Coin dealers tout tax exemption
State and local sales taxes are no longer levied on sales of coins, currency and bullion in Arkansas, an exemption a local pawnshop owner helped to codify in the state tax code.
Paul Mason, owner of Mason’s Coin & Pawn on West Grand Avenue, was part of the coalition of coin dealers that lobbied in support of Act 1109, testifying before the Senate Revenue and Tax Committee last March.
The bill passed the Senate last year by a 30-1 margin. The House approved it 93-0.
Prior to Oct. 1, Mason and other local dealers in the city had to collect 9.5 cents in state and local sales taxes on every dollar of a transaction involving coins, currency and bullion, an obligation he said discouraged dealers from the more than three dozen states with exemptions from attending coin shows in Arkansas.
Patrick Heller, the owner of one of Michigan’s largest coin and precious metals dealers, told the committee national coin dealer associations will only hold shows in states with exemptions.
Mason cited the annual show the Tri-Lakes Coin Club hosts in Hot Springs, telling the committee attendance numbers no longer justify holding the event at the Hot Springs Convention Center. A hotel conference room has become the new venue for what used to draw more than 100 dealers from multiple states.
He said forgoing the 9.5% will attract out-of-state dealers who will generate sales tax revenue for the state, city and county.
The impact statement the state revenue agency provided projected the exemption would result in a $1.15 million loss in collections of the state’s 6.5% sales tax for the fiscal year that began July 1. Cities and counties would lose out on $383,000 in local sales tax revenue.
But Heller said Michigan’s exemption spurred sales of other collectibles, such as antiques and jewelry, that are subject to sales taxes. The increased sales grew corporate income tax receipts and caused businesses to hire more employees, which
generated higher payroll tax collections.
“This is less of a tax exemption bill and more of a business development bill,” he told the committee.
The bill’s sponsor, Sen. Mark Johnson, R-District 15, of Little Rock, told the committee the state’s tax code considered coins, currency and bullion as consumable items rather than investments.
“It’s not tangible personal property that should be subject to sales tax,” he said. “In Arkansas we treat this the same as if you bought a lamp or a tire. That’s not what these are. These are investment vehicles.”
Heller said profits from the sale of coins, currency and bullion are reported to the Internal Revenue Service in the same manner as gains derived from sales of stocks, bonds and other securities. The similarity proves they’re assets and not consumer items, he said.
“The IRS considers these to be capital assets, investments, and expects to collect income taxes when they’re sold for a profit,” he told the committee.
“That shows it’s not a consumption product.”
Arkansas’ exemption doesn’t apply to coins or currency incorporated into jewelry, which Heller said is the primary use for altered coins.
“That would be fully subject to sales tax,” Johnson told the committee. “It’s no longer a medium of exchange investment item. It becomes tangible personal property.”
Heller said more sophisticated buyers will purchase gold and silver through outof-state brokers or on gold exchange traded funds, not from dealers who are required to collect sales taxes.
“Affluent customers find alternative means to make their acquisition without patronizing Arkansas businesses or creating any tax revenues for the state of Arkansas,” he told the committee.