Will Some Precious Metals IRA Purchases Be Subject To Sales Taxes?
August 1, 2019
There will doubtless be a number of unintended consequences arising out of the June 2018 Supreme Court decision in South Dakota v. Wayfair. The issue in this court case was whether the South Dakota government could require some out-of-state sellers with no nexus in South Dakota to collect and remit that state’s sales taxes when making sales to state residents. The decision in that case was that out-of-state businesses that met threshold requirements for number of transactions or total sales volume with South Dakota residents could be required to do so.
Other state governments are wrangling with the implications of this court decision. Residents in 39 states (with 87.5% of the nation’s population) enjoy either no sales tax at all or complete or partial sales tax exemptions on retail purchases of precious metals bullion and rare coins. But, those who live in the District of Columbia and 11 other states (Arkansas, Hawaii, Kentucky, Maine, Mississippi, Nevada, New Jersey, New Mexico, Tennessee, Vermont, and Wisconsin) are subject to paying sales taxes on such in-state purchases.
Before this Supreme Court decision, it was clear that those living in a state that subjected retail purchases of precious metals bullion and rare coins to sales tax could avoid this tax by making a purchase from a business located in another state and leaving those assets outside of the state where they live. Such transactions were not sited in their state and the assets were not brought into the state to become subject to an equivalent use tax in lieu of a sales tax.
This opportunity for residents in the District of Columbia and 11 states with no bullion/coin sales tax exemption to avoid paying sales taxes through out-of-state purchases and storage may now be in jeopardy.
Some state governments are considering whether to make all purchases made anywhere in the US by in-state residents subject to that state’s sales tax. If any of the twelve jurisdictions named above makes a decision that such purchases are subject to sales tax, the tax may even apply to all purchases made by a precious metals individual retirement account.
I don’t yet know if any states have enacted legislation or issued regulations to define the geographic reach of sales tax liability. As they do, expect the definitions to vary from state to state. That is why, to be on the safe side, residents in the District of Columbia and the eleven states with no sales tax exemption on the retail sales of precious metals bullion and rare coins may want to check with their Treasury departments before making out-of-state purchases thinking that they have avoided paying sales tax.