Was a licensed dealer's $20 fee for processing a prearranged private-party firearm transfer taxable?

Plain-English summary

The redacted business first asked whether it had to collect sales tax on private-party guns when its shop did the state paperwork. Tax Counsel Elizabeth Abreu assumed the guns were consigned, the business held them until sale, and it could transfer title without further owner action. Under those assumptions, Regulation 1569 made the business the retailer when a gun was sold at retail. Counsel enclosed the regulation and invited a detailed correction if the assumptions were wrong, but the enclosure is absent from the PDF.

The business's absent January 11 clarification said a legal change required private parties to sell firearms through licensed dealers and that it charged $20 simply to file Department of Justice paperwork. The February response described the cited statutes as allowing up to $10 plus the Department of Justice fee, requiring the dealer to retain and later deliver the firearm, and excluding antique firearms and specified federal curios or relics from the cited definition. If the private parties had already negotiated the sale and used the business only to meet those statutory requirements, the business was not the retailer and owed no tax on the $20 fee or the owner's other firearm charges.

If instead an owner brought in a firearm and asked the dealer to find a buyer, the dealer was a consignee and retailer. The firearm sale was taxable and all dealer fees entered the measure of tax.

The live annotation adds a later rule not explained in the supporting PDF: on and after January 1, 1999, the Department of Justice fee was not included in the tax measure, but all other charges remained taxable. It cites Amendment 99-2 without supplying the amendment, statutory authority, transition facts, or later history.

Citation and source structure

• California Penal Code sections 12072(c) and 12082 — described as requiring otherwise unlicensed private parties to complete a firearm sale through a licensed dealer and allowing a purchaser fee not exceeding $10 plus the Department of Justice fee; complete text, versions, and later history not supplied
• California Penal Code section 12001 — described as defining a firearm and excluding an antique firearm and specified federal curios or relics; complete text, federal definitions, versions, and later history not supplied
• California Sales and Use Tax Regulation 1569, “Consignees and Lienors of Tangible Personal Property for Sale” — cited for retailer treatment when the business possessed consigned guns and could transfer title without further owner action; the enclosure, complete text, version, and later history are not reproduced
• October 10, 1991 redacted assistant-manager letter asking whether the business had to collect sales tax on private-party guns when its shop did state paperwork — request, transaction records, agreements, firearm records, licenses, Department of Justice filings, fee schedules, invoices, and tax records not reproduced in the official PDF
• January 9, 1992 Tax Counsel Elizabeth Abreu response assuming consignment, possession until sale, and power to transfer title, concluding the business was retailer if the guns were sold at retail, and inviting correction — no copy of enclosed Regulation 1569 reproduced in the official PDF
• January 11, 1992 redacted clarification stating that the business only filed required Department of Justice paperwork after the law changed and charged a $20 fee — clarifying letter and supporting transaction records not reproduced in the official PDF
• February 20, 1992 Tax Counsel Elizabeth Abreu response distinguishing a prearranged private sale from a consignment in which the business found the buyer — no requester reply, audit, return, assessment, refund claim, appeal, or later outcome supplied
• Official Annotation 295.1675.600's statutory-paperwork, retailer-versus-consignee, all-fees, January 9 and February 20, 1992, and Amendment 99-2 rules, including its note that on and after January 1, 1999 the Department of Justice fee is excluded while all other charges remain taxable — annotation omits the three-letter provenance, initial assumptions and correction invitation, $20 fee, statutory $10-plus-DOJ cap and firearm definition, Regulation 1569 enclosure, absent records, later outcome, and reliance status and supplies no additional proceeding record

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-1675-600.pdf

Original ruling text

295.1675.600

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 324-8208
January 9, 1992
Mrs. M--- B--Assistant Manager
The F--- P--XXXX --- --- Avenue
--- ---, California XXXXX
Re:

Application of Sales Tax to Sales of Guns for Private Parties SR -- XX-XXXXXX

Dear Mrs. B---:
Your letter dated October 10, 1991, has been forwarded to me for a response. In your letter you state as follows: “We are writing to find out if we are required to collect sales tax on guns that are sold by private parties who use our shop to do the state paperwork.” We assume that these guns are sold by your business on consignment for the owners, that you have possession of the guns until they are sold, and that you have the power to transfer title to the guns to the buyer without any further action on the part of the owners. If this is the case, then you are the retailer of the guns if the guns are sold at retail, and your business is liable for the sales tax on these sales. (Regulation 1569, “Consignees and Lienors of Tangible Personal Property for Sale.”) If our assumptions are incorrect, please write to us and give us a detailed description of the sales your business makes for private parties. We are enclosing a copy of Regulation 1569 for your information. Sincerely,

Elizabeth Abreu
Tax Counsel
EA:cl
0543E
Enclosure

295.1675.600

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 324-8208

February 20, 1992

Mrs. M--- B--The F--- P--XXXX --- --- Avenue
--- ---, California XXXXX
Re:

Application of Sales Tax to Sales of Firearms
SR -- XX-XXXXXX

Dear Mrs. B---:
By letter January 11, 1992, you responded to my earlier letter in which I concluded that you were liable for sales tax as the consignee for sales of guns owned by private parties. In your January letter you state: “We provide a service to the public since the change in the law requiring private parties to sell firearms only through licensed dealers. This service is simply to file the required state paperwork to the Department of Justice, for which there is a fee of $20.00. Our question is, must we charge sales tax on the $20.00 fee? Or, is this a service charge, and therefore non-taxable?” We assume that the firearm statutes you are referring to are sections 12072(c) and 12082 of the Penal Code which provide that when neither party to a transaction for the sale of a firearm is a licensed dealer, the parties must complete their transaction through a licensed dealer. The seller must deliver the firearm to the dealer who retains possession until he or she follows certain statutory requirements. After the requirements have been met, the dealer delivers the firearm to the purchaser. The dealer may require the purchaser to pay a fee not to exceed $10 plus the fee which the Department of Justice may require. As used in these statutes, “firearm” means any device, designed to be used as a weapon, from which is expelled through a barrel a projectile by the force of an explosion or other form of combustion. It does not include an antique firearm or certain curios or relics as defined by federal law. Penal Code 12001.

Mrs. M--- B---

-2-

February 20, 1992
295.1675.600

Whether you are liable for sales tax on these transactions depends upon whether you are the retailer of the firearm. If an owner of a firearm and a purchaser have negotiated the terms of the sale in advance and then bring the firearm to you to meet the statutory requirements of the Penal Code, you are not the retailer of the gun and you do not owe tax on the $20 fee or the owner’s other charges for the firearm. If, however, an owner of a firearm brings the gun to you and requests you to find a buyer, you are the consignee and retailer of the firearm and are liable for sales tax on the sale. In that case, you must include all fees in the measure of tax. I hope this answers your question. If you have further questions regarding sale and use tax law, please do not hesitate to write again. Sincerely,

Elizabeth Abreu
Tax Counsel
EA:cl
0617E