By Quentin Burrows
Steve Vesely has been in the coin business in Joliet, Ill., for 32 years. Recently, the City of Joliet, a southwest suburb of Chicago with almost 150,000 residents, proposed a new ordinance that will require Vesely’s business named ICoin to photograph all items he takes in and upload pictures of the coins, or other numismatic items he purchases, within 24 hours to a website, along with detailed information regarding the sellers of the items.
Even more invasive is a requirement that the coin store hold onto the items for 14 days before they can be resold.
The City of Knoxville, Tenn., recently passed a similar ordinance that places a 30-day hold period on the items frequently purchased by coin dealers from customers in that city.
The purpose of these new ordinances is to prevent “fencing” of stolen merchandise and to aid in the recovery of said merchandise. Unfortunately, as proposed, the ordinance will have the unintended effect of seriously burdening an existing, law abiding coin and precious metals business.
Vesely is fighting against the new ordinance aimed mostly at scrap dealers, pawn shops and cash for gold stores. “I would need to hire a full-time employee just to keep up with these requirements,” Vesely notes.
“There appears to be no distinction between retail and wholesale purchases in the ordinance. Also, if someone comes in with an inscribed class ring that matches their driver’s license, I would potentially have to put that online,” he said. “If a customer who bought a gold coin from me two years ago wants to sell the coin back to me because the price of gold has gone up, I would probably need to put that online too.”
Vesely notes impossibility of predicting where the gold and silver market is going to be in 14 days from the date of a purchase.
The precious metals market, much like the stock market is constantly fluctuating. The value of precious metals, coins and ingots changes many times each day based on changes in the commodities market. Imposing a holding period of 14 to 30 days on coin shops could result in substantial losses. With the extensive swings common in precious metals, such a holding period would in essence force a coin dealer to become a speculator in commodities.
Vesely is not alone in his fight. The Will County Coin Club, a non-profit organization that has operated in and around Joliet for 53 years, has voiced its opposition to the ordinance. The coin club hosts its annual show in Joliet every year, which attracts dealers from Illinois, Indiana and Wisconsin. Club President Jim Sossong feels that the proposed ordinance “will directly impact our annual coin show,” which is the club’s biggest fund-raiser. “Members of the public have been selling merchandise to coin dealers at our show for the past 53 years without incident,” he said. The club has urged the city to exempt coin dealers from its ordinance.
The City of Joliet has indicated that a business purchasing used merchandise for future sale or melting down of metals at the club show may need a license and would likely need to comply with the code, if it is in fact amended. We have already seen what that can do.
Recently, Madison, Wis., decided to enforce a new ordinance requiring a $2,000 license fee for secondhand dealers at the 80th annual Madison Coin Club Show. This resulted in many of the out-of-town dealers and collectors abandoning the March 25 show, which was also the annual Numismatists of Wisconsin state show.
Some dealers who arrived before they were made aware of the new law refused to be a part of the show and left.
Fred J. Borgmann, vice president of the Numismatists of Wisconsin described the show as “a disaster.” As a result of Madison’s decision, Borgmann stated that this would be the last such show held in Madison.
Borgmann noted that the economic impact, however small, will be felt by area hotels and restaurants. He sent a letter to the Madison city council, in which he suggested that some revision be made to the ordinance to allow the city to host coin shows in the future.
Unfortunately, Joliet and Madison are not isolated in their decision to enforce new ordinances in an attempt to protect consumers and to limit the opportunity “for individuals to potentially transfer stolen property to those businesses” as stated in Section 9.24(1)(b) of Madison’s Licensing Code.
The Industry Council for Tangible Assets finds the new secondhand dealer laws that are cropping up to be a serious problem, particularly the excessive holding times that some municipalities require. Diane Piret, Industry Affairs Director for ICTA notes that “these laws are increasing all over the country and it has become routine for us to get calls asking to help prevent or modify either a new law or an expansion of the existing law.”
Piret states that oftentimes the laws are “poorly crafted and have many serious unintended consequences. One of the more onerous provisions of such laws can be the ‘holding’ period – a span of time wherein the dealer cannot sell or otherwise dispose of the secondhand items that have been purchased for anywhere from 7 days to an impossible 30 days,” she said.
A likely outcome of a waiting period is that if a coin dealer wishes to maintain a profitable business, the dealer would no longer be able to afford to pay market prices to the public. Prices paid to customers by a coin shop would have to be significantly discounted to allow for a possible drop in the price of metals during the holding period. An obvious ramification of such a scenario would be customers being forced to take their business out of a municipality with a secondhand dealer law.
In contrast, some state governments including Connecticut and California have also enacted legislation aimed at crime, but they have taken the opportunity to specifically exempt coin dealers from the provisions. Connecticut’s Act “Concerning the Licensing and Record Keeping of Pawnbrokers and Secondhand Dealers,” defines a class of specifically excluded dealers including antiques dealers, art dealers and coin and stamp dealers. Conn. Gen. Stat. Sec. 21-39(a)-409. The Act specifically excludes coin dealers in the definition of “Secondhand dealers” and states as follows in distinguishing coin dealers from secondhand dealers: “coin and stamp dealer” means a person primarily engaged in the business of buying and selling coins, stamps, currency or rare documents collected or desirable due to age, rarity, condition, or some other unique feature. Conn. Public Act No. 11-100 (eff. Oct. 1, 2011), amending Sec. 21-39(a) et seq.
Similarly, the State of California in Section 21626 of the Business and Professions Code explicitly states that a secondhand dealer does not include a “coin dealer.” The code further states as follows: A “coin dealer” means any person, firm, partnership, or corporation whose principal business is in the buying, selling and trading of coins, monetized bullion, or commercial grade ingots of gold, or silver, or other precious metals. Cal. Business and Professions Code Section 21626(b).
Additionally, the definition of tangible personal property under the California code states: “(d) As used in this article, “tangible personal property” does not include coins, monetized bullion, or commercial grade ingots of gold, silver, or other precious metals.
“Commercial grade ingots means 0.99 fine ingots of gold, silver, or platinum, or 0.925 fine sterling silver art bars and medallions, provided that the ingots, art bars and medallions are marked by the refiner or fabricator as to their assay fineness.” Cal. Business and Professions Code Section 21628(d).
Piret notes that there are several reasons for such an exclusion of “coin dealers” from these types of ordinances including the fact that by its very nature a coin dealer is not the same as a secondhand dealer or pawnbroker. The business models are very different for secondhand dealers and pawnbrokers. Coins, precious metals and bullion products are a completely different class of goods than consumer products that may have some precious metal content. “Investment numismatic coins, currency, precious metals and ingots are intended to be repeatedly sold and resold,” Piret said.
Recently, two counties in Florida, Pasco County and Hernando County, passed ordinances similar to what Joliet is considering in order to curb the growing problem of metal theft. As a result of backlash from coin collectors, dealers and clubs, the county commissioners are now considering amendments to their ordinances.
Local coin dealers complained that they were mostly small business owners or hobbyists who do not have the time or ability to comply with the burdensome new regulations. As a result Pasco County, according to a report in the Pasco Tribune, has agreed to repeal its ordinance and Hernando County feels that its ordinance can be corrected to parcel out the coin collectors from having to fall into its constraints.
Meanwhile as these legislative fights continue, Vesely is just hoping to be able to keep his coin shop open in the town he has always operated in. Vesely reports that he has been receiving some positive feedback from Joliet City Council members as to possible “tweaking” of the proposed law to not directly impact coin dealers and coin collectors.
Quentin Burrows is a numismatist, author, and attorney representing coin dealers and the Illinois Numismatic Association. He can be reached at QCBurrows@aol.com, or (630) 222-6448.