Tag Archives: Steve Haner

Tax Preference or Tax Prejudice?

The Whitman exhibition of collector coins in Baltimore

Exhibit One: The Whitman exhibition of collector coins in Baltimore

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.

Exhibit Two: Richmond numismatic show

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.

Virginia's Tax on Money

gold_coinBy Steve Haner

You can now walk into a retailer in Virginia (or buy from a Virginia retailer online) and get your gold or silver without having to pay sales tax — but only if you have $1,000 to spend.

House Bill 1648 and Senate Bill 1336, signed into law this year, were companion bills that created a new sales and use tax exemption for gold, silver and platinum bullion. Similar bills had been offered for years without success. Are we looking at another example of a government policy promoting income inequality? To get the exemption, you have to spend at least $1,000. The buyer picking up $250 or $500 of bullion is still being taxed.

Effective July 1 the sales and use tax (5.3 percent in most of Virginia, 6 percent in Northern Virginia and Hampton Roads) was not applied to items which met the following tests:

  • It must be refined to a purity of at least 90 percent precious metal. It can be a bar, ingot or coin – but cannot be artwork or jewelry.
  • The sale price must not exceed 120 percent of the value of the precious metal content.
  • The total transaction, which can include more than one exempt item, must exceed $1,000. That is only one ounce of gold, but it is more than four pounds of silver.

You can read the Tax Department guidelines here. Disclaimer: Yes, I worked in support of this bill on behalf of a Virginia Beach company. The $1,000 minimum purchase matches Maryland’s law and in theory limited the fiscal impact. Actually, I’m convinced Virginia has been collecting very little tax on bullion. It was too easy not to pay it.

More than 30 other states – including the largest – already exempt these popular investment items or have no sales tax at all. Virginia dealers have been required to impose the sales tax on any Virginia buyer, which meant most Virginia buyers purchased their bullion somewhere else to save 5-6 percent. They went to the U.S. Mint, which charges no sales tax, or used out-of-state on-line providers and ignored the requirement to pay the use tax.

The smaller investor, spending less than $1,000, will still be doing that. They will still turn around and walk out of the store or cancel the e-transaction before paying the tax. This market is a perfect example of the impact e-commerce makes when there is any marginal price advantage.

Virginia remains behind the times when it comes to the other (and larger) side of this business – collector coins. The introduced bills also would have exempted legal tender, but that far the Assembly would not go. Yes, Virginia, you tax hard money — another investment item not taxed by 30 or more other states.

Investors in coins do much of their business at large national and regional shows, which fill hotel rooms and restaurants in their host cities for a week – generating plenty of other taxes to compensate for the lost sales tax on the coins. None of those lucrative shows will ever come to Virginia unless the General Assembly takes that additional step and stops taxing money. Virginia collectors and investors in these products (big and small) will continue to bypass Virginia dealers and shop on-line.

Stephen D. Haner is the principal of Black Walnut Strategies.

Virginia’s Tax on Money

gold_coinBy Steve Haner

You can now walk into a retailer in Virginia (or buy from a Virginia retailer online) and get your gold or silver without having to pay sales tax — but only if you have $1,000 to spend.

House Bill 1648 and Senate Bill 1336, signed into law this year, were companion bills that created a new sales and use tax exemption for gold, silver and platinum bullion. Similar bills had been offered for years without success. Are we looking at another example of a government policy promoting income inequality? To get the exemption, you have to spend at least $1,000. The buyer picking up $250 or $500 of bullion is still being taxed.

Effective July 1 the sales and use tax (5.3 percent in most of Virginia, 6 percent in Northern Virginia and Hampton Roads) was not applied to items which met the following tests:

  • It must be refined to a purity of at least 90 percent precious metal. It can be a bar, ingot or coin – but cannot be artwork or jewelry.
  • The sale price must not exceed 120 percent of the value of the precious metal content.
  • The total transaction, which can include more than one exempt item, must exceed $1,000. That is only one ounce of gold, but it is more than four pounds of silver.

You can read the Tax Department guidelines here. Disclaimer: Yes, I worked in support of this bill on behalf of a Virginia Beach company. The $1,000 minimum purchase matches Maryland’s law and in theory limited the fiscal impact. Actually, I’m convinced Virginia has been collecting very little tax on bullion. It was too easy not to pay it.

More than 30 other states – including the largest – already exempt these popular investment items or have no sales tax at all. Virginia dealers have been required to impose the sales tax on any Virginia buyer, which meant most Virginia buyers purchased their bullion somewhere else to save 5-6 percent. They went to the U.S. Mint, which charges no sales tax, or used out-of-state on-line providers and ignored the requirement to pay the use tax.

The smaller investor, spending less than $1,000, will still be doing that. They will still turn around and walk out of the store or cancel the e-transaction before paying the tax. This market is a perfect example of the impact e-commerce makes when there is any marginal price advantage.

Virginia remains behind the times when it comes to the other (and larger) side of this business – collector coins. The introduced bills also would have exempted legal tender, but that far the Assembly would not go. Yes, Virginia, you tax hard money — another investment item not taxed by 30 or more other states.

Investors in coins do much of their business at large national and regional shows, which fill hotel rooms and restaurants in their host cities for a week – generating plenty of other taxes to compensate for the lost sales tax on the coins. None of those lucrative shows will ever come to Virginia unless the General Assembly takes that additional step and stops taxing money. Virginia collectors and investors in these products (big and small) will continue to bypass Virginia dealers and shop on-line.

Stephen D. Haner is the principal of Black Walnut Strategies.