by Steve Haner
Three times per year a massive coin show is held in Baltimore, packing a large convention space for several days and filling hotel rooms and restaurants all around the area. The photo above is from 2015. The dealers and the buyers include the key Virginia players in this industry. A 2013 analysis by the Baltimore Tourism Bureau estimated that attendees spend $3 million inside and outside the arena at just one show, and they do it three times a year. The expo may be an even bigger show now.
A similar show is held in a faded motel on Richmond’s Boulevard, near the Diamond. I took this photo in October. The comparison to the Baltimore show is obvious, but there is no other show anywhere in Virginia that compares to Baltimore’s either. Maybe, just maybe, every show conducted in Virginia combined generates the $3-4 million in local spending that goes on at one Baltimore show. No one has bothered to do a formal impact analysis.
What does Baltimore have that Richmond does not? It is the other way around. Richmond and Virginia have something Maryland got rid of – a sales and use tax on collector coins. In fact, Maryland is one of 27 states that have no sales tax on those items, and then of course five states have no sales tax at all, for a total of 32 tax-free states. Ohio just rejoined the list of tax-free states on January 1. It dumped the exemption a few years back because of one bad-apple dealer, but the local industry visibly shrank and the exemption is now back.
The national Industry Council for Tangible Assets, representing the bullion and coin dealers, surveyed its members and compared the responses from the states which do and do not tax bullion and coins. You can see the results summarized here: Exhibit Three. Dealers in the tax-free states have more than four times the annual revenue. Dealers in both kinds of states do mainly shows in tax-free states. Dealers in the tax-free states, being bigger, sell more taxable items as well and remit almost as much tax as the dealers in taxing states.
Argue all you want about how Virginia ranks overall as a good place to do business – Virginia is a lousy place to do this business. Like everything else, the Internet is taking over. A Virginia buyer on a Virginia retailer’s website will get the tax added on at check-out, and often the transaction ends right there. The buyer clicks off and goes elsewhere.
Oh, in case you haven’t figured it out yet, I’m back with another bill on this issue for a client. In 2015 the Virginia General Assembly did approve legislation to remove the tax on large purchases of gold, silver or platinum bullion. Coins were removed from that bill and remained taxable. But it is the coins that are of interest to the bulk of the dealers and collectors, and only by removing the tax on the coins will the industry be able to build up the native shows, attract one of the national shows, and grow actual retail operations in storefronts. Would you like that, Virginia? Compared to the grants and tax advantages you provide other industries, the impact of this is just pocket change.
Tax policy has always fascinated me, and this issue is a classic example of how tax policy has consequences in a free market. Some may dismiss this effort as another tax preference or even, dare I say it, a loophole. But turn that around and in light of the 32 tax-free states and the tax-free U.S. Mint supply, it seems to me that the existing situation in Virginia represents a form of tax prejudice.
Stephen D. Haner is the principal of Black Walnut Strategies.