Precious Metals

Coins and bullion get tax exemptions in Indiana

In what the Industry Council for Tangible Assets is calling a great result from a team effort, Indiana Gov. Mike Pence has signed a sales tax exemption for coins and bullion in Indiana.

The legislation, House Bill 1046, was introduced in the Indiana General Assembly by state Rep. Greg Beumer on Jan. 5 and passed on its third reading on Feb. 1. From there it went to the state’s Senate, where it passed on its third reading on March 1. After returning to the state House for amendments it was signed by the governor on March 24.

The new law provides a sales tax exemption for transactions involving the sale of: (1) coins that are permitted investments by an individual retirement account under federal law; (2) bullion that is a permitted investment by an individual retirement account under federal law; or (3) legal tender. The law will take effect on July 1.

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In a March 28 press release, ICTA said that Indiana is now the 33rd state to have a complete or partial sales-tax exemption on the retail sales of rare coins, paper money, and precious-metals bullion.

David Hendrickson, of Winchester, Ind., firm SilverTowne, spearheaded the two-year campaign with the support of ICTA and lobbyist Mike McDaniel. ICTA executive director Kathy McFadden said, “The Indiana dealer and collector communities owe Mr. Hendrickson a debt of gratitude for his generosity.”

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Rep. Beumer, who lists his occupation as a private grant writer/grant administrator, represents Jay, Randolph and Delaware counties in the Indiana House of Representatives, whose district includes Winchester.

In a letter to the Times-Union newspaper of Warsaw, Ind., Warsaw resident Brad Skiles, founder of Hoosiers for Tax-Free Bullion, identified several reasons why the Indiana exemption would make a difference by creating new jobs and bringing new revenue to Indiana. He cited statistics that when Michigan exempted bullion sales more than a decade ago, new jobs were created in the state and overall tax revenues increased, while, when Ohio removed the exemption, resulting in the taxation of sales of coins and bullion, dealers and coin shows left the state.

He wrote: “It is time to make Indiana competitive with Michigan and Illinois and join more than 30 other states which have exempted bullion from sales tax. This is common sense.”

ICTA has shown that a lost large coin show can cost a state between $1 million and $4 million in total economic impact.

A fiscal impact statement from the Legislative Services Agency prepared on March 20 estimates that the sales tax exemption could reduce Indiana’s state sales tax revenue by approximately $1.5 million annually starting in Fiscal Year 2017. The Department of State Revenue identified 65 dealers who have paid about $3 million in sales tax annually for the past several years.

The statement added, “Recent surveys of coin dealers in Kentucky and Ohio indicate that precious metals bullion and coins account for an average of 50% of coin dealers’ total sales. The revenue loss estimate reported above is supported by estimates generated using data from the U.S. Census Bureau and data derived from a survey of Indiana precious metals dealers. However, the estimated revenue loss could be lower to the extent that it includes sales of coins and bullion that are not permitted investments as defined by the bill.”

The statement cited a 2015 survey of 29 Indiana bullion and coin dealers. Of these, 22 indicated that they had collected a total of nearly $1.1 million in Indiana sales tax for the sale of coins and paper money, along with gold, silver and platinum coins and bullion in 2014.

Skiles warned that the Indiana’s predictions of lost sales tax revenue may not be accurate, writing, “The agency guessed at the tax impact by allocating a portion of gross U.S. Mint sales to Indiana based on Indiana’s portion of national personal income.” He concluded his letter with a reasonable question, asking, “Why would a knowledgeable Hoosier buy bullion from an Indiana coin store when they could pay 7 percent less (avoiding sales tax) in Michigan, Illinois or another tax-exempt state?”

Registration requirement

The newly signed law also authorizes Indiana’s secretary of state to issue a temporary registration to out-of-state dealers not otherwise lawfully authorized to conduct business in Indiana to sell coins at coin shows in Indiana by submitting an application to the secretary of state and paying a $35 fee.

The fiscal impact statement on the bill notes that the new registration requirement may increase the secretary of state’s administrative expenditures but that additional costs may be offset by the registration fee. The statement said: “This provision could increase revenue by a potentially significant amount. However, the increase in fee revenue is indeterminable and would depend on the number of entities that register with the Secretary of State.”

ICTA’s David Crenshaw noted that the requirement of out-of-state dealers to register and pay a fee to conduct business in Indiana at a coin show is similar to the trader’s license requirement for out-of-state dealers conducting business at a coin show in Maryland, which hosts Whitman’s Baltimore Expo three times a year. In Maryland, no sales tax is charged on transactions of coins and bullion over $1,000. Sales under $1,000 are subject to sales tax.

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