By: Jimmy Hayes
Editor’s note: The federal and state governments are hungry for new tax revenue. The Industry Council for Tangible Assets has issued the following evaluation of how this might impact the numismatic business. The introduction is by ICTA and a summary by Jimmy Hayes follows:
The following article is a brief summary from ICTA/CERT Legislative Consultant and former Congressman, Jimmy Hayes, regarding the possibility (or probability) that the U.S. Congress will pass legislation in 2013 that would allow the states to force out-of-state merchants to collect and remit sales taxes across state lines.
While the states have sought this power for over half a century, the new approach outlined in this report points out the very real possibility that Congress will finally grant this authority to the states. Although it is likely that any legislation will include a “small business exemption,” the $500,000 or even $1 million thresholds referenced in various discussions will be grossly insufficient to protect our industry’s small businesses.
To illustrate: In today’s marketplace using an approximate $1,700 per ounce figure for gold, a $500,000 definition of small business would allow a coin dealer to sell only 294 one-ounce gold coins during an entire year. That is less than one coin a day. No other products could be sold as that would take the gross volume of that business over the $500,000 threshold and would require the dealer to collect and remit sales taxes on all further transactions. Similarly, a $1 million threshold would mean 588 one-ounce gold coins could be sold during the course of a year (or 1.61 one-ounce gold coins per day), assuming no other products are sold at all.
While this report is not yet a call to arms, we felt it was important to collectors and dealers throughout our hobby and industry to be aware of this threat to our way of doing business. We are hopeful that existing state sales tax exemptions would remain intact, but there is no guarantee this will be the case. In addition, there are still 20 states that levy a sales tax on our products.
For many years, ICTA has been urging its members in every state to organize to 1) protect existing sales tax exemptions on coins and/or bullion; 2) fight to achieve such an exemption if one does not presently exist in their states; and 3) continuously monitor state and local legislatures for new laws and regulations that could impact their businesses. It is possible to work with lawmakers to craft legislation that will have negligible negative impact on coin/currency/precious metals businesses; but once enacted, deleterious legislation is extremely difficult, if not impossible, to undo.
Please feel free to contact ICTA with any questions you may have. Executive Office (410) 626-7005, or firstname.lastname@example.org, or Industry Affairs Office (504) 392-0023 email@example.com.
Outlook For Internet Taxation
I. Political Climate
Almost all of the recent press attention that has been focused on taxation issues has been aimed at the federal level. Numerous articles have outlined the predicted adverse consequences to the national economy if Congress fails to avoid the impending “fiscal cliff” term given to automatic mandatory cost cutting and expiration of tax benefits otherwise commencing Jan. 1, 2013. However, little press attention has gone to the numerous governors who are facing their own projected state budget shortfalls destined to occur whether or not the federal dilemma is avoided.
While the headlines have been written about alternative means of addressing the economic woes facing the entire nation, most state executives have been initiating committee hearings on “re-assessments” by their own legislature to identify “tax loopholes and generous exemptions” for the express purpose of raising additional state revenues through repealing selected tax provisions. Such legislative actions would not require voter approval.
While Democrats and Republicans have recently had little or no agreement on national policy issues, both the Democratic and Republican governors have united “arm in arm” through the National Governors Association to embrace and endorse legislation promoting the state imposition of sales and/or use taxation of Internet transactions. Consequently, the mainly dormant Internet sales taxation legislative proposals of past Congresses have now become potentially major agenda items for the 113th Congress convening in January 2013.
II. Potential Federal Legislation
Premier in concept among past and current legislative proposals is S. 1832, a refined version of prior legislation introduced by Sen. Dick Durbin known as the “Main Street Fairness Act” which previous proposal had encountered not only legal hurdles of existing Constitutional case law (specifically a case know as Quill v. North Dakota) but also political hurdles for federally imposing a sales/use tax collection authority without a clear methodology and standards.
A second generation of Internet tax legislation, known as the Marketplace Fairness Act (S. 1832), was filed Nov. 9, 2011, by a very well respected Republican Senator from Wyoming, Hon. Mike Enzi, a former mayor and the only CPA ever elected to the Senate. It has attracted 20 Senate co-sponsors as well as endorsement support from over 75 major retail and trade association groups.
Senate 1832 seeks to address prior concerns about previously filed legislation as follows:
(1) The bill authorizes, not requires, a state to establish minimum standards it must meet before it is can mandate sales/use tax collections on Internet transactions;
(2) The bill places all choices for what is taxed and at what rate solely with the state whether through the Streamlined Sales and Use Tax Agreement or by alternative;
(3) The bill provides a “small seller exemption” of up to $500,000 (a similar House bill used $1 million) in total gross annual revenue receipts (in the preceding calendar year);
(4) The bill requires states to provide software availability and certification, holds taxpayers harmless for software errors and mandates a single state agency for receipt of payments.
As a result of these and other provisions, governmental groups and “brick and stone” retailers have joined forces for passage. Over 75 such sponsoring groups include: American Conservative Union, National Governors Association, National Conference of State Legislators, Association of Counties, Home Depot, DICKS, National Association of Realtors, National Retail Federation, Amazon, Auto Zone, Gap and Container Store.
III. Industry Response
The merits of the legislation will be debated in hearings and groups in support and/or opposition will loudly make their voices known prior to votes for passage. If any Internet taxation proposals become law, legal challenges will no doubt arise and will include Constitutional arguments. Numismatic organizations, CERT, as well as concerned dealers and collectors alike will be much involved in that process.
However, any person engaged in the selling and buying of rare coins, bullion or numismatic items should right at this moment concentrate their attention on their own state and its current tax laws (or lack thereof) because those engaged in the industry have important distinctions from almost every other potentially affected party:
(1) Many states have exemptions for the sale of rare coins or numismatic items;
(2) Many states have current exemptions for “investments” such as stocks and bonds and other “securities” with legislative language that would include bullion transactions;
(3) Some states have exemptions for “legal tender” taxation that could include numismatic items and bullion coins;
(4) Many states have not joined the Streamlined Sales and Use Tax Agreement or conditionally expressed support;
Every collector, dealer, or entity engaged in the industry should know at least two things:
First, such persons should become aware of their own state laws, exemptions and existing efforts to promote their state’s taking advantage of any federal legislation authorizing collection of sales/use taxes on Internet transactions.
Second, such persons should use their trade associations and business connections to determine how and under what circumstances those states with favorable treatment and exemptions were influenced to create them.
It is the cities, counties and states; it is the governors, state legislators, county commissioners, mayors and local officials who are the impetus for federal legislation to authorize states to tax Internet transactions. It is their attention that interested parties can get to most influence the direction taken by Congress. Those who fail to act can look out their own window to see where the failure occurred.
Former Representative Jimmy Hayes is the ICTA legislative consultant. Viewpoint is a forum for the expression of opinion on a variety of numismatic subjects. To have your opinion considered for Viewpoint, write to David C. Harper, Editor, Numismatic News, 700 E. State St., Iola, WI 54990. Send email to firstname.lastname@example.org.