Texas and Louisiana repeal sales tax on precious metals

img--0032Texas and Louisiana both passed bills this summer making the sale of gold, silver, or numismatic coins or platinum, gold, or silver bullion completely tax exempt. Previously, both states taxed sales above $1,000.00, meaning that precious metals were treated differently than other investments.

Edward Allen of AOCS helped persuade Texas legislators when he testified before a subcommittee hearing in 2011. Allen was invited to speak by Rep. David Simpson, who authored Texas House Bill 78, eliminating the tax. Governor Rick Perry signed the bill into law on June 14, 2013

The author of the Louisiana version said Texas helped make the case in his own state. Rep. Paul Hollis, a first term member of the Lousiana House of Representatives, is also a rare coin dealer.

“This expansion just makes sense for Louisiana’s investors and dealers,” Hollis said. “The efforts of Mike Fuljenz and other Texas dealers and the timing for passage of the Texas exemption expansion really helped make our case.”

The legislation puts precious metals on a level playing field with other investment vehicles. Previously, the $1,000.00 threshold meant that collectors buying the odd piece for its aesthetic or numismatic value were exempt, but those treating precious metals as an investment were penalized. With the U.S. dollar losing value due to quantitative easing and other inflationary policies, investors seeking to preserve their purchasing power with precious metals paid a tax that other investors didn’t.

The tax was especially burdensome to small investors, for whom the additional cost might make the difference in whether they could invest at all. Young people comprise a whole new market for the precious metals industry, especially those who became interested in monetary policy because of the Ron Paul presidential campaigns. These younger investors are enthusiastic about precious metals, but typically can only afford to make smaller investments.

Mulligan Mint serves this market directly with its new “paraDimes,” fractional gold and silver coins in small denominations. The mint gave customers a first look at their tenth ounce silver coins on July 19. Packaged in 5oz rolls, the paraDimes will be an affordable way for small investors to increase their precious metals positions.

The legislation is also a boon to AOCS, whose core mission is to “bring economic independence to communities, towns, cities, tribes and nations that aim to resist inflation through the issuance of an honest monetary system.” Communities seeking to introduce a local currency were also taxed when purchasing the necessary coins, creating an artificial barrier to launching the new system. The exemption could make the difference for smaller communities just as it does for smaller investors.

Legislators were persuaded not only by the argument for fairness in treating precious metals like other investments, but also by the economic results they believe the bill will achieve for their respective states. Proponents of the bill argued that the exemption will keep business within the state by attracting coin shows, auctions and other events. It also gives consumers an incentive to establish relationships with local merchants, rather than ordering from out-of-state dealers over the internet.