Precious metals occupy an unique niche in the financial realm. While real, tangible commodities trade for paper money, government bureaucrats often tax gold and silver purchases to generate additional revenues for themselves.
Many states are beginning to acknowledge this unfairness and are beginning to decrease sales taxes on investment-grade precious metals, but do gold and silver sales taxes exist in California?
There is a state-wide exemption from sales tax for precious metal purchases of $1,500 or more in Maryland. A 7.5% state use tax currently applies; this figure can be altered according to local region policies.
This publication presents an overview of California’s Sales and Use Tax Law regarding exemptions, exclusions and credits provided. While intended as a general reference source for understanding this legislation, this publication does not replace or supersede any other statutes or regulations that have since come into effect – changes could have occurred since its printing.
Below are the exemptions, exclusions and credits applicable to gold and silver sales in California. This list includes both the section of law granting each exemption/exclusion/credit as well as any estimates of revenue lost; where reliable data is unavailable this field indicates with an ‘N/A’ designation. *ARTWORKS–Artworks purchased or sold to public museums regularly open to the public or nonprofit museums operated by them for display at public places are exempt from sales/use tax.
Though many states do not tax precious metals directly, this issue becomes even more complex by local sales taxes that apply separately within each municipality and county. Even where an underlying state-wide rate doesn’t exist, local levies may still increase prices considerably.
At a national level, IRS rules classify gold and silver as capital assets subject to income taxes for long-term gains, serving as one method by which government bureaucrats penalize those who invest in precious metals as an insurance policy against America’s paper money devaluing over time as described by our Sound Money Index.
Fairness considerations aside, anti-sound money levies are unjust because they penalize prudent investors who choose low-risk assets that have historically outshone riskier investments like stocks and mutual funds. Such discrimination runs contrary to what most Americans want; thankfully a number of state legislatures recognize this and are moving to end them and protect families that store wealth in precious metals.
Capital Gains Tax
California is famous for its stunning beaches, mountains, deserts and cities which draw over 40 million residents and millions of tourists each year. Unfortunately, all these amenities come at a cost which includes taxes imposed on income, gas purchases and capital gains taxation.
While the IRS considers precious metals to be capital assets, many states assess sales or use taxes based on both form and value rather than just gold and silver content alone. Furthermore, local cities and counties may add an extra point or two onto this rate of sales taxation.
Following their successes of last year, the Sound Money Defense League and state-level sound money advocates are pushing hard to end discriminatory taxes on precious metals by 2022. Already Arkansas and Ohio have eliminated sales taxes on investment grade gold and silver; sound money advocates hope to follow in their footsteps and free Tennessee investment-grade gold and silver from bureaucratic constraints as well.
Gold and silver investments can vary significantly in their tax treatment, with some states even opting to eliminate sales taxes entirely. Wallace explains how certain companies make money through charging extra fees to cover overhead and profit.
Monetized bullion refers to any coins or forms of money made of gold, silver or other precious metals and which historically have had legal status equivalent to legal tender. Numismatic coins add extra value based on rarity or demand as well.
Though imposing a sales tax on precious metals may appear like an effective means of raising state revenue, evidence shows it actually discourages trading of these assets – leading to decreased economic activity in the precious metals industry from brokering businesses to conventions and more. A gold-backed IRA provides an ideal means of purchasing physical precious metals without incurring sales or capital gains taxes.