Poll: what Silver bullion premium is too high?

That opportunity to pay state sales tax on online purchases is called 'Use Tax' and as you say, is just about totally ignored,and indeed, pretty well unknown.

Without some form of Federal collection framework, any attempt at enforcement nationally would be a nightmare, and a can of worms that senators with an eye to States Rights would really not want to open when all it would get them is disaffected voters.

 

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Many states exempt 'pure' bullion sales from sales tax. In New York State, I believe it is any amount over $1,000.

A similar coin from dealers I know across the NJ border is usually uncompetitive on price with one from my NY dealers. Complete opposite of most everything else, from clothing to gasoline (due to sales and other taxes) !

 

Bingo....in theory, if you buy cheap NJ gasoline across the border you should be keeping track and refunding the difference back to NY. Or if you drive down to Florida for vacation and buy a pack of cigarettes and you're from NYC, you should be paying NYC/NYS another $5 a pack or more.

Good Luck with that.............

 

HI Del,

I'm only going to talk about stateside prices, taxes and premiums. That's all I have a bit of a clue about.

First of all, premiums vary by type of bullion AND by quantity. I've attached the daily quotes from my hometown dealer. Note that a 1/10 AGE is 14% while a 1 oz is 4.4. Also, generic plain vanilla bullion is much cheaper than ASE, AGE, and some of the other 'top shelf' brands.

I'm sure you can appreciate the a quantity purchase will get you a discount. But the issue surrounding name brand silver has to do with fungibility. What I mean is that you can buy and sell them readily. An ASE can be sold anywhere, but a silver round from BillyBob's Mint and Bowling Alley is harder to sell. That's why in silver bullion, Engerhard and JohnsonMatthey brand stuff carries a higher premium than plain vanilla.

Another issue that impacts premiums has to do with Supply/Demand pricing economics. There is a paper price and a street price for bullion. Whenever these diverge significantly, prices get funny. There are a lot of folks that believe the paper price for bullion is at times artificially low due to various market factors. Whenever this occurs, either supply dries up OR premiums increase. For example, in the recent liquidity trap the interest rates were lower on mortgages than the banks wanted to pay. Ergo, they were out of money and loans were not available. At least not a 4%. However, if you wanted to pay 6%, they all of a sudden found some cash. feh. Or when Nixon applied gasoline price controls . . . supply disappeared.

Lastly, if you really want this coin or that, for whatever reason, you pay the piper the going price.

peace,

rono

 

Thanks Rono, that's especially useful.

For USA buyers: Quick check reveals the HIGHEST SALES TAX for bullion would be shops in TN, AR, OK, AL, CA, & MN. This also varies by county in some states, but online/out of state sales tax may be legally waived in some cases by vendors in some locales. I do not know this for a fact, but I'd also imagine sales taxes generally inflate prices in those markets. It's also harder for dealers to compete, selling bigger ticket commodity items; affluent informed consumers can shop elsewhere.

 

If the bullion in California is a single purchase $1500 or over it is considered differently and is generally not applicable for sales tax. Several states have this type of policy.

http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1599.html

 

Here's the law in New York State, I believe Kruggerands are now OK and I think the percentages are still the same but generally 140% for silver, 120% for gold under 1/4 ounce, and 115% for all other gold/metal:

http://www.tax.ny.gov/pdf/memos/sales/m89_20s.pdf

This covers all 50 states and looks to be pretty accurate, though it might be off on a few states if they've changed their laws in the last few years:

http://thecoinologist.com/sales-tax-state-by-state-breakdown/

 

Someone 'buying a few ounces of Silver' (OP) isn't getting a bullion tax waiver in the few states allowing that, however.

More likely, the retail buyer is paying more. How much?

Let's assume, compared to all in retail stores nationally, Littleton offers a 'very competitive retail premium' (21.76%) on ASEs, 2/5/15: $20.98

Now, for example, let's look more closely at TN, the "most expensive" US sales tax, and then in towns/counties with the highest local tax options, to see what we'd pay in a store charging the same retail premium as Littleton :
a) the state sales tax is 7.0% (+$1.47)
b) the county tax is another 2.75% (+$0.58)
c) the town tax (in places like Murfreesboro, Jackson, Johnson City, Bartlett, Kingsport, etc.) is another 2.75% (+$0.58)

Total cost 1 ASE bought in stores charging the tax rates above: $20.98 + $2.62 = $23.60. The 'retail premium' is effectively 37%. (I found about 12 stores in said locales in the Yellow Pages.) ALERT! That's a very high cost basis!

This is much worse than the 20% VAT, I see. While TN is probably among the 'most expensive' for retail premiums in the USA, we can easily imagine the 'ten highest sale tax states' in-store bullion buyers suffer as much or worse than the average UK buyer.

Understanding (and reducing) cost-basis should be a factor to anyone seriously accumulating bullion as an investment.

 

Del Pinto, what about buying from an OOS dealer or online place ?

 

Exactly. That would be the way to go. You'd still technically owe the state, county and town taxes in TN (and most places) but then we're back to the honesty question, tax-cheating.

But dont forget: you're also paying s/h/II, at that point.

The point here: for someone who would normally pay 37% premium in-store, a 25% premium might look like a bargain. Has there been a USA list of most expensive cities/counties to buy bullion retail, before?

Qualification: Although I do feel that 'high taxes' generally probably boost the retail dealer's premium too, I could see quite the opposite might happen. S/he needs to offer more competitive pricing and should offer even better deals online/oos. I have no evidence either way, however.

 

we can easily imagine the 'ten highest sale tax states' in-store bullion buyers suffer as much or worse than the average UK buyer.

Hardly surprising as the average UK buyer won't be paying any tax at all, just the dealer's profit margin. I have never paid any tax on a coin or precious metal item. Were I asked I'd just walk away.

 

"Hardly surprising as the average UK buyer won't be paying any tax at all, just the dealer's profit margin. I have never paid any tax on a coin or precious metal item. Were I asked I'd just walk away."

I really don't want to wade into this, but it certainly appears (info online) that retail UK buyers do get charged VAT on Silver coins purchased at UK shops. It sounds complex. I don't know what the "Global tax scheme" is, relevant to other PMs?

1) http://www.cointrust.co.uk/help_answer.asp?ID=14#14
"Due to the complexity of the collectible business it is very difficult to give an accurate V.A.T payments on all our products. Where it is clear on newly released products we show the VAT within the product. However if the item has bought through the secondry market then this will come under a Global tax scheme and will not be shown. If trying to claim VAT back and you are VAT registered then we recommend speaking to your accountant. If you are not this cannot be claimed back.

All gold coins are tax free"

2) http://www.finesilvercoins.co.uk/faq/
"SILVER, PLATINUM & PALLADIUM BULLION ARE NOT VAT FREE:
VAT at 20% is chargeable on Silver, Platinum and Palladium."

3) http://therealasset.co.uk/vat-silver/

Back in Arkansas:
In Texarkana, AK you'd pay 10.5% in combined sales taxes, but I find no coin shops there.
It looks like the highest sales taxes in the top 10 towns would be ~8.5 - 9.25%; again, that's tacked on to whatever dealers' retail premium for Silver bullion. If the dealer charged as much as Littleton, you'd pay a 32 - 33% effective premium, after taxes.

I honestly can't imagine that driving to an AR county/town with 'lower sales taxes' would be worth the gas, but in some cases (larger bullion purchases) driving across state lines might be.

 

:

 

I have no idea how the two largest (arguably) UK silver online bullion dealers manage to get away with this outrage. Charging VAT on Silver bullion.

 

that's how it works the $$ premium stays about the same as spot goes up and down so a "fair" percentage over spot varies.

 

No, the fixed dollar price retail markup allows the dealer's premium to rise when commodity price falls. That premium is ever-changing, when a retail markup is fixed, expressed as "+ $2.50" etc.

eBay or online looks REALLY CHEAP compared to what you'd pay in store, in some US places.

 

I have no idea how the two largest (arguably) UK silver online bullion dealers manage to get away with this outrage. Charging VAT on Silver bullion

They can do as they please, but there is no need to pay this tax if you buy with your eyes open. Like many taxes, this is a mug punter tax.

 

Roughly speaking the global tax scheme is one where dealers pay tax based on turnover rather than accounting for tax on individual items. It is similar to the dealers margin scheme.

I am surprised that any buyer would pay VAT when buying silver bullion since it is so easy to get any reasonable quantity VAT free. Rather like you chaps driving to a tax free state, but with vastly less distance involved.

 

But is it cheating ? If you buy from OOS or online, I don't think you should be liable.

You buy something OOS -- like gasoline on a trip to DisneyWorld -- who in their right mind thinks the state should get the difference from the low-tax states you buy car in while driving there ?

 

What you (or I) "think" (and you mean, "want") is immaterial here - and in fact dangerously deceptive. Talk to an accountant. Or check the law in YOUR state: that's reality.
http://www.nolo.com/legal-encyclopedia/50-state-guide-internet-sales-tax-laws.html

You're really stretching here. Let's stick to the issue at hand: is buying bullion online from your computer at home a sales taxable event in your state, yes or no? The purchase is certainly executed at your address, even if billing is elsewhere (like using your debit or credit card at the local grocery store) or shipping is involved (loophole? try giving that excuse to US customs!) This isn't difficult to understand, and it honestly shouldn't seem "unfair" in any way shape or form to a reasonable citizen in 2015.

This is what a criminal does:
http://theartlawblog.blogspot.com/2006/05/kozlowski-sales-tax-deal.html

I know we're on the internet, and I don't "like" taxes either, but please let's avoid sociopathic rationales: tax-cheating is tax-cheating. We might get away with it, but that doesn't make it right.