First, this post may not be what you hoped, but it'll be in the right direction. I live in California, and as many are aware, the state charges sales tax on coin purchases under $1500. Supposedly it's because $1500 is an investment and under that amount is just play. Of course, if a coin bought for $1000 is later sold for $1450, you're supposed to pay income tax on the gain. If you're a dealer (have a resale license), then no sales tax, but the income tax situation on any gain may be different. The $1500 barrier refers to a single invoice that can have multiple coins on it. So, if you're bidding in an auction, and the total (bid plus premium) is getting close to $1500, try real hard to find a coin in the remaining lots that will bring the total to the magic mark or over it. The state tax rate is 7.5%, but many (most?) local governments have their own sales tax too. The average in large metro areas is close to 9% total, so I'll use that figure. For example, if the first coin is $1300 total, then the tax is 0.09 x 1300 = 117. So, if you can find another coin that you can get for $200 total, then the net cost is $83 (i.e. = 200 - 117) because you'll pay no sales tax on the pair. I try to have less expensive coins that appear later in the auction pre-picked if I think I may be getting close to $1500. For example, in an auction, I "won" a proof 2-cent piece for about $1400. I was facing a tax bill of 0.09 x 1400 = $126. Although I don't collect half-cents, I thought it would be fun to have a nice example. So, I was able to bid on one later in the auction and got an 1851 MS62BN (NGC) for $262 total. But since there was no tax on the pair, the real cost of the second coin was 262 - 126 = 136. I'm now a happy half-cent collector with only one example! This strategy can be used with dealers too, and I've seen savvy dealers point it out to potential buyers. With a dealer, you can take your time. At a show, it might be possible to have two dealers put multiple coins from the two of them on an invoice from one of them. One dealer sells the coins to the other, who then sells those coins plus some others to you. With an auction, the lots move quickly, and you must be ready and nimble. There are other strategies for beating the CA sales tax, like buying over the internet from a dealer or eBay seller with no physical presence in the state. In theory, you're supposed to send the state the sales tax yourself. I wonder if anyone does. All the major auction companies have a physical presence in CA, so they charge sales tax. Cal
Umm. I live in cali and do that all the time if I buy over $1K at heritage or GC. I'll find a coin for $500 or $300 or whatever and consider it like using a coupon. If the invoice is close to say $1400 then if I find a coin for say $120-$150 I practically got it for free.
Yup. I'm not the first by a long shot to do this. One benefit is that I bought examples of coins that I hadn't intended to collect, like a half-cent and bust half. Although I didn't collect any more in these series, I learned a lot about them, became better educated and enjoyed the process. Cal
North Carolina has no threshold -- any purchase of coins or PM, no matter how large or small, is taxable (unless you're buying from the US mint directly). How this plays out in real life: 1) At shows, dealers maintain that sales tax is "included in the marked price". I have no doubt that some dealers fail to submit tax to NC, but it's not my job to police them. 2) When you buy from out-of-state, you're responsible for reporting and submitting "use tax" on your return. However, if you do not have records of all your out-of-state purchases, you have the option of paying a flat amount, equivalent to saying "I spent 1% of my total income on out-of-state purchases". Since I don't retain records for (say) every burger or soda I buy when traveling out-of-state, my choice is obvious. 3) When I'm shopping for coins (outside of a show), if I buy from an in-state seller, I get charged sales tax on the spot. If I buy from an out-of-state seller, it falls under the flat-rate coverage, which means that I legally "don't owe use tax" (I'm fulfilling my legal obligation by paying the flat amount, and buying another coin from out-of-state does not impose further obligation). Now, what sorts of buying patterns do you imagine this produces?
I used to be a director in a tax department for a large mortgage firm. From that, I know for certain every state in the US has a law making having sales tax "included" in the price illegal. The first reason they did so was because direct tax on commerce was illegal, so by making the tax on the consumer they skirted the law. The second reason is exactly like you said, I am sure some do not include it in their returns. Without the seller having to list it separately there is no easy way to audit them. I am not saying consumers need to worry about this. It truly would be a dealer problem if the DOR got a hold of them. I am writing this for dealers here. At one point or another I handled sales and use taxes for every state that has them. Every single one of them has law forbidding "including" sales and use tax in the price. You can kind of say this in advertising, (we pay the tax kind of thing) but must give a detail receipt of how much was the sale and how much was tax to the consumer.
I'm shocked, shocked to discover that some of the tactics dealers use to "comply" with local tax laws are themselves of questionable legality. Or, to put it another way, that legislators would impose silly additional requirements in an effort to keep the Federal government from interfering with "their own" revenue stream.
Thanks, good information to have, you never know you might get a call or letter someday. It's no secret the government is always looking for ways of squeezing every penny out of everyone.
Lol, I am there with you. I have dealers who "only deal in cash" or ask me to make a check out to Cash, (they must be a relative of Johnny somehow). I play the game and just let them deal with the consequences. I just posted this for our dealer friends so they know what they are up against.
It's hard to know whether a dealer is paying the state sales tax on a transaction even if they indicate they're not collecting it from you. I'm guessing the CA Board of Equalization cares a lot more about getting their cut than whether the customers are told about it in a proper manner. You'd have to compare a dealer's books to customers' receipts (if provided) to know. There are advantages to cash transactions other than an increased chance to hide it from the authorities: no delays, no bounced checks, no credit card merchant fees, no credit card disputes, can get better deals when buying stock from other dealers, etc. Dealers are pretty savvy about sizing-up customers. Most prices are negotiable, and the quoted price for the goods may already include sales tax. If they can add it explicitly again to the final total, it's gravy. Cal
IIRC, there is one caveat: any single purchase over $1000 must be reported and tax paid at the regular rate.
Yes, that's true, unfortunately. It makes the NC resident's problem sort of the opposite of the California resident -- we get socked if our purchase is too large, not too small.
One dealer I don't go to often only accepts cash but charges tax. The other dealer I prefer accepts all forms of payment but with cash doesn't charge tax. Some ebay sellers in my home state charge a tax, most others seem clueless about it
Yeah, I've noticed some eBay sellers in my state (CA) charge tax and some don't. Just because they don't explicitly list it doesn't mean they aren't paying it, but good chance they aren't. Tax authorities probably don't consider most eBay sellers worth going after. Just identifying the seller and their address could be problematic and expensive. Cal
