By Patrick Heller
Two weeks ago, I wrote about the growing problem of how sales facilitators (referred to by many states as “market providers”) such as Amazon and eBay are now required to collect and remit the sales taxes applicable in the buyer’s state if the seller is from a different state. Unfortunately, every software system approved by the Streamline Sales Tax Governing Board, Inc. and available to Amazon and eBay has a number of errors in 1) implementing existing states’ sales tax exemptions, and 2) calculating the correct sales taxes to collect in states where county and local sales taxes may apply.
With 38 states having either no sales tax at all or complete or partial sales tax exemptions on retail sales of precious metals bullion and coins, it turns out that there are a number of would-be purchasers on Amazon and eBay who are erroneously being charged sales tax when they purchase such items. Since my column appeared two weeks ago, I have heard from a number of buyers who have tried to complete their purchases of sales tax-exempt merchandise without having to pay the erroneous addition of sales tax to the invoice. The results thus far are mostly dismaying.
In most of the circumstances that have been shared with me, both the buyer and seller have contacted the buyer’s local state treasury and eBay (I haven’t recently heard of a problem with Amazon), received acknowledgment that no sales tax should have been charged, but have not been able to receive an elimination of the sales tax on the invoice or file with the state treasury office for a refund. It appears in all circumstances that the state treasuries and eBay acknowledge that no tax should have been charged. Still, I know of only one instance thus far where the buyer ultimately was able to complete the transaction with the sales tax being removed from the invoice.
The people who have shared their stories with me have been told by the state treasuries and by eBay that they each have received a growing number of complaints about the incorrect assessment of sales tax on transactions.
Unfortunately, there is no easy across-the-board solution for implementing the correct sales tax or lack of sales tax. Part of the problem is that every state with a complete or partial sales tax exemption on precious metals bullion and coin sales have different definitions of when the exemption does and does not apply. To give you an example, in Michigan sales of gold, silver, and platinum bullion products sold on the basis of content rather than form are exempt from the state’s sales tax if the purity of the precious metal is at least 90 percent pure. Purchases of palladium bullion that are not legal tender coins are not exempt from Michigan sales tax. All coins that have or had legal tender status and sell for more than face value are exempt from Michigan sales tax (a different law exempts exchanging money at face value, such as when someone might break a $100 note at a bank into smaller denominations).
Other states have other requirements for an exemption. In some states, the exemption applies if the total transaction exceeds a threshold amount of either $500, $1,000, or $1,500. In other states, bullion-priced palladium bullion is exempt from sales tax. In at least one state, purchases of precious metals bullion and coins are exempt from the state sales tax, but not from local sales taxes.
In one state, coins with a selling price of $1,000 or higher are not exempt from sales tax if purchased in a store or at a local coin show, but would be exempt if purchased at a national, state, or multi-county coin show. Just from these examples, you can understand how complicated it would be to develop computer software that would correctly calculate the lack of sales tax or the correct sales tax amount on all transactions.
The same problem exists in other industries as well. As of last I knew, there are six states that exempt clothing from sales tax, but each of these states has a different definition of what is considered to be exempt items.
There are two rays of hope for buyers and sellers of precious metals bullion and coins facing the dilemma of erroneous sales tax charges.
The coin and precious metals national tax-exempt trade association, the Industry Council for Tangible Assets (ICTA), has worked with eBay for several years on a variety of issues. The two organizations have a working relationship, where eBay is a member of ICTA. Because of this relationship, eBay has given permission to ICTA to disclose to its membership, on a case-by-case basis, a special email contact at eBay to resolve such errors. Thus far this system seems to have worked, even though ICTA itself does nothing beyond providing the email contact and the list of information to provide to eBay about the specific transaction. ICTA is not allowed to provide this information to non-members because the staff at eBay would be unable to handle the volume of reported problems.
Therefore, if an eBay seller is a member of ICTA, it has the means to seek faster and more likely successful correction of eBay invoices where sales tax has erroneously been added. That would be one more reason for coin dealers to consider becoming an ICTA member if they have not already joined (go to https://www.ictaonline.org/join-icta to do so).
The other problem that arises on eBay transactions is where resellers are purchasing merchandise on eBay for resale and incorrectly being charged sales tax. For these circumstances, they can go directly to eBay at https://www.ebay.com/help/buying/paying-items/paying-tax-ebay-purchases?id=4771 to register their sales tax license to eliminate the future addition of erroneous sales tax on applicable purchases.
In the past two weeks, I have not yet heard of similar problems of sellers and buyers having problems conducting transactions on Amazon where the sales tax was erroneously applied. However, I have heard of such problems in the past. If readers do encounter such problems, I would appreciate hearing from them by email at email@example.com. I would not be able to assist in a resolution, but learning more about the extent of the problem may eventually drive a solution by others.
Special Note: After the Kansas governor vetoed legislation that would have established an annual $100,000 sales volume threshold before out-of-state sellers would be required to register with the Kansas state treasury to collect sales taxes, that state’s treasurer made an announcement that the existing statutory language would require every seller, in-state or out-of-state, to be registered to collect Kansas sales tax right from the very first sale to any Kansas business or resident.
The effective date this would be enforced is Oct. 1, 2020. That state’s governor supports this position, but the Kansas attorney general says this position is invalid. A resolution will likely come from the courts. Who wants to be the business to incur massive legal fees to be the test case? More details at https://www.thetaxadviser.com/issues/2020/feb/nonstatutory-state-reactions-wayfair.html?fbclid=IwAR3_7nTl3cemTwq7zJxHvlW6KVLoS0hrQyXxC2rmnnx38d7_6S4aXwpr4Ec.
Full disclosure again: I served ICTA as treasurer from 2002 to 2019 and have been a member of ICTA’s board of directors from 2002 to date. This column represents my personal opinion and is not an official communication of the Industry Council for Tangible Assets.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman National 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).