If you're buying a $20 mil. piece of art, you likely have other homes in tax free states.
"My friends who see my collection sometimes ask what something costs. I tell them and they are in awe at my stupidity." (Baccaruda, 12/03).I find it hard to believe that he (Trump) rushed to some hotel to meet girls of loose morals, although ours are undoubtedly the best in the world. (Putin 1/17) Gone but not forgotten. IGWT, Speedy, Bear, BigE, HokieFore, John Burns, Russ, TahoeDale, Dahlonega, Astrorat, Stewart Blay, Oldhoopster, Broadstruck, Ricko, Big Moose, Cardinal.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
I think all significant collectors should get a table at a local coin club show once in a while, and sell off a few items to get a feel for the market as a dealer.
In my own situation, I sometimes buy silver bars at coin shows or coin shops, for use in making a product. Because the silver is a direct input into the product that is then sold, I can claim sales tax exemption on the silver purchase. Essentially, I am taking the silver and reforming it, then reselling it. But this means that I am also required to collect and remit sales tax (where applicable) on the sales of my products.
I do operate as a for-profit business, and I have never once reported a loss for said business.
If a hobbyist were to report losses year-after-year, then the IRS probably would declare it a "hobby" and disallow the deductions.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
I think all significant collectors should get a table at a local coin club show once in a while, and sell off a few items to get a feel for the market as a dealer.
In my own situation, I sometimes buy silver bars at coin shows or coin shops, for use in making a product. Because the silver is a direct input into the product that is then sold, I can claim sales tax exemption on the silver purchase. Essentially, I am taking the silver and reforming it, then reselling it. But this means that I am also required to collect and remit sales tax (where applicable) on the sales of my products.
I do operate as a for-profit business, and I have never once reported a loss for said business.
If a hobbyist were to report losses year-after-year, then the IRS probably would declare it a "hobby" and disallow the deductions.
.
Yes, but you have to declare the inventory as you buy it. Unless the collector is a frequent seller, that's going to be a problem.
All comments reflect the opinion of the author, even when irrefutably accurate.
@PerryHall said:
Is it possible to get a PO Box in a nearby state with more reasonable sales tax laws and use that for your mail order purchases?
Maybe...depending where in the state you live to define "nearby". If you live near seattle, or on the peninsula, you are likely 3-5 hours from Oregon, 5-8 from Idaho, so would you consider that "nearby"?
Nearby or not, this scheme still requires use tax to be paid, so there's no legal benefit; it's just easier to skirt the state's tax laws.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
The main coin shows in Spokane, WA moved across the border to Idaho during covid due to excessive shutdowns in WA. They'll obviously stay in Idaho now. That's OK, it's only a 15 minute drive for me.
I'm sure every Washington resident who goes to the shows in Idaho promptly pays their full use tax.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
All comments reflect the opinion of the author, even when irrefutably accurate.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
.
If as a dealer you want to buy a coin or coins to hold for long term appreciation when you get it simply sell it to yourself at cost just to get it out of your inventory. In ten years if you want to sell it then buy it back from yourself for what you paid.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
.
If as a dealed you want to buy a coin or coins to hold for long term appreciation when you get it simply sell it to yourself at cost just to gt it out of your inventory. In ten yars if you want to sell it then buy it back from yourself for what you paid.
Good luck with that when dealing with the taxing authorities.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
.
If as a dealed you want to buy a coin or coins to hold for long term appreciation when you get it simply sell it to yourself at cost just to gt it out of your inventory. In ten yars if you want to sell it then buy it back from yourself for what you paid.
Good luck with thet when dealing with the taxing authorities.
There is nothing to dictate what you must buy and sell your inventory for. No difference between buying from yourself or lowballing some nimrod who wanders into your shop with it.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
.
If you're buying it as an investment, it is NOT for resale and not business inventory. Your "resale certificate" does not allow you to purchase PERSONAL investments.
It IS a clear violation of existing statutes. You just don't want it to be.
All comments reflect the opinion of the author, even when irrefutably accurate.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
.
If as a dealed you want to buy a coin or coins to hold for long term appreciation when you get it simply sell it to yourself at cost just to gt it out of your inventory. In ten yars if you want to sell it then buy it back from yourself for what you paid.
Good luck with thet when dealing with the taxing authorities.
You can sell it to yourself, as long as you pay the sales tax to the state. In NY, there is a line for goods converted to personal use.
There is no (legal) way to buy it with a resale certificate and sell it to yourself without paying the sales tax that they are trying to avoid.
All comments reflect the opinion of the author, even when irrefutably accurate.
@PerryHall said:
Is it possible to get a PO Box in a nearby state with more reasonable sales tax laws and use that for your mail order purchases?
Maybe...depending where in the state you live to define "nearby". If you live near seattle, or on the peninsula, you are likely 3-5 hours from Oregon, 5-8 from Idaho, so would you consider that "nearby"?
Nearby or not, this scheme still requires use tax to be paid, so there's no legal benefit; it's just easier to skirt the state's tax laws.
I'm not going to get into the law, or usage. That's not what my reply was for. The reply was to comment on "get a POBox in a nearby state" so I wanted to highlight how that isn't a great option for many due to distance.
WA is screwing too many with too many taxes and the politicians and organizations that get those tax dollars are not held accountable, so I know many will skirt it if they can, and I really don't care because the monies wouldn't be used appropriately anyway
@PerryHall said:
Is it possible to get a PO Box in a nearby state with more reasonable sales tax laws and use that for your mail order purchases?
Maybe...depending where in the state you live to define "nearby". If you live near seattle, or on the peninsula, you are likely 3-5 hours from Oregon, 5-8 from Idaho, so would you consider that "nearby"?
Nearby or not, this scheme still requires use tax to be paid, so there's no legal benefit; it's just easier to skirt the state's tax laws.
I'm not going to get into the law, or usage. That's not what my reply was for. The reply was to comment on "get a POBox in a nearby state" so I wanted to highlight how that isn't a great option for many due to distance.
WA is screwing too many with too many taxes and the politicians and organizations that get those tax dollars are not held accountable, so I know many will skirt it if they can, and I really don't care because the monies wouldn't be used appropriately anyway
@Bochiman said:
WA is screwing too many with too many taxes and the politicians and organizations that get those tax dollars are not held accountable, so I know many will skirt it if they can, and I really don't care because the monies wouldn't be used appropriately anyway
@Bochiman said:
WA is screwing too many with too many taxes and the politicians and organizations that get those tax dollars are not held accountable, so I know many will skirt it if they can, and I really don't care because the monies wouldn't be used appropriately anyway
How else should every single service, essential or otherwise, be paid for?
I live in WA, do you?
WA has PLENTY OF TAXES. There has not been an income tax due to our state constitution and we have survived.
I won't get into everything here, but this state has a 1 party rule going on for a long time and so everything that party wants to spend on happens. No accountability and no tax gets voted down.
They even put a "head tax" on businesses in seattle. There is a "Climate Control Act" that adds to the gas tax. When someone audited it, they found a vast majority (80%+) went to hiring people and nothing to do with solving what it was created for.
So, how else should things be paid for? WITH EXISTING TAXES that are quite high anyway.
My property taxes have gone up 400%+ in 20 years. I get LESS services than I did when I moved in. Go figure
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
All comments reflect the opinion of the author, even when irrefutably accurate.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong.
But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong.
But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
.
Well, they'll get in less trouble following my random ramblings than yours.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong.
But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
.
Well, they'll get in less trouble following my random ramblings than yours.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong.
But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
.
It someone is a certified tax accountant then anything they post here should be able to be taken to the bank. If someone gains the same information/expertise from having done their own tax reporting for 15 years then their postings should have validity as well.Expert opinions about coins are posted and sought after all of the time altho opinions are facts, but could be factual.
Not directed at you, but is a sales tax the same as a use tax? I see them both used here.I never heard of having a use tax here in Iowa. There is a mail order tax which is the sales taxes that are supposed to be paid on taxable items purchased outside the state.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong.
But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
.
It someone is a certified tax accountant then anything they post here should be able to be taken to the bank. If someone gains the same information/expertise from having done their own tax reporting for 15 years then their postings should have validity as well.Expert opinions about coins are posted and sought after all of the time altho opinions are facts, but could be factual.
Not directed at you, but is a sales tax the same as a use tax? I see them both used here.I never heard of having a use tax here in Iowa. There is a mail order tax which is the sales taxes that are supposed to be paid on taxable items purchased outside the state.
The "mail order tax" is a version of the "use tax". Many States (NY, for example) passed "use taxes" for items that were purchased tax free on the internet but "used" in the (once) great state of NY. This was generally a self reported amount on the state income tax form.
All comments reflect the opinion of the author, even when irrefutably accurate.
Been awhile since I looked at, but IMO 2 terms for the same thing. If I have a vehicle repaired OOS I expect that that state will add their sales tax to the bill so in that case I don't think I'm required to pay to both. Anyway I don't buy or sell coins anymore so it's all moot to me. I'll play devil's advocate and say that coins and are common merchandise just like Barbie dolls and Big Wheel tricycles are. Coins may be money but nobody buys Morgan dollars to use as money.
Been awhile since I looked at, but IMO 2 terms for the same thing. If I have a vehicle repaired OOS I expect that that state will add their sales tax to the bill so in that case I don't think I'm required to pay to both. Anyway I don't buy or sell coins anymore so it's all moot to me. I'll play devil's advocate and say that coins and are common merchandise just like Barbie dolls and Big Wheel tricycles are. Coins may be money but nobody buys Morgan dollars to use as money.
Sales and use tax are generally the same (I'm sure there are some caveats depending on specific state rules). If I buy something from out of state and am not charged sales tax, I owe use tax. Same if someone with a reseller certificate buys something tax-free and decides to keep it instead of put it in inventory (this is no different than selling to yourself and paying sales tax). If I go to Oregon (no sales tax), buy something, and come right back to WA, I owe use tax on it (or if I do the same with a state that has a sales tax rate lower than WA, use tax is the difference). I'm sure states handle this different, but if you buy something and use it out of state before returning, that can negate the need to pay use tax.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong. But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
Correct. My mother is a CPA. I've run countless tax scenarios by her over the years, and it is overwhelmingly clear that tax authorities act on reasonable interpretations of what's written, even if no law or statute can cover every scenario someone can come up with. The idea you've come up with is ridiculous to anyone with any experience whatsoever with taxes. If nothing I've cited thus far can prove it to you, as I suggested before, go ahead and ask the IRS, or your state's tax authority, or a CPA. They will all give you the same answer.
I have a wad of $100s, a full tank of gas, and a grande drip from Starbucks.
I'm less than 3 hrs from Portland OR.
Don't toy with me Washington State!!!
Dave
Always looking for original, better date VF20-VF35 Barber quarters and halves, and a quality beer.
taxes taxes taxes. The ultimate will be when they tax us on our breathing as we are sending CO2 into the atmosphere.
AKA a carbon tax! Right now there is much talk on taxing us on our net worth! that includes our collections! -- every year!!
“I'll tax the street
(If you try to sit, sit) I'll tax your seat
(If you get too cold, cold) I'll tax the heat
(If you take a walk, walk) I'll tax your feet” … 🎶
Always looking for original, better date VF20-VF35 Barber quarters and halves, and a quality beer.
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong. But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
Correct. My mother is a CPA. I've run countless tax scenarios by her over the years, and it is overwhelmingly clear that tax authorities act on reasonable interpretations of what's written, even if no law or statute can cover every scenario someone can come up with. The idea you've come up with is ridiculous to anyone with any experience whatsoever with taxes. If nothing I've cited thus far can prove it to you, as I suggested before, go ahead and ask the IRS, or your state's tax authority, or a CPA. They will all give you the same answer.
.
I highly doubt that (that you would get the same answer from all three entities). In fact, you might get a different answer from the IRS each time you ask.
Regardless, the important thing to determine is, what is the correct answer.
I was just looking into the issue of inventory accounting for small businesses. Such businesses with annual revenues below $25 million are allowed to use the "cash" method of accounting. In addition, the "Tax Cuts and Jobs Act" (TCJA) was enacted in 2018 and it seems to allow small businesses to also use the "Non-Incidental Materials and Supplies" (NIMS) accounting to simply deduct the entire cost of their new inventory in the year that it was paid for. But that is somewhat unclear. This web site has a pretty good analysis of it:
“I'll tax the street
(If you try to sit, sit) I'll tax your seat
(If you get too cold, cold) I'll tax the heat
(If you take a walk, walk) I'll tax your feet” … 🎶
They forgot one:If you try to tan I'll tax the Sun.
Successful transactions:Tookybandit. "Everyone is equal, some are more equal than others".
“I'll tax the street
(If you try to sit, sit) I'll tax your seat
(If you get too cold, cold) I'll tax the heat
(If you take a walk, walk) I'll tax your feet” … 🎶
They forgot one:If you try to tan I'll tax the Sun.
.
This is a coin forum.
You all forgot the most applicable line:
"Now my advice for those who die - Declare the pennies on your eyes"
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
.
You would be whacked for Social Security tax too, no?
@dcarr said:
I don't understand why everyone doesn't do the following:
Set yourself up as a business entity, such as " your_name Enterprises " .
Keep track of all your expenses and purchases. The miles driven to coin shows and other expenses related to buying/selling/holding become part of the cost basis of your coins.
Apply for a sales tax license. All coins purchased are then exempt from all state/city sales tax.
But note that you will also have to charge sales tax when you sell to an entity that is not exempt from sales tax.
For a small business, typically you will have to file a sales tax return quarterly.
Maybe they don’t do it because it’s not legal
.
It is legal.
If coins are purchased with the intent of selling at some point (hopefully at a profit), then it can be considered a business.
Of course, you also have to pay income tax on any profits from coin trading. But you would have to do that anyway, even if you were still doing so as an individual rather than a "business".
Coin dealers operate without paying sales tax when they purchase inventory.
There is no stipulation that inventory must be sold in the same year that it was purchased.
.
They also actively and continuously engage in buying and selling. A collector’s collection isn’t a dealer’s inventory, no matter how much you want to skirt clear and obvious laws.
How about this? You go ahead and do this, but also write a letter to the IRS and your state detailing your strategy. Report back with their responses.
Mr. Carr, of course, probably has a resale certificate from his regular minting business. Hiding a few coin purchases won't raise any red flags. For a hobbyist without another business, it's a little harder to simply hide your collection from both the State and Federal tax authorities.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others -merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong. But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
Correct. My mother is a CPA. I've run countless tax scenarios by her over the years, and it is overwhelmingly clear that tax authorities act on reasonable interpretations of what's written, even if no law or statute can cover every scenario someone can come up with. The idea you've come up with is ridiculous to anyone with any experience whatsoever with taxes. If nothing I've cited thus far can prove it to you, as I suggested before, go ahead and ask the IRS, or your state's tax authority, or a CPA. They will all give you the same answer.
.
I highly doubt that (that you would get the same answer from all three entities). In fact, you might get a different answer from the IRS each time you ask.
Regardless, the important thing to determine is, what is the correct answer.
I was just looking into the issue of inventory accounting for small businesses. Such businesses with annual revenues below $25 million are allowed to use the "cash" method of accounting. In addition, the "Tax Cuts and Jobs Act" (TCJA) was enacted in 2018 and it seems to allow small businesses to also use the "Non-Incidental Materials and Supplies" (NIMS) accounting to simply deduct the entire cost of their new inventory in the year that it was paid for. But that is somewhat unclear. This web site has a pretty good analysis of it:
Please consult your tax attorney. It is not nearly that straightforward.
If I sell $10,000 in coins and buy $20,000 in coins, that is not a $10,000 loss. If I sell $10,000 in coins and buy $10,000 in coins, that is not a $0 gain. You can deduct the full purchase price, but any unsold inventory gets added back in.
So, for example, let's say I had no coins until this year. I buy $20,000 in coins and sell half of them for $15,000. [For simplicity, no other costs of business.]
On line 1, $15,000 goes in as receipts. The cost of goods sold, however, is NOT $20,000. On line 35, you enter $20,000 for purchases, then $0 for inventory costs which gives you a line 40 of $20,000. Your inventory at the end of the year is then $10,000 which gives you a net cost of goods sold of $10,000 and a net profit of $5000. So, yes, you deducted the $10,000 you spend on the coins you sold in the year they were purchased, but you are carrying the other purchases as inventory into following years. So, effectively, you're only deducting the cost of the goods sold in the year in which they were sold.
All comments reflect the opinion of the author, even when irrefutably accurate.
Comments
If you're buying a $20 mil. piece of art, you likely have other homes in tax free states.
.
Of course, I do not advocate "hiding" any coins from the tax man. But there is nothing wrong with assuming that, eventually, every coin you buy will be re-sold. As long as you collect the proper sales tax whenever you sell (if required) and pay the income tax, then there is no problem doing that.
I think all significant collectors should get a table at a local coin club show once in a while, and sell off a few items to get a feel for the market as a dealer.
In my own situation, I sometimes buy silver bars at coin shows or coin shops, for use in making a product. Because the silver is a direct input into the product that is then sold, I can claim sales tax exemption on the silver purchase. Essentially, I am taking the silver and reforming it, then reselling it. But this means that I am also required to collect and remit sales tax (where applicable) on the sales of my products.
I do operate as a for-profit business, and I have never once reported a loss for said business.
If a hobbyist were to report losses year-after-year, then the IRS probably would declare it a "hobby" and disallow the deductions.
.
Yes, but you have to declare the inventory as you buy it. Unless the collector is a frequent seller, that's going to be a problem.
All comments reflect the opinion of the author, even when irrefutably accurate.
Nearby or not, this scheme still requires use tax to be paid, so there's no legal benefit; it's just easier to skirt the state's tax laws.
Yes, there is. Holding onto a coin for an extended period where it is clearly part of your collection until you choose to sell is use, not long-term dormant inventory. It isn't tax-exempt just because one day you'll get rid of it.
The main coin shows in Spokane, WA moved across the border to Idaho during covid due to excessive shutdowns in WA. They'll obviously stay in Idaho now. That's OK, it's only a 15 minute drive for me.
I'm sure every Washington resident who goes to the shows in Idaho promptly pays their full use tax.
.
First of all, nothing is "tax exempt" in terms of income tax (regardless of how long the item is held).
The question is, what can be exempt from sales tax.
Is there any specific statute that defines "dormant inventory" vs "use" ?
.
I bought a gold coin at Stacks had a bezel on it. Made it Jewelry. I paid tax. That mistake happened once
For a collectible? Do you really think a jury of your peers would consider a painting hanging on your wall for 10 years as "inventory" and NOT "for personal use"?
Could I buy sneakers with my resale certificate because I'm someday going to sell them at a garage sale?
It's really not that complicated to a "reasonable man". You can't buy a coin, hold it in your personal collection for 10 years and then sell it and call it "business inventory".
All comments reflect the opinion of the author, even when irrefutably accurate.
.
What if the coin, painting, and sneakers were purchased for the purpose of investment and/or you were a dealer in those items ?
What if the coin and painting were put away in storage where they weren't viewed very often ?
What if you put the sneakers in a box, in storage, and never wore them, and then sold them 5 years later for a profit and remitted the sales tax collected on that sale, and paid the income tax on the gain ?
I think there would have to be a clear violation of an existing statute before any judgement against the owner of the items.
.
If as a dealer you want to buy a coin or coins to hold for long term appreciation when you get it simply sell it to yourself at cost just to get it out of your inventory. In ten years if you want to sell it then buy it back from yourself for what you paid.
Good luck with that when dealing with the taxing authorities.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
There is nothing to dictate what you must buy and sell your inventory for. No difference between buying from yourself or lowballing some nimrod who wanders into your shop with it.
If you're buying it as an investment, it is NOT for resale and not business inventory. Your "resale certificate" does not allow you to purchase PERSONAL investments.
It IS a clear violation of existing statutes. You just don't want it to be.
All comments reflect the opinion of the author, even when irrefutably accurate.
You can sell it to yourself, as long as you pay the sales tax to the state. In NY, there is a line for goods converted to personal use.
There is no (legal) way to buy it with a resale certificate and sell it to yourself without paying the sales tax that they are trying to avoid.
All comments reflect the opinion of the author, even when irrefutably accurate.
I'm not going to get into the law, or usage. That's not what my reply was for. The reply was to comment on "get a POBox in a nearby state" so I wanted to highlight how that isn't a great option for many due to distance.
WA is screwing too many with too many taxes and the politicians and organizations that get those tax dollars are not held accountable, so I know many will skirt it if they can, and I really don't care because the monies wouldn't be used appropriately anyway
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
Tax and spend wastefully, it's what pols do.
How else should every single service, essential or otherwise, be paid for?
chopmarkedtradedollars.com
give 10,000, take a penny?
I live in WA, do you?
WA has PLENTY OF TAXES. There has not been an income tax due to our state constitution and we have survived.
I won't get into everything here, but this state has a 1 party rule going on for a long time and so everything that party wants to spend on happens. No accountability and no tax gets voted down.
They even put a "head tax" on businesses in seattle. There is a "Climate Control Act" that adds to the gas tax. When someone audited it, they found a vast majority (80%+) went to hiring people and nothing to do with solving what it was created for.
So, how else should things be paid for? WITH EXISTING TAXES that are quite high anyway.
My property taxes have gone up 400%+ in 20 years. I get LESS services than I did when I moved in. Go figure
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
https://app.leg.wa.gov/rcw/default.aspx?cite=82.08.130
RCW 82.08.130
Reseller's permit—Purchase and resale—Rules.
(1) If a buyer normally is engaged in both consuming and reselling certain types of personal property, the retail sale of which is taxable under this chapter, and the buyer is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a reseller permit or other documentation authorized under RCW 82.04.470 for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit or other documentation authorized under RCW 82.04.470 that is used by the buyer and remit the deferred sales tax on the property to the department.
(2) A buyer who pays a tax on all purchases and subsequently resells property or services at retail, without intervening use by the buyer, must collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property or service resold upon which retail sales tax has been paid. The deduction is allowed only if the taxpayer keeps and preserves records that include the names of the persons from whom the property or services were purchased, the date of the purchase, the type of property or services, the amount of the purchase, and the tax that was paid.
(3) The department must provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later resold without intervening use by the buyer or for purchases that would otherwise have met the definition of wholesale sale if the buyer had provided the seller with a reseller permit or other documentation as authorized in RCW 82.04.470.
The DOR has a guide on Intervening Use here: https://taxpedia.dor.wa.gov/documents/current eta/3005.pdf. None of the example align with a collectible, however, the intent is clear. Intervening use includes the use of an item in its normal manner between the time of purchase and the time of sale. That a collectible's use is to be held/locked away/displayed/studied, it seems quite clear that, as I've been saying all along, your indefinite hold as inventory until the coin is sold is a ridiculous notion that no tax authority would buy.
There is also a guide for use tax in the context of jewelry stores, which is the closest you'll get to coins: https://dor.wa.gov/education/industry-guides/jewelry-stores/use-tax
You owe use tax on items you use for business or personal purposes. This includes:
-items you use for your business including display fixtures, equipment, point of sale systems and security cameras
-merchandise you give to friends, employees and others
-merchandise you use yourself
Now you'll read "You do not owe use tax on merchandise you use for display while it is held for sale. You must collect and report sales tax applies when you sell the item." and claim that you were right all along. But of course not. The guide is a for a store, and this merchandise being held is being displayed at a store with the intention of selling it. It is not the jewelry store owner's personal collection in a public case. The store owner doesn't get to take it home and wear it to a party and then put it back in the case without paying use tax.
https://app.leg.wa.gov/WAc/default.aspx?cite=458-20-178
WAC 458-20-178
Use tax and the use of tangible personal property.
(7)(d) Intervening use of property purchased for resale. Persons purchasing tangible personal property for resale in the regular course of business may purchase the property at wholesale without paying retail sales tax provided the property is not put to intervening use, and the buyer provides the seller with a completed reseller permit. (See RCW 82.04.050 and 82.04.060.)
A buyer who purchases taxable property at wholesale and subsequently puts the property to intervening use is subject to either the retail sales tax (commonly referred to as "deferred retail sales tax") or use tax, unless a specific use tax exemption applies to the intervening use. The tax applies even if the property is at all times held out for sale and is in fact later sold. Tax is due even if the intervening use is the result of an unforeseen circumstance, such as when property is purchased for resale, the customer fails to satisfy the terms of the sales agreement, and the property is used until another customer is found. See WAC 458-20-102 Reseller permits regarding tax-reporting requirements when a person purchases property for both resale and consumption.
.
I can see how this would apply to something like a rare bicycle. If you used the bicycle for its intended purpose, and then sold it more than a year later, that would constitute a "use" of the item.
But how would a coin stored in a safe deposit box be "used" ?
.
Because that is the normal "use" of a collection. Now, you're just being intentionally obtuse.
The entire nature of business vs hobby requires that there be actual ongoing business activity. Collecting "inventory" for 40 years and then selling it does not constitute a business.
All comments reflect the opinion of the author, even when irrefutably accurate.
.
Says who ?
Has any court ruled on something like this ?
Has a state/county/city entity clarified or written specific statutes about it ?
I admit that I am not a lawyer, tax representative, accountant, or anything like that.
That is why I am asking questions.
I am not claiming that you are wrong.
But anyone engaged in dealing as a business should get advice from additional sources and not just from postings by random people on a forum like me, or maybe you (depending on your qualifications).
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Well, they'll get in less trouble following my random ramblings than yours.
https://www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax-purposes
All comments reflect the opinion of the author, even when irrefutably accurate.
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Well, I have been known to cause some trouble (such as "1964-D" Peace Dollar over-strikes)
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It someone is a certified tax accountant then anything they post here should be able to be taken to the bank. If someone gains the same information/expertise from having done their own tax reporting for 15 years then their postings should have validity as well.Expert opinions about coins are posted and sought after all of the time altho opinions are facts, but could be factual.
Not directed at you, but is a sales tax the same as a use tax? I see them both used here.I never heard of having a use tax here in Iowa. There is a mail order tax which is the sales taxes that are supposed to be paid on taxable items purchased outside the state.
The "mail order tax" is a version of the "use tax". Many States (NY, for example) passed "use taxes" for items that were purchased tax free on the internet but "used" in the (once) great state of NY. This was generally a self reported amount on the state income tax form.
All comments reflect the opinion of the author, even when irrefutably accurate.
https://revenue.iowa.gov/taxes/tax-guidance/sales-use-excise-tax/sales-use-tax-guide
The Commonwealth of Pennsylvania is still accepting refugees from high tax States.
No sales tax on coins and bullion in the Commonwealth.
https://www.pcgs.com/setregistry/gold/liberty-head-2-1-gold-major-sets/liberty-head-2-1-gold-basic-set-circulation-strikes-1840-1907-cac/alltimeset/268163
Been awhile since I looked at, but IMO 2 terms for the same thing. If I have a vehicle repaired OOS I expect that that state will add their sales tax to the bill so in that case I don't think I'm required to pay to both. Anyway I don't buy or sell coins anymore so it's all moot to me. I'll play devil's advocate and say that coins and are common merchandise just like Barbie dolls and Big Wheel tricycles are. Coins may be money but nobody buys Morgan dollars to use as money.
Sales and use tax are generally the same (I'm sure there are some caveats depending on specific state rules). If I buy something from out of state and am not charged sales tax, I owe use tax. Same if someone with a reseller certificate buys something tax-free and decides to keep it instead of put it in inventory (this is no different than selling to yourself and paying sales tax). If I go to Oregon (no sales tax), buy something, and come right back to WA, I owe use tax on it (or if I do the same with a state that has a sales tax rate lower than WA, use tax is the difference). I'm sure states handle this different, but if you buy something and use it out of state before returning, that can negate the need to pay use tax.
Correct. My mother is a CPA. I've run countless tax scenarios by her over the years, and it is overwhelmingly clear that tax authorities act on reasonable interpretations of what's written, even if no law or statute can cover every scenario someone can come up with. The idea you've come up with is ridiculous to anyone with any experience whatsoever with taxes. If nothing I've cited thus far can prove it to you, as I suggested before, go ahead and ask the IRS, or your state's tax authority, or a CPA. They will all give you the same answer.
Buy through a dealer and pick the coins up once a year at a show in a non tax state. The tax savings might pay for your trip
I would not want a dealer holding my coins for a year and I bet the feeling is mutual.
The idea is to legally avoid the tax and not spend the equivalent amount on something else.
I have a wad of $100s, a full tank of gas, and a grande drip from Starbucks.
I'm less than 3 hrs from Portland OR.
Don't toy with me Washington State!!!
Dave
Lakes:
Pack up and move to Florida. 😀
taxes taxes taxes. The ultimate will be when they tax us on our breathing as we are sending CO2 into the atmosphere.
AKA a carbon tax! Right now there is much talk on taxing us on our net worth! that includes our collections! -- every year!!
Beatles Taxman
“I'll tax the street
(If you try to sit, sit) I'll tax your seat
(If you get too cold, cold) I'll tax the heat
(If you take a walk, walk) I'll tax your feet” … 🎶
Iowa doesn't tax most retirement income for us COFs so there's that.
Is there an upcoming WA sales tax exemption for paying for gold and silver bullion coin?
You can also draw a line between your coins for investment/hobby vs coin purchased for resale.
A logical breakdown would be your plastic rarities for resale vs your previous cool rare coins which is part of your core collection.
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I highly doubt that (that you would get the same answer from all three entities). In fact, you might get a different answer from the IRS each time you ask.
Regardless, the important thing to determine is, what is the correct answer.
I was just looking into the issue of inventory accounting for small businesses. Such businesses with annual revenues below $25 million are allowed to use the "cash" method of accounting. In addition, the "Tax Cuts and Jobs Act" (TCJA) was enacted in 2018 and it seems to allow small businesses to also use the "Non-Incidental Materials and Supplies" (NIMS) accounting to simply deduct the entire cost of their new inventory in the year that it was paid for. But that is somewhat unclear. This web site has a pretty good analysis of it:
"Can I deduct inventory when I puchase it ?"
https://notyourdadscpa.com/can-i-deduct-inventory-when-i-purchase-it/
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They forgot one:If you try to tan I'll tax the Sun.
Lakes can go to the FUN show and pick up his coins.
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This is a coin forum.
You all forgot the most applicable line:
"Now my advice for those who die - Declare the pennies on your eyes"
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food isn't free, why not a human carbon tax?
Please consult your tax attorney. It is not nearly that straightforward.
If I sell $10,000 in coins and buy $20,000 in coins, that is not a $10,000 loss. If I sell $10,000 in coins and buy $10,000 in coins, that is not a $0 gain. You can deduct the full purchase price, but any unsold inventory gets added back in.
So, for example, let's say I had no coins until this year. I buy $20,000 in coins and sell half of them for $15,000. [For simplicity, no other costs of business.]
On line 1, $15,000 goes in as receipts. The cost of goods sold, however, is NOT $20,000. On line 35, you enter $20,000 for purchases, then $0 for inventory costs which gives you a line 40 of $20,000. Your inventory at the end of the year is then $10,000 which gives you a net cost of goods sold of $10,000 and a net profit of $5000. So, yes, you deducted the $10,000 you spend on the coins you sold in the year they were purchased, but you are carrying the other purchases as inventory into following years. So, effectively, you're only deducting the cost of the goods sold in the year in which they were sold.
All comments reflect the opinion of the author, even when irrefutably accurate.