Editor’s Note
As state governments face fiscal pressures, some are reconsidering sales tax exemptions—including those on precious metals. This article examines the potential unintended consequences of such tax policy changes.
Many state governments are struggling, especially with declines in federal government transfers or from state residents who previously held federal jobs or contracts that have ended. As a consequence, legislators in several states are looking for ways to increase tax collections. One means to do so is to review existing sales and use tax exemptions for possible elimination.
The intuitive general concept is that eliminating existing sales and use tax exemptions will result in higher state tax collections. For most items, that is true. However, the opposite is true with respect to precious metals bullion, coins, and currency.
It turns out that coin and bullion dealers generate tax collections in multiple ways. First, there would be sales and use taxes collected on precious metals bullion, coins, and currency, if they were subject to such taxes. Second are sales of other merchandise that would be subject to sales taxes even if such a sales and use tax exemption existed. Among items that many coin and bullion dealers sell that would be subject to such taxes are jewelry, antiques, other collectibles, hobby supplies, and the like. Third, states that have such exemptions have greater per capita coin shows and higher attendance at these shows, which generates more sales taxable by the hospitality industry. Fourth, in-state workers spend part of their pay on items on which sales taxes are collected. In the 1990s, the Michigan Treasury did a study which calculated that 38.5 percent of payrolls were spent on items on which the state’s sales tax was collected.
When an existing precious metals bullion, coin, and currency sales tax exemption is repealed, in-state coin and bullion dealer sales decline substantially. Many close, lay off staff, or move out of state. In-state coin shows also decline. The net result is that while there may be a small increase in sales and use tax collections on sales of precious metals bullion, coins, and currency, it is more than offset by the reductions in taxes collected on sales of other merchandise, by the hospitality industry, and by lower spending on taxable merchandise from former in-state workers who lost their jobs.
This was documented in the four states that repealed or suspended such exemptions before 2025. When Florida repealed its exemption in the 1990s, so many coin shows were cancelled or moved out of state that the Orange County Convention & Visitors Bureau estimated that the state’s hospitality industry suffered an annual decline of $60 million in sales.
In 2005, Ohio repealed its exemption in the midst of a political scandal. The weekly Coin World reported that within six months, there were 100 Ohio dealerships that had closed, laid off staff, or moved out of state. Also, every major upcoming coin show had been cancelled.
In 2015, the states of Louisiana, Oklahoma, and Texas experienced huge declines in severance taxes collected from the oil and gas industry after major price drops. In response, Louisiana suspended almost 300 sales and use tax exemptions or tax credits for 27 months, beginning April 1, 2016. During the suspension, a State Senate committee held hearings on each of these exemptions and credits to decide whether to allow them to return at the end of the suspension, to modify them at the end of the suspension, or to end them permanently.
Yes, all four of these states learned the hard way that repealing sales and use tax exemptions on retail sales of precious metals, bullion, coins, and currency resulted in a net decline in tax collections. All four reinstated the same or similar exemptions.
One factor that is evident to politicians and bureaucrats is that those who make major purchases of coins and bullion have multiple ways to acquire such items without having to pay sales and use taxes: 1) they can make purchases stored out of state such as in vaults in Delaware, 2) they can purchase shares of stock in gold, silver, platinum, or palladium exchange traded funds, 3) they can purchase shares of large precious metals ingots stored in the vaults of the Perth Mint in Australia, Royal Canadian Mint in Canada, or the Royal Mint in England, 4) they can establish self-directed Individual Retirement Accounts which assets are store out of state, or 5) they can purchase shares of stock in companies that mine precious metals.
