2019 New Pinball purchase will be taxed.

This has definitely been on my mind lately. I have lots of customers in different states, mainly for tax reasons, but also because we have built a relationship. The way I understood the law was "if I (the seller) had a physical presence in the same state as you (the buyer) then I was required to collect the sales tax. On the other hand, if you (the buyer) were located in a different state then it was up to you to pay the tax. It's not that you never had to pay the tax, it was that I just never had to collect it.

Now, under the new laws, I'm am a glorified tax collector for the government. What does this mean for me as a distributor? Let me ask this instead. Let's say I make the 18 hour drive one way from my office to texas pinball fest. What advantages does a texas resident have to buy from me instead of from their local distributor? Other than offering extended warranties and exclusive stories about the superstar jjp designer?

I can see this new tax collection law increasing my local sales as now I am on the same price level as guys from out of state, but I can't see a reason (other than personal) for making the business journey to far away shows. I will probably still make the trip to tpf because I like the show and they (dallas) do not have a local JJP/Spooky distributor, but (as always) I encourage everyone to buy locally to support local dealers.

I ask the pinside crowd this. Would you still continue to buy from and out of state dealer if they had to collect sales tax from you (and charge a higher shipping rate)? I included the high shipping since shipping one game states away cost more than shipping a dozen games to my office where "local" buyers can pick them up? I have lot of pinball friends in lots of other states, but I would not blame any of them for choosing to buy locally if all else was equal.

Lots to think about in 2019.

Key post

#302 5 years ago

CCM

KingPinGames

Quoted from FightNightFZ:
Do you have to charge if a nexus is not setup in a particular state yet? Or if you don’t do the required volume of business in that state (by dollar amount or units)? I thought that was how it worked?

I'm working with my tax people to try to get some answers. Maybe some of the tax guys here can answer that for us.

#304 5 years ago

CCM

KingPinGames

So far I have only really looked at Illinois and Minnesota since that is the bulk of my out of state business (with Iowa and texas not too far behind). From what I see in the first two is that if I (as a company) have more than 100 individual sales or $100k in sales IN A 12 MONTH PERIOD (not a calendar year) then I am supposed to collect the state's sales tax. Well, with the cost of the machines that I sell, I exceed that pretty quickly. What I dont know is if that customer base will stay with me if I have to collect sales tax while a smaller volume distributor might not have to, therefore potentially making my sales figures drop under the threshold.

Fun time, fun times indead.

Key post

#317 5 years ago

CCM

KingPinGames

Quoted from cpr9999:
As far as distributors go, streamline costs and undercut other distributors (which may mean you take less profit) but you continue to take the sales. (Grow customer base - we call that market share).

Jjp, cgc and api all have contracts with their distributors that strictly forbid these practices. Any distributor caught breaking these contracts will no longer be a distributor.

I hope to grow local sales by having services available for local buyers. Extended warranties, in home service contracts, pinball maintenance seminars, etc. At the end of the day all distributors will have to adapt in order to survive this (and probably future) changes.

This will not only apply to nib games. Any brick and mortar store will be collecting tax on all potential sales.

Here's a tip for dealing with your local distributor. Trade ins will help. The value of the trade in is taken off of the price of the new game, and then tax is calculated on the remaining balance, therefore making the amount of taxes potentially collected lower. While most distributors can not offer retail prices for trade ins, the tax savings might make up (some) of that difference.

#320 5 years ago

CCM

KingPinGames

Quoted from Bryan_Kelly:
Here's another scenario. What if I've never met either of those thresholds and I've never collected sales tax. What happens if I now hit one of them. What do I do if I've never collected the tax? I certainly can't go back and collect it from customers on past sales. Would I then have to pay it out of my own pocket?

Yeah, those are the same questions I have asked my advisors

#467 5 years ago

CCM

KingPinGames

Also, this part not directed specifically at you but all distributors. How would this impact trade in's? Does anyone know if tax would only be paid on the difference (ala cars)? If so, it may change the resale market a bit as more people would be inclined to trade games in. I haven't as it was just to much of a difference before but this could tip that scale and make it a more reasonable solution for collectors.

From what I understand (and I am not a tax expert), this is exactly how it works. $6000 nib - $4000 trade in, leaves $2000 in taxable sales.

1 week later

#514 5 years ago

CCM

KingPinGames

Thanks Kurt, that follows along with most of what we have found too. it's going to be an adjusting year for both consumers and dealers.

#523 5 years ago

CCM

KingPinGames

Quoted from Whysnow:
looks like these are the states where distributors should set up?
Only distributor I know of off the top of my head that is from any of those states is Rob Anthony whom is a Spooky distributor (Montana is his home state I think?). Does that mean I could avoid sales tax if I order future Spooky games through him?

no, even the states that don't have sales tax will still have to collect it from the states that do. technically, even if you cross the border into a no sales tax state and bring the game back to your state (that does have a sales/use tax) you are still responsible for declaring that.

#568 5 years ago

CCM

KingPinGames