House Bill 434 updates current sales tax laws to allow for the exemption from sales taxes for the commercial sales of gold and silver bullion and coins. Included in the exemption is the commercial sale of legal tender, typically in the form of misprinted coins and paper money, also known as error currency. Error currency tends to have a greater market value than its face value.
Sponsors of HB 434 say that exempting these types of sales from taxation will attract business activity in this industry and that the tax exemption would amount to a negligible loss in tax revenue for the state. With about 117 professional numismatists (coin dealers) in North Carolina in fiscal year 2017-18, and a state sales tax rate of 4.7 percent, the tax revenue lost in that year amounted to about $600,000 or less. Experts estimate sales tax collection could be as low as $150,000 annually.
In past years, coin and currency chows would do business in North Carolina, but that business has taken a sudden downturn. Dealers say the collection and remittance of the sale tax is just becoming more trouble than the amount of the tax is worth.
North Carolina is surrounded by states that have a complete or partial sales tax exemption on the retail sale of precious metal numismatic and bullion items. Thirty-four states have a complete or partial sales tax exemption on the retail sale of precious metal numismatic and bullion items: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, and Washington.
During floor debate, Representative Larry Yarborough said in support of the bill, “I have a friend that considers gold to be a good investment as part of a diverse portfolio and he buys all of his gold from Texas because he can avoid the sales tax on it. So we’re not really gaining anything by taxing investment gold.”
Data from the Industry Council for Tangible Assets suggests that retailers in the jewelry, watches, precious stones and precious metals business see an increase in the sale of both exempt and non-exempt merchandise wherever there is a sales tax exemption.
Removing the state sales tax imposed on these items promises to stimulate economic activity at little cost to the state, and the benefits of this tax relief can be passed on to the consumer for spending on other taxable merchandise.
If House Bill 434 is passed by the Senate and becomes law, the sales tax exemptions would begin on July 1, 2017.