All business owners--including coin dealers--should get ready for the government paperwork nightmare resulting from last year's Supreme Court decision in South Dakota v. Wayfair.
State governments are on the verge of notifying out of state businesses of the possibility that they may need to register to collect that state's sales tax and file sales tax reports, even if no sales taxes are due. At the same time this is going on, the accounting profession is preparing to let business clients know what they must do to comply with the new tax collection environment.
On this subject, the August issue of the Journal of Accountancy has posted a new article here.
Here are some sage points from this article:
- Pretty much every business except those with very low annual wholesale and retail sales (probably under a few hundred thousand dollars) will need to sort out their sales made by city, county, and state for each year. Including cities, counties, and states, there are over 10,000 sales tax jurisdictions in the U.S. that businesses need to either register with or need proof that they do not need to register with them (in case any of these jurisdictions unilaterally sends an invoice for taxes, penalties, and interest due to failure to register and file forms).
- Sellers need to determine the sales tax applicability for the kinds of merchandise you sell in each of the jurisdictions where you have sales. Five states (Alaska*, Delaware, Montana, New Hampshire*, and Oregon) have no sales tax at all. Right now, there are 34 other states that have complete or partial sales tax exemptions on the retail sales of rare coins and precious metals bullion. Coin dealers will have the responsibility to know what is subject to sales tax and what is exempt from sales tax in each of these 10,000 jurisdictions where the dealer may have sales--and the definitions of what is exempt are different from one jurisdiction to the next. Note: it is doubtful that the accounting profession will be of much, if any, help in pinning down these details.
Coin dealers need an efficient way to access details state-by-state. One option to achieve this is to become a member of the Industry Council for Tangible Assets (ICTA). You can join at www.ictaonline.org if you are not already a member. Members can access the state-by-state analysis of sales tax exemptions for rare coins and precious metals bullion and the economic nexus thresholds for Wayfair registration requirements, including links to the respective states' statutes and regulations.
- Be aware that states have different effective dates for requiring out of state businesses to register to collect that state's sales tax and also different minimum thresholds above which businesses must register. It is the responsibility of each dealer to know and understand these requirements for each state in which they make sales, as at least one state requires registration for making only one sale of any amount. It may become necessary to break down some sales by state, county, and city going all the way back to 2017.
- Wholesale sales are included in the totals in determining whether a coin dealer needs to register in another state to collect sales taxes and file forms (unless such state specifically excludes incorporating wholesale sales), even though the dealer never makes a retail sale in that state and never collects any sales tax. This could especially impact dealers who sell merchandise to major bullion wholesalers, some of whom are located in California, Massachusetts, New York, and Texas.
- Needing to register to collect sales taxes in other states may also make a coin dealer subject to income or franchise tax returns in those other states.
The businesses that will not have to now do all this extra paperwork are those that are already registered and collecting sales taxes in every state where they make sales (Wayfair, Inc., for example, was already registered for sales taxes in every state except for South Dakota before this court case was initiated). Generally, this means that small businesses will be subject to extra onerous paperwork burdens.
One warning, some online sellers, such as eBay, are automatically adding sales tax to invoices of purchasers in several states. The experience thus far is that this process has resulted in:
1) sales taxes being added to some sales where some or all of the items in the purchase were exempt from sales tax
2) failure to add the appropriate city or county sales taxes
3) this only covers collecting sales taxes for sales in some of the states.
The online seller is still potentially liable for any erroneous over or under-charging of sales taxes by the online vendors, so don't fall into the false sense of security that you don't have a problem because the online vendor is handling it. Further, just because the online vendor may be collecting the sales tax on behalf of the seller does not mean that the business is therefore exempt from registering to collect sales tax and file reports.
These government paperwork burdens not only apply to many coin dealers but also to just millions of businesses in the country. The furor of this will trigger a massive outcry. It will get worse before it gets better.
*Some local jurisdictions impose a sales tax in Alaska and possibly some in New Hampshire.
Patrick A. Heller was the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman Dealer of the Year Award, and 2008 Presidential Award winner. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2019), Professional Numismatists Guild, Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and become part of the audio and text archives posted at http://www.1320wils.com).