Roll back sales taxes

June 8, 2017
Pat Heller

Progress is being made on the state sales tax exemption front.

Let’s take a look.

Virginia: Earlier this year, the state of Virginia not only renewed its existing precious metals bullion sales tax exemption, it expanded the exemption to rare coins as well. The effective date of the expansion of the exemption is Jan. 1, 2018. Since all tax exemption and credit legislation in that state now have a sunset provision, this renewal does only last until June 30, 2022. That is still 4-1/2 years versus the three years of effect for the original partial exemption enacted in 2014. However, the previous minimum transaction size of $1,000 for the exemption to kick in will still be in effect.

Minnesota: Last week, after the third attempt, a bullion sales tax exemption was sent to Minnesota’s governor. He signed it into law rather than vetoing it. Effective July 1, 2017, any bullion-priced gold, silver, platinum, or palladium bars or rounds that are marked both as to purity and weight and have a purity of at least 99.9 percent will be exempt from Minnesota sales tax. Unfortunately, the exemption does not include coins.

The Minnesota Department of Commerce regulations effectively require almost all coin dealers who sell and deliver precious metals and rare coins to residents in that state to register with it, obtain a Minnesota sales tax license, and file regular tax and regulatory reports with the state continue to apply. Effectively, this exemption will be of primary benefit to coin dealers already registered with the Minnesota Department of Commerce, almost all of whom are themselves located in that state. Since these onerous registration regulations went into effect, perhaps half of the pre-existing coin dealers in Minnesota have either closed or moved out of state.

Louisiana: This state has twice previously had rare coin and precious metals sales tax exemptions in effect. When the state government saw oil and gas tax collections plummet two years ago, it “suspended” 285 sales tax exemptions and tax credits from April 1, 2016, to June 30, 2018. The rare coins and precious metals sales tax exemption was one of those that were suspended. A State Senate committee held hearings last year to evaluate each exemption and credit to judge whether to abolish them entirely, modify them, or allow them to go back into effect on July 1, 2018. I testified before this committee in March 2016 to advocate that an early reinstatement of the rare coins and precious metals exemption be expedited.

On Tuesday this week, the legislature passed a new rare coins and precious metals sales tax exemption with almost unanimous support. It is now on the way to the governor to be signed into law. The state government still faces significant fiscal problems, which could preclude this exemption from being signed into law. If it does become law, the effective date is Oct. 1, 2017. Items that would be exempt would have to meet one of three categories of the exemption:

Bullion-priced gold, silver, platinum and palladium ingots, rounds and coins;

Numismatic coins with a unit selling price of less than $1,000 per piece; or,

Any numismatic coins that are sold at national, state, or multi-parish coin shows in the state.

North Carolina: A sales tax exemption bill for rare coins, currency and precious metals has passed the House and is currently in the Senate Finance Committee. If it received favorable action there it would then go before the Senate Committee on Rules and Operations. The legislature is still in session and may yet pass it to send to the governor for signature. The current stated effective date is July 1, 2017, though that may be amended to delay it to allow the State Treasury to make the necessary adjustments. Proponents of this bill are hopeful for enactment this year, but nothing is certain until it actually occurs.

Alabama: A rare coins and precious metals sales tax exemption passed the House before the 2017 session ended. It was on the agenda to be voted on four times in the Senate, but no action was taken before the session expired. There were three other controversial issues in that state that clogged the legislative process, preventing action on a number of non-controversial bills (of which the coin and bullion exemption was considered one). It is highly likely that the governor will call the legislature back for at least one special session yet this year to address unfinished business. If so, an attempt will be made to have this exemption pass the Senate and be sent to the governor.

Kentucky and Tennessee: Rare coins and sales tax exemption bills were entered in both of these legislatures but did not pass out of them before adjournment. The Tennessee bill will carry over to the 2018 session where proponents are planning to overcome remaining obstacles to passage. Kentucky’s legislation was not pursued from lack of financial support to pay for a lobbyist and other expenses. It may be possible to resurrect an effort in that state in 2018.
When the Minnesota law takes effect, that will mean that 35 states (including Louisiana) will either have no state sales taxes or complete or partial sales tax exemptions for rare coins and precious metals. Should North Carolina and Alabama also enact exemptions, that could boost the total to 37 states. There are efforts stirring in at least two more states to seek exemptions in 2018, for which I won’t go into details that are not yet pinned down.

The remaining jurisdictions that do not yet have or are not currently working to gain rare coins and precious metals sales tax exemptions are Arkansas, District of Columbia, Hawaii, Kansas, Maine, Mississippi, Nevada, New Jersey, New Mexico, Vermont, West Virginia and Wisconsin. While dealers in states have been the driving force in funding the efforts at gaining such exemptions, the Industry Council for Tangible Assets (www.ictaonline.org or phone 410-626-7005) has substantial supporting documentation and can provide expert testimony. With ICTA’s support, such efforts have close to a 100 percent success record over time.

One key piece of supporting information is ICTA’s nationwide coin dealer survey conducted last year to document that state treasuries in states with complete or partial sales tax exemptions for rare coins and precious metals almost certainly collect more taxes per capita than states without any exemption! If you have an interest in exploring a sales tax exemption in the handful of states that do not yet have an exemption, talk with dealers in your state and contact ICTA.