Wayfair update

Greeniejr

There was a thread a few months ago about Stacks sending out an email about their collection of sales tax. It was quite a shock to the system and things are only getting worse. It is truly shocking how one sentence in a supreme court decision could have such incredible consequences. I feel it is necessary to get good information out there so that people can know what to expect. I am not going to lie, I am going to use this forum as a place to pitch joining ICTA, the Industry Council for Tangible Assets.
ICTA has been at the forefront of defending our industry from onerous legislation, unreasonable taxation and the big R word, regulation. We have helped secure full or partial sales tax exemptions in 35 states and in the long run have our eyes on the other 15. We secured the new, stronger hobby protection which gives teeth to our hosts to go after counterfeiters for damage caused by fake holders. We created the Anti-Counterfeiting Task Force and Educational Foundation which we handed off to PNG. We are now continuing our work towards handling the fallout of the Wayfair decision.
First off, this effects everyone. The current rules in any given municipality, city or state can literally be anything and trying to find out what the rules are that you have to follow could be extremely difficult. Part of this difficulty is that even the municipality may have no idea what the rules are. It is fun that they could have rules but are unable to tell you how to follow them. What is happening now is only the beginning. Each different taxing unit is going to see this as a potential gold mine and try to get a piece. People in Louisiana can attest to this but there are places there that their transactions are subject to tax by 5-6 entities. One thing people do need to understand is that it is entirely possible that some of these taxes could violate the constitution. Their reaction, so sue me/us. Sadly with thousands of taxing entities across the country, it is impossibly expensive to fight them all or even a few of them. The only solution is legislation. Luckily when the poop hits the fan with this, it will not be a partisan issue, it will be both sides trying to not alienate small business owners. However, the dog isn't even squatting at the fire hydrant yet.
Anyone who has a sales tax exemption should retain their exemption on the buy side for now. We will likely have to defend them moving forward but that is a whole other battle. This is not perfect because some states with exemptions may still collect the money and require you to request a refund on your taxes later on. Unfortunately if you are selling to someone in a sales tax state, you are out of luck. The tax needs to be paid. If you have a substantial collection, people will start taking the sales tax, on top of the BP, into account when making bids at auction. Even if you have the best, rarest material, this could drop prices as much as 5-10% across the board. It may not matter to the extremely wealthy, but buyers of 5k, 10k, 25k coins will be influenced by a 5% tax. Imagine if Mr. Hansen had to pay $200k in taxes on his Trade Dollar.
So what to do? First, don't panic. This year is likely to be challenging as the need for a legislative solution becomes apparent. Sadly legislators are unable to see past the potential windfall that these taxes falsely promise. When it hits the fan, it will hit hard and they will be forced to act. Challenging any single local law might seem worthwhile but it will waste a lot of money and accomplish nothing. Second, join ICTA. Historically ICTA has been funded entirely by dealers and other coin service businesses like PCGS. Dealers were the primary beneficiaries of the projects so it made sense. Now this effects everyone. Think about how much money you spend on coins every year and think about how much your potential tax liability will be. For many of us here, that is a very large number. That being said, supporting ICTA is essential. Go to their website ictaonline.org, make a donation, support the cause. It is a 501 C 6 and I believe 75% of any donation is tax deductible. Third, if you get any correspondence from your local or state government regarding sales tax, send it to ICTA. Part of what we are working on right now is getting as much information as possible about the effects of this decision so when it comes time for legislation, Jimmy can take it to the proper legislators to get the most favorable rules. We are not just talking to coin dealers, this is all small businesses. Lastly, please keep this conversation clean. It is important and can easily be derailed by partisan BS. This is not a D or R issue, this is an everyone issue.

David Greenstein
Vice-Chairman ICTA

CaptHenway

Attention all. Some of you know me. I wholeheartedly endorse this message.

I worked with David and his father Bob at Harlan J. Berk, LTd., and they have done tremendous work through ICTA. The new threat is real, and ICTA is the one fighting this threat. For your own good, support ICTA.

Tom DeLorey

jesbroken

I bought and sold many coins with David Greenstein for many years at HJB and found him to be extremely honest, helpful and knowledgeable. It is never a good thing for the government to become involved with anything. Hopefully, ICTA will be able to aid our hobby in this instance.
Jim

logger7

Everyone should educate themselves on the law and the real requirements on taxes, instead of following fear-based actions. It is against the law for a business to collect taxes when they are not due as one of the major ones on ebay tried to do on a potential purchase I was seriously considering, I am in a sales tax free state on coins. I have found it amazing that some who inveigh against the government the most are often the same ones rushing to obey what they see as required actions so they don't get in trouble without educating themselves and others whether or not it is required.

Coinosaurus

I've donated to ICTA in the past and encourage everyone to do likewise.

HeatherBoyd

This is a pre-emptive blanket notice that I will be closely monitoring this thread to ensure responses comply with the posted forum rules and guidelines. Thank you all in advance.

291fifth

The effect of that supreme court ruling is now being felt well outside the realm of coin sales. I noted that many on-line retailers changed their sales tax policy on January 1, 2019 and now collect sales tax even though they have no physical location in my state.

Greeniejr

@291fifth said:
The effect of that supreme court ruling is now being felt well outside the realm of coin sales. I noted that many on-line retailers changed their sales tax policy on January 1, 2019 and now collect sales tax even though they have no physical location in my state.

That is the whole reasoning behind the ruling. Under quill, you needed to have a "physical presence" in the state in order to be subject to the tax. To Wayfair, Overstock and Amazon who has a large footprint in literally every state, there was no question they had to pay. That is why they assaulted small business as they did to "even the playing field." This is why ICTA is working with a wide variety of industries who have small businesses like ours to gather information to deal with this issue.

CaptHenway

@HeatherBoyd said:
This is a pre-emptive blanket notice that I will be closely monitoring this thread to ensure responses comply with the posted forum rules and guidelines. Thank you all in advance.

Always a good idea, but may I respectfully request that if somebody does go out of bounds that you delete the post and not the thread? As I said above I know the OP and this concern is 100% legitimate.

TD

EagleEye

Thanks for the update. Very important info.

Davideo

@logger7 said:
Everyone should educate themselves on the law and the real requirements on taxes, instead of following fear-based actions. It is against the law for a business to collect taxes when they are not due as one of the major ones on ebay tried to do on a potential purchase I was seriously considering, I am in a sales tax free state on coins. I have found it amazing that some who inveigh against the government the most are often the same ones rushing to obey what they see as required actions so they don't get in trouble without educating themselves and others whether or not it is required.

Agreed.

The difficulty is that the ruling changed the precedent for nexus in a state, but obviously didn't pass any specific legislation. The courts agreed with collection sales tax in one circumstance, specifically the South Dakota law of business with over $100,000 in sales or 200 transactions. Many states followed South Dakota in passing laws with similar thresholds, but could a state enforce collection based on a single transaction? Or if a business doesn't know if they will be over the threshold, do they just collect to be safe? And could smaller municipalities collect based on smaller thresholds? And sales tax rates often vary or are excepted based on the categorization of the good in question. For example, states may have exception for bullion but not collector coins, but the definition of bullion could be different between the various states. So it may just be a business decision that it is easier to simply charge sales tax on all transactions as it is inefficient to try to figure out the exact laws and perhaps more importantly defend yourself against overzealous state tax collection agencies.

Greeniejr

@Davideo said:

@logger7 said:
Everyone should educate themselves on the law and the real requirements on taxes, instead of following fear-based actions. It is against the law for a business to collect taxes when they are not due as one of the major ones on ebay tried to do on a potential purchase I was seriously considering, I am in a sales tax free state on coins. I have found it amazing that some who inveigh against the government the most are often the same ones rushing to obey what they see as required actions so they don't get in trouble without educating themselves and others whether or not it is required.

Agreed.

The difficulty is that the ruling changed the precedent for nexus in a state, but obviously didn't pass any specific legislation. The courts agreed with collection sales tax in one circumstance, specifically the South Dakota law of business with over $100,000 in sales or 200 transactions. Many states followed South Dakota in passing laws with similar thresholds, but could a state enforce collection based on a single transaction? Or if a business doesn't know if they will be over the threshold, do they just collect to be safe? And could smaller municipalities collect based on smaller thresholds? And sales tax rates often vary or are excepted based on the categorization of the good in question. For example, states may have exception for bullion but not collector coins, but the definition of bullion could be different between the various states. So it may just be a business decision that it is easier to simply charge sales tax on all transactions as it is inefficient to try to figure out the exact laws and perhaps more importantly defend yourself against overzealous state tax collection agencies.

One point that it is important to understand is that there are intricacies to the thresholds. I forget which state it is but one of the states that has a 200 transaction deminimus, treats each part of an item individually. This means that if someone buys 10 rolls of silver eagles, you have reached the threshold.

mustangmanbob

I sold my first item today that sales tax kicked in on (same state).

logger7

I appreciate the good work that ICTA does.

In our state sales/use taxes are due on contracting, I do some work where I need to collect, many customers don't want to pay, I tell them I have to collect, sometimes when they refuse to pay I have to take it out of my earnings on a job. I have spoken with the state department of revenue about it they gave me no remedy on that. I know contractors who don't charge sales/use fees which are required. Enforcement on that is light.

Collectible coins and antiques are exempt for good reason. If people are buying as an investment the tax comes right out of their bottom line.

Veep

On eBay for instance, I can foresee bidders lowering their bids by 5-10% on all bids over confusion about whether tax will be collected or not —> another hit for sellers.

Greeniejr

@Veep said:
On eBay for instance, I can foresee bidders lowering their bids by 5-10% on all bids over confusion about whether tax will be collected or not —> another hit for sellers.

Absolutely. This is a mess. Worse yet, they will discount their bids by 5-10%, you lose out because eBay collects it, then they get the money refunded on their taxes because it was not really due.

Greeniejr

Another interesting point is that the taxes are due on goods AND SERVICES. What is the 4th word of our host's name? Service. That means unless something happens, grading companies may have to start charging sales tax. Many people here are already price sensitive so adding 5% or whatever it would be. Or even moreso, what about when someone crosses an expensive coin and has to pay sales tax on the guarantee premium.

Coinosaurus

True, but wouldn't all medical treatment also be considered a "service?" We already commit 20% of our economy to health care. If the government attempts to tax that as a "service" there will be a public meltdown. (I don't mean to derail an important topic, but had to ask.)

Davideo

@Coinosaurus said:
True, but wouldn't all medical treatment also be considered a "service?" We already commit 20% of our economy to health care. If the government attempts to tax that as a "service" there will be a public meltdown. (I don't mean to derail an important topic, but had to ask.)

Professional services (healthcare, lawyers, etc.) are typically tax exempt as compared to personal services (salon, landscaping, etc.).

I've not heard of PCGS charging sales tax for customers in their home state or for walk-up service at shows, so I can assume their services are exempt. However, that doesn't mean they would be exempt in all states.

Greeniejr

@Davideo said:

@Coinosaurus said:
True, but wouldn't all medical treatment also be considered a "service?" We already commit 20% of our economy to health care. If the government attempts to tax that as a "service" there will be a public meltdown. (I don't mean to derail an important topic, but had to ask.)

Professional services (healthcare, lawyers, etc.) are typically tax exempt as compared to personal services (salon, landscaping, etc.).

I've not heard of PCGS charging sales tax for customers in their home state or for walk-up service at shows, so I can assume their services are exempt. However, that doesn't mean they would be exempt in all states.

So my brief research tells me that Medical care is exempt in most states because it is medical care and there would be uproar. As far as professional services, I don't know the current rules but the point is that the municipalities may start because..... why not try. This could get very messy if they start trying to tax fees on professional services like banks, lawyers, doctors, etc...

MrEureka

@logger7 said:
I appreciate the good work that ICTA does.

In our state sales/use taxes are due on contracting, I do some work where I need to collect, many customers don't want to pay, I tell them I have to collect, sometimes when they refuse to pay I have to take it out of my earnings on a job. I have spoken with the state department of revenue about it they gave me no remedy on that. I know contractors who don't charge sales/use fees which are required. Enforcement on that is light.

Collectible coins and antiques are exempt for good reason. If people are buying as an investment the tax comes right out of their bottom line.

From a national economic perspective, the fact that something is bought for investment purposes shouldn't have anything to do with whether or not its taxed. Yes, there's a good reason that we don't WANT coins taxed, but that doesn't mean that there's a NEED for coins to be exempt. On the other hand, there is a NEED for an exemption on investments in stocks and bonds. Those exemptions increase the amount of capital available to business, the liquidity of the markets, and our nation's ability to compete internationally.

The best LEGITIMATE reason for a state exemption on coins (or anything else that can be shipped economically across state lines) is to allow local retailers to remain competitve with out-of-state retailers. Unfortunately, Wayfair may have eliminated the need for such exemptions, as far as the states are concerned.

Greeniejr

@MrEureka said:

@logger7 said:
I appreciate the good work that ICTA does.

In our state sales/use taxes are due on contracting, I do some work where I need to collect, many customers don't want to pay, I tell them I have to collect, sometimes when they refuse to pay I have to take it out of my earnings on a job. I have spoken with the state department of revenue about it they gave me no remedy on that. I know contractors who don't charge sales/use fees which are required. Enforcement on that is light.

Collectible coins and antiques are exempt for good reason. If people are buying as an investment the tax comes right out of their bottom line.

From a national economic perspective, the fact that something is bought for investment purposes shouldn't have anything to do with whether or not its taxed. Yes, there's a good reason that we don't WANT coins taxed, but that doesn't mean that there's a NEED for coins to be exempt. On the other hand, there is a NEED for an exemption on investments in stocks and bonds. Those exemptions increase the amount of capital available to business, the liquidity of the markets, and our nation's ability to compete internationally.

The best LEGITIMATE reason for a state exemption on coins (or anything else that can be shipped economically across state lines) is to allow local retailers to remain competitve with out-of-state retailers. Unfortunately, Wayfair may have eliminated the need for such exemptions, as far as the states are concerned.

Andy it is a very slippery slope. The origin of the IL sales tax exemption came from issues with the board of trade. People could walk into the board of trade, buy a contract of Kruggerrands and ultimately take delivery there was no sales tax. If they walked into RARCOA a few blocks away and bought the same 25 KR they were charged sales tax. While this exact scenario is no longer the case, coins do have more investment characteristics than pretty much any other "collectible". This is acknowledged by the fact that certain coins are allowed in IRAs while no other collectible is allowed. It would be extremely challenging for any government entity to effectively legislate fair taxation on coins and bullion without causing huge unintended consequences. In many ways bullion coins are no different than commodity contracts that can be delivered. Coins are legal tender so how do you tax them without taxing taking change out of the bank. At this point, coins/bullion make sense to be exempt more than anything except necessities (food, clothing, shelter, medicine).

BAJJERFAN

@logger7 said:
I appreciate the good work that ICTA does.

In our state sales/use taxes are due on contracting, I do some work where I need to collect, many customers don't want to pay, I tell them I have to collect, sometimes when they refuse to pay I have to take it out of my earnings on a job. I have spoken with the state department of revenue about it they gave me no remedy on that. I know contractors who don't charge sales/use fees which are required. Enforcement on that is light.

Collectible coins and antiques are exempt for good reason. If people are buying as an investment the tax comes right out of their bottom line.

I suppose that with computerized cross checking that the state might be able to determine that the amount of sales tax that you collected and submitted was consistent with the amount of business income that you reported.

BAJJERFAN

@Davideo said:

@Coinosaurus said:
True, but wouldn't all medical treatment also be considered a "service?" We already commit 20% of our economy to health care. If the government attempts to tax that as a "service" there will be a public meltdown. (I don't mean to derail an important topic, but had to ask.)

Professional services (healthcare, lawyers, etc.) are typically tax exempt as compared to personal services (salon, landscaping, etc.).

I've not heard of PCGS charging sales tax for customers in their home state or for walk-up service at shows, so I can assume their services are exempt. However, that doesn't mean they would be exempt in all states.

Or that California may reclassify the taxable status of their business.