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coin and bullion sales tax

By Ron Drzewuckiwww.moderncoinwholesale.com ….
 

There’s no denying that the internet has changed our world dramatically over the last 20 years. When describing the impact that it’s had on our lives–and not just in the United States but all over the world–socially, economically and culturally, “revolutionary” is not too strong a word. What might have once involved fees, middlemen, “six to eight weeks for delivery”, or travel to a place of business in another state can now be accomplished directly in a matter of minutes from the comfort of your own living room (or even a McDonald’s).

This is especially true for the coin and bullion industry. While a strong and thriving mail-order business has long existed, the internet has greatly expanded the consumer base, allowing more and more people to take advantage of the wealth protection that bullion and precious metals provides. It has also allowed dealerships to grow in ways not possible two decades ago.

But while the internet has been a boon to consumers and dealers alike, governments and municipalities around the world have often struggled to come to terms with the new business model–especially when it comes to taxation.

In the U.S., sales tax is levied on a state and local level, so there is no one rule that fits all precious metal purchases. The complications wrought by conflict between the tax laws applying to the buyer versus the tax code applicable in the dealer’s location is inefficient and confusing at best, and inhibiting or even legally problematic at worst.

So to help our customers achieve a better understanding of the issue, Modern Coin Wholesale is happy to announce a new series of blog posts dedicated to a state-by-state breakdown of the relevant tax law pertaining to the sale and purchase of coins and bullion products.

As we do so from week to week, please keep in mind that Modern Coin Wholesale is not qualified to dispense legal advice and we are not at any time advocating a particular course of action. We are also not tax professionals. We merely wish to present this information in a relatively easy-to-understand way, enabling you, our customer, to judge for yourself what purchasing decisions are in your own best interest.

We hope you enjoy!

-Ron and the Staff at Modern Coin Wholesale


Silver Bullion Coins

Alabama

  • Sales Tax: 4% – 12%
  • Exemption: none

It’s interesting to see how differently the tax laws are structured and written from state to state. For instance, Alabama is the first state I’ve come across that specifies gold nuggets as being subject to state sales tax. Gold mining used to be a more significant part of Alabama’s economy than it is now, but perhaps a nugget here or there is still found by the occasional panner or prospector.

Whatever the case with nuggets (and flakes), the sale of all precious metal bullion products and numismatic coins are subject to a 4% base sales or use tax.

Much like New York and California, city and local sales taxes also apply.

There are no exemptions for purchases equal to or exceeding a certain amount.


Alaska

  • Sales Tax: none*
  • Exemption: N/A

Alaska is famous for its natural beauty, its self-sufficient spirit, and being able to see Russia from your house. It’s also famous for gold, with more than one gold rush taking place during the 19th and 20th centuries.

So with that history and independent streak in mind, Alaskans charge no state sales tax on precious metal bullion products or collectible coins.

*Cities and local municipalities are free to do so, however. Juneau, the state capital, charges 5%, while Kodiak charges 6%. Anchorage, the largest city in Alaska and home to a good number of coin and bullion dealerships, does not.


Arizona

  • Sales Tax: none
  • Exemption: N/A

According to Title 42, Chapter 5, Section 61 of the Arizona Revised Statutes, precious metal bullion (whether it’s legal tender or not) is exempt from retail sales tax. Coins as collectibles are also exempt, though items made from coins–such as jewelry, for example–are not.

Essentially, if the bullion or numismatic product gains its value from its content or status as money and not its form, it is exempt from sales tax.


Arkansas

  • Sales Tax: 6.5% – 9.75%
  • Exemption: none

Like Alabama, Arkansas is another state rich in gold and other precious metals that charges a state sales tax. The base rate for all retail transactions involving bullion and numismatic collectibles (coins and paper money, etc.) in Arkansas is 6.5% as of July 1, 2013.

Add local sales and use taxes as high as 3.25% per transaction in some instances (source: PDF) .

No exemptions are made for purchases equal to or exceeding a certain amount.


gold_bullion_coinsCalifornia

  • Sales Tax: 7.5%
  • Exemption: ≥ $1,500

Whether a coin is bought as an investment or is numismatic in nature, it is subject to California sales tax according to Regulation 1599. The same applies to all gold and silver bullion products, including (but not limited to) coins, bars, rounds and ingots, etc.

The base rate for sales tax in the state of California is 6.5%, but city and local sales taxes complicate matters. A mandatory minimum 1% local sales tax rate is charged statewide, thus effectively imposing a California sales tax of 7.5% on each sale.

And nothing prevents cities and municipalities from charging more; Los Angeles, for example, charges an additional 2.5% sales tax over the base rate, for a total of 9% per transaction.

However, California law does include a sales tax exemption for “bulk” purchases of coins and bullion. As of January 1, 2009, no sales tax is charged on any given single transaction of $1,500.

Special one-ounce, half-ounce and quarter-ounce commemorative California Gold Medallions authorized by the state are completely exempt from sales and use tax.


Colorado

  • Sales Tax: none*
  • Exemption: N/A

There is no state sales tax on coins and precious metal bullion in Colorado (source: PDF). However, medals, tokens, paper money, scripophily and–quite intriguingly–wampum are not. If you wish to purchase these items in Colorado or from a Colorado-based dealer, you will be required to pay a 2.9% sales and use tax.

*Nevertheless, cities and other municipalities charge local sales taxes, going as high as 7.5%


Connecticut

  • Sales Tax: 6.35%
  • Exemption: ≥ $1,000

Legal tender gold and silver coins (both foreign and domestic) and gold and silver bullion products, along with numismatic coins, are subject to Connecticut sales tax. A rate of 6.35% per transaction has been in effect since 2011.

Single-transaction sales are exempt from sales tax if the gross receipt equals $1,000 or greater.


Washington, D.C.

  • Sales Tax: 5.75%
  • Exemption: none

Precious metal and numismatic items are subject to a 5.75% sales tax in the District of Columbia. There is no exemption for purchases over a certain amount.


Delaware

  • Sales Tax: none
  • Exemption: N/A

One of the many reasons that Delaware is considered such a business and corporate-friendly state is because it currently charges no state sales tax. This of course extends to precious metal bullion and numismatic items.

No local sales tax is charged either, which greatly simplifies the tax situation.


Florida

  • Sales Tax: 6%
  • Exemption: ≥ $500

In effect since July 1, 1999, the State of Florida imposes a 6% sales tax on gold, silver and platinum bullion for purchases under $500. This means that if the before-tax sales price of one transaction is $500 or less, then a 6% sales tax must be paid to the state. If one transaction costs more than $500 before tax, then it is exempt from Florida sales tax altogether.

A transaction can consist of any combination of gold, silver or platinum.

Coins, currency and other numismatic items not considered bullion but that are legal tender in the United States are not taxed.

Numismatic items that are not legal tender in the United States are subject to a 6% sales tax.

According to state law, bullion dealers based in Florida are required to keep documentation for every bullion sale that claims exemption from sales tax (i.e., any transaction above $500). While the penalty for failing to do so (having to pay sales tax) would fall on the dealer, understand that this means you should also be careful when it comes to your records and receipts, as the Florida Department of Revenue simply has to check against the dealer’s records should an issue arise.


Georgia

  • Sales Tax: none
  • Exemption: N/A

According to this list (source: PDF), the State of Georgia does not tax the sale of either coins or paper money. Also exempt are gold, silver and platinum bullion products.

Exonumia, such as medals and tokens, are subject to a base sales tax of 4% but local surtax can increase that amount up to 8% in some locations.

Other forms of bullion not specifically mentioned in the list of exemptions (like, say, palladium) are subject to sales tax.


Hawaii

  • Sales Tax: none
  • General Excise Tax (GET): 4% – 4.712%

Hawaii is interesting.

There is no sales tax charged on coins and precious metals. Nevertheless, all sales within the state are subject to what’s called a general excise tax, or GET (source: PDF). The GET is imposed on the seller, not the buyer. In practice, what this means is that the business must pass the extra cost on to the consumer in the form of an increased purchase price. Usually, the amount due in excise tax for a purchase is listed as a separate item on the receipt, but some businesses will simply lump it in with the purchase price and offer no transparency. Ask in advance how the GET will be accounted for should this be an issue.

The GET is as low as 4% on most of the islands but can be as high as 4.5% in places like Oahu, the third-largest island in size and home to the state capital of Honolulu. Individual businesses, however, are allowed to charge customers a maximum of 4.712% GET in order to cover the expense of their overall excise tax responsibilities.

Again, it is up to you to determine in advance whether you are comfortable or not with how a particular coin dealer chooses to do business in the State of Hawaii.
 


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