Three States Considering Repeal of Coin/Bullion Sales Tax Exemptions

March 5, 2020

Patrick A. Heller


In recent years, state, county, and local governments were finally required to include on their financial statements the net present value of unfunded liabilities for employee pensions and retiree health care and other retirement benefits. Michigan’s state government now discloses, for example, that it owes more than $60 billion in debt and liabilities, although these numbers are masked by spreading this information over multiple financial reports.

As a result, governments have become more aggressive at seeking additional ways to raise revenues. One tactic is to review existing state tax exemptions and credits for possible elimination or reduction.

Right now, three states—Maryland, Pennsylvania, and Washington—have pending legislation to eliminate their existing sales tax exemptions on the retail sales of coins and precious metals bullion. The legislative committee in Maryland was scheduled to hold its hearings on Thursday this week.

Unfortunately for legislators and government bureaucrats, almost none understand the well-documented fact that states with complete or partial sales tax exemptions on the retail sales of coins and precious metals bullion results in those states collecting higher sales taxes as well as other taxes than do states that do not have such exemptions. If the objective of a state government is to maximize its revenues, it should maintain existing complete exemptions, expand existing partial exemptions, or adopt exemptions if it does not currently have them.

The reason so few people in government do not understand the resulting enhanced revenues from such exemptions is that, on the face of it, when an item that was previously exempt from a tax then becomes subject to it, the anticipated result is that tax collections would increase.

Here are the reasons why sales tax exemptions on coins and precious metals bullion actually end up generating greater sales tax and other tax collections.

When tax laws change, taxpayers alter their financial activities.

In the precious metals bullion markets, for instance, the overwhelming amounts invested are for intangible forms that will never be subject to a state’s sales tax. These intangible forms include owning shares of stock in gold, silver, or platinum exchange-traded funds (ETFs), certificates representing ownership of physical precious metals sitting in the vaults of the Perth Mint in Australia, the Royal Canadian Mint in Canada, or the Royal Mint in England, owning precious metals commodity and options contracts, or owning shares of stock in precious metals mining companies.

In the gold market, over 95 percent of all transactions are in these intangible forms. Owning precious metals bullion in physical form in an investor’s direct custody or stored in a vault is only a tiny slice of the entire market. Should an existing sales tax exemption for precious metals bullion be eliminated, more investors will shift their purchases toward owning intangible forms listed above (shares of gold and silver EFTs are currently priced less than $200).

This alternative of being able to purchase intangible forms of precious metals bullion gives investors an option to legally avoid paying sales taxes. This means of tax avoidance is not possible with other tangible assets such as clothing, furniture, vehicles, and gasoline.

When the Industry Council for Tangible Assets (ICTA) conducted a 2016 national survey on sales, sales tax collections, and trade show attendance by coin dealers, it found that coin dealerships in states with complete or partial sales tax exemptions for coins and precious metals bullion experienced a huge increase in in-state retail sales of those items. In addition, dealers also sold far more other merchandise on which sales taxes were collected—enough so that the increase in these sales tax collections replaced, on average, about 2/3 of the sales tax collections lost from the exemption. Such sales-taxable items include, depending on the particular dealer, jewelry, antiques, other collectibles, and hobby supplies.

Also, when coin dealers see their in-state retail sales volume soaring—an average of more than 300 percent, they need to hire more staff. When jobs are created, a portion of the resulting increase in payrolls is spent on merchandise on which sales taxes are collected (a 1990s study by the Michigan Treasury calculated that 38.5 percent of payrolls are spent on items on which that state’s sales tax was collected.)

Another result of coin and precious metals sales tax exemptions is a significant increase in the number of businesses in a state or the expansion of existing businesses to extend their product lines to handle coins and precious metals bullion. These new businesses also create more jobs.

In the 2016 ICTA survey, it was projected that the increase in sales tax collections from the newly created jobs replaced more than 100 percent of the tax collections lost as a result of the adoption of the sales tax exemption.

Of course, most states also tax individual incomes. As a result, the creation of new jobs results in higher income tax collections as well as more sales tax collections.

Further, states with complete or partial sales tax exemptions also host a greater number of coin shows that have higher average dealer and public attendance than shows in states with no such exemption. This greater trade show activity results in higher sales by the hospitality industry (hotels, restaurants, convention halls, gas stations, and the like) which also increases sales and income tax collections.

There have been a few states in years past that eliminated coin and precious metals bullion sales tax exemptions—Colorado, Florida, Louisiana (twice), and Ohio (twice). In each of these instances (other than the second elimination of the Ohio exemption that took effect just over five months ago), the resulting net decrease in tax collections resulted in the restoration of the same or similar exemptions.

The second time that Louisiana eliminated its exemption in 2016, it was one of about 285 exemptions and credits that were “suspended” for 27 months. When the industry’s tax collections fell dramatically as a result of not being able to sell coins or precious metals bullion without charging sales tax, a similar coin and precious metals bullion exemption was restored the next year. The first time Ohio’s exemption was revoked, in 2005, within six months it was reported that at least 100 Ohio coin dealers had either closed, move to another state that had a coin/bullion sales tax exemption, or reduced staff. Ohio’s largest coin show was quickly canceled.

As I explained above, most legislators and other government officials do not understand the net decline in sales tax and other tax collections that result from eliminating a sales tax exemption on coin and precious metals bullion sales. Consequently, there is a prospect that even more state governments will propose revoking such exemptions.

ICTA has been working with dealers and collectors in Maryland, Pennsylvania, and Washington to oppose elimination of the coin/bullion sales tax exemptions in those states. Defending the exemptions in these states could help protect similar exemptions in other states. Coin dealers across the country who are not currently ICTA members can help support these exemptions by joining the organization. Go to for more details. Individual collectors can also support ICTA’s efforts.

Full disclosure: Since 2002, I have been a member of the board of directors of ICTA, served as the organization’s treasurer from 2002-2019, and participated in preparing and analyzing the 2016 ICTA national coin dealer survey (though I did not have access to individual dealer responses). This column expresses my personal opinions and is not an official ICTA communication.

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