By E.F. Nappen, Esq.
General Counsel and Board Member, Pro-Gun New Hampshire, Inc.
[Posted Saturday, July 24, 2010, at 9:00 a.m. This updates the version posted 7/23.] Effective January 1, 2012, the national healthcare legislation passed by Congress contains tax provisions that will require gun dealers to report to the IRS their purchases of guns and any other goods valued over $600. This reporting will be required for purchases from either individuals or corporations. The new IRS provisions apply to all goods and services. IRS 1099 forms will have to be filed, reporting the purchase by the gun dealer. (This same IRS issue exists for gold and silver bullion dealers, coin dealers, knife dealers, car dealers or any other business that buys goods from a person.)
It applies to all businesses who buy from "persons." If you sell your gun for over $600 to an FFL, the FFL must send in a 1099 on you which reports the sale by you to the IRS. It is not simply a "business to business" reporting requirement. (Which, even if it was, would still be bad for business.)
Sec. 6041 says:
"All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year" (Emphasis added)
This has the effect of creating a system of gun "sales to dealer" registration, controlled by the IRS. It also creates mountains of more paperwork for dealers who are already burdened with filling out 4473's, A&D (Acquisition and Disposition) Bound Books, receipts, and all the other paperwork associated with gun business. Even purchases made at gun shows or at people's homes by gun dealers will have to be reported. The current Form 1099 requires the buyer to state for what purpose the payment was made. (See: http://www.irs.gov/pub/irs-pdf/f1099msc.pdf and note blocks 1-14 of the 1099 form.) Who knows how the IRS will rewrite the new form and what more information will be demanded?
It is true that gun dealers already have to keep A&D books that require very specific information. However, the information is not centrally databased by the IRS. This new law creates a list of private gun sellers with the IRS. Also, FFL's who fail to file 1099's on folks who sold them guns and were paid over $600 may be caught during their license inspections by way of their A&D books. This will cause trouble for the gun dealer and tax trouble for the private seller.
Modern sport/utility (AR-15 type) rifles sell for over $600 even at used wholesale prices. Your quality tactical or custom handguns easily sell for over $600, and finding shotguns worth over $600 is not hard at all. $600 in ammunition is not a lot at today's prices. Even if the dealer buys a pile of clunkers but pays out over $600 to any person, the report to the IRS must be made. Ammunition, knives, parts, reloading equipment, accessories, or any other goods valued over $600 must be reported to the IRS. The bottom line is, sell your gun or other goods to a dealer for over $600 and it must be reported to the IRS by the dealer.
Rep. Dan Lungren has introduced a bill (H.R. 5141) to repeal this section.
Section 9006 of the bill amends Section 6041 of the Internal Revenue Code in the following way:
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) IN GENERAL.-Section 6041 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new subsections:
‘‘(h) APPLICATION TO CORPORATIONS.-Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person' includes any corporation that is not an organization exempt from tax under section 501(a).
‘‘(i) REGULATIONS.-The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.''.
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.-
Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended-
(1) by inserting ‘‘amounts in consideration for property,'' after ‘‘wages,'',
(2) by inserting ‘‘gross proceeds,'' after ‘‘emoluments, or other'', and
(3) by inserting ‘‘gross proceeds,'' after ‘‘setting forth the amount of such''.
(c) EFFECTIVE DATE.-The amendments made by this section shall apply to payments made after December 31, 2011.
(a) Payments of $600 or more
All persons engaged in a trade or
business and making payment in the course of such trade or business to another
person, of rent, salaries, wages, premiums, annuities, compensations,
remunerations, emoluments, or other fixed or determinable gains, profits, and
income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e),
6049(a), or 6050N(a) applies, and other than payments with respect to which a
statement is required under the authority of section 6042(a)(2), 6044(a)(2), or
6045), or $600 or more in any taxable year, or, in the case of such payments
made by the United States, the officers or employees of the United States
having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.