Monday Morning Brief for July 2, 2018: Tax worries
- Published: Jul 2, 2018, 3 AM
The Supreme Court ruling on June 21 in South Dakota v. Wayfair Inc. that states can begin collecting sales taxes even for purchases made by out-of-state buyers has the coin collecting industry on high alert.
The ruling could have a major and negative effect on the market for coins, bullion, and related items, critics warn.
It is no secret that online business is big business, and getting bigger every year. Consumers like being able to buy stuff online from home, and the free shipping that many online retailers offer makes it more economical than having to drive around to multiple stores to buy the same items. Not having to pay sales taxes for most of these online purchases is a benefit as well.
However, as traditional brick-and-mortar businesses have lost market share to online retailers, states have experienced drops in revenue because of reduced sales tax collection. A customer walking into a coin shop could expect to pay state and even local sales taxes on a purchase unless buying in a state with an exemption for bullion and numismatic materials. However, a customer from one state buying online from a seller in another state generally would not have to pay sales taxes, under laws formulated long before computers and the internet and World Wide Web became so pervasive. States have clamored to get back their share of tax revenues, and now the U.S. Supreme Court has ruled that states can begin collecting sales taxes even for purchases made by out-of-state buyers.
The results are going to be a logistical nightmare, retailers and others in the coin industry warn. The possibility exists that an online retailer in Ohio, for example, will have to collect sales taxes not only on purchases made by Ohio residents, but also on purchases made by customers in dozens of other states and thousands of other communities. No centralized tax database exists that provides the sales tax rates for every state and community that has a sales tax, making such collection a nightmare. Auction houses, online coin sellers, and others are rightfully scared about what happens when states start passing legislation requiring businesses in their state to collect sales taxes on purchases no matter the home state of the buyer.
Inside Coin World: About those 1805 silver dollars Although an 1806 Mint document claims 321 silver dollar were made in 1805, no such coins are known today. It took a later book to explain the reference.
At a June 26 meeting of the Tax Policy Center, Forbes reports, a panel of sales tax experts said that states could begin the process of collecting sales taxes in 12 to 18 months, or even before the end of 2018. But how will it all unfold?
According to Forbes writer Howard Gleckman of The Urban Institute, the Supreme Court “set out two overriding principles: A state tax system should not discriminate against out-of-state businesses and it should not place an ‘undue burden’ on interstate commerce.”
Gleckman suggests that this could be accomplished in three ways: each state could go its own way, states could work together, or the states could let Congress do all of the heavy lifting to come up with a plan. Congressional action, however, could be impossible given the fractured nature of American politics today.
No one knows what is going to happen yet. The next few years could get very interesting.
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