The California Coin and Bullion Merchants Association (CCBMA) is taking a stand against the California Department of Tax and Fee Administration (CDTFA) for its failure to notify dealers about significant changes to the sales tax threshold after CDTFA imposed penalty assessments on dealers who were unaware of the increase when filing their quarterly reports.
After reviewing inflation data in October 2022, the state of California increased its exemption threshold for sales and use tax on bulk sales of monetized bullion, nonmonetized gold or silver bullion, and numismatic coins from $1,500 to $2,000, effective January 1, 2023. However, the lack of communication about the change and untimely updates have caused confusion and potential penalties for affected parties.
The issue came to light when a San Diego coin and bullion dealer contacted the National Coin and Bullion Association (NCBA) seeking clarity on NCBA’s position regarding the new penalty assessment from the CDTFA. This was the first NCBA had heard of the threshold adjustment, raising concerns about the lack of communication from the regulatory agency. Further investigation by NCBA revealed the lack of notification and awareness was common among California dealers, and no information was easily found on the CDTFA website regarding the threshold changes. Reviewing the relevant statute and regulations showed that while CDTFA had the authority to adjust the thresholds based on inflation, it had neglected to update the public records to reflect the change.
The absence of proper notification and the failure to update the relevant texts have had severe implications for affected parties. Notably, California coin and bullion business owners and CCBMA were left in the dark about the threshold changes, resulting in thousands of dollars in taxes and penalties for misreporting sales in 2023.
Because of the lack of notification, CCBMA representatives argue that the effective date of the adjustment should have been January 1, 2024.
To clarify the effective date of the change and rectify the situation, CCBMA has been actively communicating with the CDTFA about the issue. CCBMA is committed to resolving these issues amicably but is prepared to pursue legal action if necessary to protect the rights and interests of affected dealers.
In discussions with CDTFA, CCBMA sought clarity on how its members should proceed. CCBMA received an unofficial statement from CDTFA assuring them that relief from interest and/or penalties may be available for taxpayers who incur any penalties or interest related to sales of coins and bullion during the affected periods.
CCBMA encourages affected taxpayers to reach out to CDTFA to discuss their circumstances and find the best resolution for their specific issues.
The CDTFA has issued a special notice on its website, “Exemption Threshold for Bulk Sales of Monetized Bullion, Nonmonetized Gold or Silver Bullion, and Numismatic Coins Increased to $2,000,” (link: PDF) that addresses this issue in part. Moreover, CDTFA has also informed CCBMA that legislation is pending to change the effective date of future threshold increases to July 1. CCBMA is hopeful that it will provide clarity and prevent similar issues from arising again.
