New York State Tax Department Provides Guidance for Firearm Retailers

Thursday, April 26th, 2012

New York

The New York Department of Taxation and Finance (DTF) recently issued an advisory opinion addressing the taxability of services provided by gun dealers in the state. N.Y. Advisory Op. of the Commr. of Taxn. and Fin. TSB-A-12(8)S (Apr. 13, 2012).

The petitioner, a New York Federal Firearms Licensee (FFL), occasionally transfers firearms from out-of-state sellers (who are also FFLs) to purchasers who are New York residents. This happens because the federal Gun Control Act (GCA) prohibits transporting a firearms across state lines, so when New York resident purchases a gun from an out-of-state FFL, the gun must first be shipped to an FFL located in New York. At that point, the in-state FFL contacts the National Instant Criminal Background Check System (NICS) in order to perform the required background check on the buyer. The NICS does not charge a fee for the background check. Once the buyer passes the required background check and meets all other legal requirements for gun possession (e.g., mandatory waiting periods), the in-state FFL prepares a bill of sale noting that the customer already remitted payment for the gun to the out-of-state FFL. The in-state FFL may charge the purchaser a fee in exchange for these services.

Thus, the petitioner needed know if he was required to collect sales or use tax when he transferred a firearm purchased from an out-of-state FFL to a purchaser in the state. Based on the facts presented to the DTF, the petitioner is not required to collect sales or use tax on either the sale of the gun or any administrative fees charged for services performed.

State sales tax is imposed on the sale at retail of tangible personal property (N.Y. Tax Law sec. 1105(a)). The petitioner in this instance would not have to collect sales tax on the price of the gun because he did not actually sell the gun to the purchaser. The out-of-state FFL would be required to collect sales or use tax from the purchaser at the time of sale. As for the petitioner's charge to the purchaser for services performed, only certain enumerated services are subject to tax in New York. Requesting the NICS complete a background check and any additional services performed in accordance with federal, state, and local gun laws are not specifically listed as taxable. Therefore, the petitioner will not be required to collect sales tax in regards to those charges.

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