by a seller in the course > of activities for which he or she is required to hold a seller's > permit or permits or would be required to hold a seller's permit or > permits if the activities were conducted in this state, provided that > the sale is not one of a series of sales sufficient in number, > scope, and character to constitute an activity for which he or she is > required to hold a seller's permit or would be required to hold a > seller's permit if the activity were conducted in this state." > > (this sounds like a circular definition of who is required to have a > seller's permit to me...) > > -Mark Bole > I think the only people who can answer your primary question are the people who know how the CA BOE defines the word "substantial." As to the secondary question, the fact that sales tax had been paid when the item was purchased has no relevancy. The same item can be taxed every time it gets resold. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Wallace on August 10, 2009, 11:33 pm Please log in for more thread options > > As to the secondary question, the fact that sales tax had been paid when > the item was purchased has no relevancy. The same item can be taxed every > time it gets resold. Goods purchased for resale, and for which sales tax is paid, results in a credit of some sort on the sales tax return. Perhaps that doesn't apply here, where the goods were bought for personal use, then resold. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on September 10, 2009, 10:27 pm Please log in for more thread options Wallace wrote: >> As to the secondary question, the fact that sales tax had been paid when >> the item was purchased has no relevancy. The same item can be taxed every >> time it gets resold. > > Goods purchased for resale, and for which sales tax is paid, results in a > credit of some sort on the sales tax return. Perhaps that doesn't apply > here, where the goods were bought for personal use, then resold. > FWIW, the answer I found is: it depends on whether there was personal use after the prior sales tax was paid. Seems to agree with the above. Scenario 1: items are purchased, sales tax paid, items are immediately wrapped and put into storage as inventory for future sale. This sales tax offsets the sales tax to be collected upon sale (not sure how changes in rates between purchase and sale are handled). Scenario 2: items are purchased, sales tax paid, items are used personally. Over time, items are stored and then sold. Because there was personal use, the prior sales tax paid has no effect upon future sales tax. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Home sale exemption? ? ? August 14, 2009, 6:34 pm Sale of Main Home - $500,000 Exemption November 15, 2006, 10:06 pm Gross sales and services on NYS Sales Tax form ST-101? 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