A dealer/collector dynamic I've never heard about nor encoutered
JeffersonFrog
Posts: 836 ✭✭✭✭✭
I recently participated in a small, 25-table Club Show, from behind the table as a seller. A first, and I enjoyed it. The one-day show was small, but it had a steady crowd and I met some nice people. I even sold a few things. A few of my fellow coin compatriots encouraged me to participate in a much larger (80 tables), relatively close, regional show coming up in several months. I thought about it for a few days and decided I just might like it. So I called to express my interest and ask if there were any tables available.
I was told, "I field requests from collectors all the time who want to sell. You need to be a coin dealer with a tax ID. Professional coin dealers don't look kindly on collectors who want to show up one time and sell [cheaper]." I was shocked. I do get the competing inventory & margins aspect, but heck, doesn't this exist anyway between dealers, and wouldn't the shrewd and savvy dealers want to take advantage of a newbie like me?
The more I've thought about it, I think this "only dealers" view is outdated and just plain bad business. But, I'm not a dealer, and as Grandpa said, "There are two sides to every story." Is this "dealers only" approach at larger shows the norm? Thank you in advance for your thoughts.
ps - The upcoming show is in a state where there is no sales tax on coins.
If we were all the same, the world would be an incredibly boring place.
Tommy
Comments
It somewhat depends on the state. In NY State, you can't set up at any show or flea market without a sales tax resale certificate.
As a part-time dealer, I actually don't like amateurs who have a tendency to not collect sales tax (required in NY State) and often not pay income or self-employment tax on their profits. [No, I don't like sales tax or income tax.] This creates an unlevel playing field.
Consider the problem. We both pay $80 for a coin. You don't collect sales tax or pay income tax and sell it for $90. You make $10. I sell it for $90 INCLUDING sales tax, that means the actual sale price is $83.33. That means I actually get a gross profit of $3.33 which is about $1.70 net after income and SE tax. We both did the same amount of work and you made SIX TIMES as much money as I did.
Or, looked at the other way. You can sell that coin for $85 and make $5. I can't sell it at $85 and make any profit.
It's just not a level playing field. If you want to collect sales tax (if applicable) and pay all your taxes, then I don't care.
As someone who's participated in putting on shows, my general philosophy is the more the merrier (within common sense parameters obviously); more dealers usually equate to better attendance and better sales results for those sellers. Having said that however, the concern expressed to you is valid- particularly if you are in a state that charges tax on coins. You would be required to get a tax ID number for that state to legally participate. In fact, I've been at shows where that state's revenue department had reps handing out forms to dealers and making sure they're registered. If the state doesn't charge sales tax on numismatic items, then the answer is that tax ID requirements can occasionally vary by show and venue. As you found out, some show promoters only want verified businesses/dealers for the "level playing field" reasons that @jmlanzaf outlined. Also, sometimes with large higher end shows you'll get quizzed about what you'll be selling as well to determine where you'll be put in the bourse, near sellers offering comparable value items, in a separate bourse room, etc. The smaller shows don't usually mind as much in my experience; as long as you're paying for a table(s) you can set up and any applicable tax liability is your concern. Income taxes are of course your responsibility regardless of location.
Edit to add a side note/response to this quote from @jmlanzaf ...
"Consider the problem. We both pay $80 for a coin. You don't collect sales tax or pay income tax and sell it for $90. You make $10. I sell it for $90 INCLUDING sales tax, that means the actual sale price is $83.33. That means I actually get a gross profit of $3.33 which is about $1.70 net after income and SE tax. We both did the same amount of work and you made SIX TIMES as much money as I did."
If you're tying up most of $100 to make $1.70, then you have a larger problem than just the playing field; you need to rethink your margins as they relate to your business model.
RIP Mom- 1932-2012
Just get a resale cert if you are required, and include any tax you are collecting in your quoted prices (not on top). That way Jman peeking over your shoulder will not be able to bother you about playing fields and you can sell your coins in peace.
Lol. I agree.
I'm not saying that I'm trying to make $1.70. It was more the point that the tax evasion limits me to making $1.70. If we're both paying the same taxes, we're probably both at $100. But if you can make 10% at $90, it makes it impossible for me to compete.
Lol.
May your children lose their jobs to a lower cost provider. 😉
Happens all the time. H1B
Could be worse. What if instead of "only dealers" they started selling on OnlyFans? There's something you wouldn't want to see.
I am a dealer and have a store intown, however, when our coin club has a show, I set up a table mainly for adveritising reasons that I am here locally daily to buy. I do however carry a few things like bullion in case to sell. I sell to the local market, some of these dealers come in from larger areas where they are used to gettting several dollars more than I can. Sometimes I get looks or questions becuase I am selling bullion considerably cheaper than them. I just ignore em. I am not running a museum and this is what this area's prices are at.
One time a few years ago, I had one dealer consistantly buy my silver out, to keep my prices in check, I put out a roll or rounds, he'd come by it up. I ended up selling several hundred oz to him, he sold little to nothing for the duration of the show, becuase I know the area and pricing, he didnt.
@jmlanzaf sorry, I did not realize coin dealing was your job. I thought you worked at a community college or something.
I do work at a University. But my side hustle/second job/side gig is selling collectibles.
I'm not sure why the skewed playing field which is based on illegal activity should be embraced. I'm sure a lot of full-time dealers resent my presence because I'm willing to work at smaller margins because it is a side hustle not my main source of income. But at least my "competitive advantage" isn't rooted in tax avoidance/evasion.
FWIW, I also abhor the professional dealers who engage in the same sort of tax evasion. I've told this story before but it is worth repeating. NY State taxes all collectible coin sales. So I went to a local show with a pile of pre-printed resale certificates to give to dealers if I bought something. For a dealer who is accurately collecting and reporting sales tax, they NEED the form. More than half of the people wouldn't even take the form from me. One guy did take it and then couldn't figure out what to do with it. LOL. I'm sure he eventually threw it out. But ALL the B&M guys actually took them and were actually adding the sales tax to purchases instead of pretending (?) to include it in the total cost.
I know tax evasion is one of those crimes that people justify because of political opposition to taxes. I DON'T like taxes but I do want fairness. This is especially true given the magnitude of the advantage gained. In NY State, with the sales tax (8%), state income tax (7-10%), federal income tax (25-32%), and self-employment tax (15%), on a coin with a 20% margin the price advantage is roughly 19%. On a coin with a 10% margin, the price advantage is about 14%. That is enough to put you out of business.
If you want fairness, I'm thinking you picked the wrong state. LOL. If you're doing enough business to warrant it, have you looked into, say, being your own LLC (no state/fed tax on that in NY I believe, just your own personal income tax), or perhaps your own small sub S corp and then holding 100% of the stock? No self employment tax that way at least, and then as the only shareholder you just pay regular income tax on the profits. Might be worth looking into with a tax guy.
RIP Mom- 1932-2012
On a side note.... recently had this discussion number of tables is not the same thing as number of dealers... A show can have only a dozen dealers but have 40 or 50 tables with some dealers taking 4-8 tables.... so even with 80 tables this may be a small show with 25 dealers... National shows also can be a bit misleading A show may advertise 600 dealer tables but that again may only be 250 dealers...They do this with attendance numbers too... my last Long Island show (1 day) that I ran we had 400 collectors come thru the doors.... we do not count dealers etc... National shows running multiple days count dealers/helpers and they recount the same people each day... so they may have 600 unique people but say that 2,400 people came to thru the door...
Registered/licensed dealers presumably get to deduct their expenses, such as table cost, transportation and lodging, meals, spot remover for mustard stains, etc.
Hobbyists, I believe, do not.
Now where was that level playing field....
And you are making malicious unfounded accusations.
I was not arguing in favor of people not paying their taxes. I was merely pointing out some of the benefits of being a licensed dealer.
And I really do not think that setting up a table at a show makes someone a recognized dealer for tax purposes. The IRS is constantly on the lookout for hobbyists/crafters/etc. who try to claim their activities are a business so that they can claim the benefits of that status. Not having to pay 28% federal tax on the sale of collectables being one of them.
BTW, Schedule C is for an actual/established/licensed business to deduct expenses. It is not for a collector who is selling a few things here or there.
If set up to sell and not buy, yeah still a hobbyist.
That's not an official requirement. Attempt to profit is.
The only requirement is "attempt to profit". There is no requirement that you be licensed.
My accusation is not unfounded since my entire argument was based on tax evasion and you were arguing against my position. You may not have intended to argue in favor of "illegal activity" but you implicitly did.
Explain that logic to the I.R.S.
peacockcoins
Has nothing to do with the IRS.
Al Capone has left the chat.
peacockcoins
Still here
It is the IRS definition that matters.
My original comments were not quoting you nor were you tagged. I was commenting on the general challenges faced by the OP, such as hostility from licensed dealers who, like you, apparently harbor tremendous resentment over having to obey the law and obtain the necessary licenses and pay the necessary costs while ignoring the tremendous advantages they enjoy.
And you continue to dispense questionable tax advice by telling people who are not legally a business to deduct expenses as if they were.
You have once again proven that your arrogance does not make you right.
Again, statement has nothing to with the IRS. The lack of common sense so many of you exhibit daily is pretty sad so will lay this out once.
A hobbyist is someone that actively is engaged in an interest. I said if selling only not a hobbyist. A buyer would still be engaged in the hobby.
If someone sets up a coin show table as a venue with purpose of selling only after loosing interest they are no longer interested in the hobby. Same applies selling furniture at a garage sale, clearing out old baseball cards, liquidating land.
You may wish to insult us but you miss the point. The entire discussion was about taxability so it is only the IRS definition that matters. The IRS definition is based on "intent to profit" not whether you are buying or selling.
@jmlanzaf
I do have better things to do such as get back to work and pay taxes so that you can play on messages boards all day.
A lot of insults entering this thread.
The only IRS requirement to be a business is intent to profit. you can use Schedule C for those purposes. Many of us do.
My 55% tax rate and 8% sales yac is certainly a tremendous advantage.
And while you may not have tagged me, you used my language in your post which seemed to suggest a response to me with our without a tag.
Notice how I responded to you without the need to insult you? Or does the winky emoji remove the insult?
Lmao. I'm at work as we speak.
Don't forget to pay your taxes on your hobbyist capital gains.
This statement is factually incorrect, at least in regard to the use of Schedule C.
From the IRS site:
I'm just offering this as a public service to those who might otherwise be misled by bad tax advice being dispensed here on the forum.
Hobbyists can deduct expenses in a similar fashion, but they cannot generate a net operating loss, as it is a "hobby loss," they are allowed to report gains from their hobby just not losses.
And the Sub-S idea above does not eliminate self-employment tax, it just lowers it as you need to have a rational division of employment pay and dividends. Of course that only matters if you get audited, so one must live within ones own personal beliefs.
Dang.
Your charm and wit will be missed.
peacockcoins
As long as what you are doing is legal in your state I wouldn’t have an issue with it. As a buyer it keeps things competitive. If I’m a seller that makes my living on selling at higher margins I’m probably not going to like have to compete with someone doing it for the shear pleasure and as long as they are covering their expenses is happy to be there.
I said "intent to profit". Regularity is in the eye of the beholder. If you sell once, probably not. Twice? Maybe, maybe not. Do you have to do it for multiple years? Many people have used Schedule C for short term dispersal without incident. There is not, however, the huge advantage you think which is why most people opt for capital gains reporting. Schedule C will generally give you a much higher total tax rate even though it gives you more deductions.
And, of course, you should always consult a tax professional. But even the capital gains reporting should allow for an adjusted cost basis related to certain costs of dispersal.
Lord, I go fishing for a day, and a simple thread goes to hell and a handbasket. Let's refocus for a moment.
I appreciate the thoughts and input so far - much more so than the accusations and arguments. Much of the @jmlanzaf and @telephoto1 thoughts seem to center around sales tax, which is not applicable in this situation. This leaves income (or loss). I have the same responsibility as any other dealer (or individual for that matter) regarding the reporting of income. This is not the place to discuss taxes and our responsibilities as law-abiding citizens, so let's leave it at that.
Perhaps I should have put more emphasis on the inventory/margins aspect. As a collector who is a couple of lots away from being a hoarder, I have too many coins purchased over too many years. If I were a numismatic businessman, a 30+ year inventory carrying cost would be irresponsible. As a collector, using the Show as an accomplice to eBay and Coin Club auctions to sell off my inventory, I don't have to worry about margins. For example, what few slabbed Morgan and Peace dollars I do have were back-in-the-day TeleTrade purchases at $33 or $36. I might be willing to sell @jmlanzaf 's hypothetical coin at $70 because I paid $36 (also know that as a collector, I also have plenty of $80 purchases that are now worth $40). Does this "I can't compete with a seller who is always willing to undercut the market price by a little" factor into Dealer's disdain for us collectors who want to sell? Or is this a cherry-pick opportunity for other dealers to buy my inventory?
At the end of the day, I guess my question is this: Implementing some form of @telephoto1 's "within common sense parameters," why would a Show not want more Sellers [in my no sales tax state]?
If we were all the same, the world would be an incredibly boring place.
Tommy
Maybe. As I said, I'm sure full time dealers don't appreciate my lower margins at times. For me, it's more about the tax cheats, dasher or not. [And I don't mean you as I know nothing about you.]
Have often wondered if one was to set up at a show to strictly trade,coin for coin(s) etc. would a tax # be required? And further, how would the IRS determine for tax purposes, that a strict trade is a taxable transaction? A barter type tax? Would the other person on the end of the trade be required to report a trade that value wise was to their advantage?
Not paying tax is the most based thing ever.
It's going to depend on the State. In NY, there's no barter tax. However, every NY show I've ever set up at required a resale certificate to get a table.
The IRS does have rules for barter income but I don't fully understand them as they would apply to an exchange of goods which, presumably, would have to be seen as equal at the time of transfer. No?
https://www.irs.gov/taxtopics/tc420
We don’t do trades - just buy or sell.
It’s not uncommon for a bourse chairman to require a tax ID. Additionally assistants behind the table must meet the approval of the bourse chairman. Kat passed with flying colors. In training her on pricing she has caught on real quick both retail and the buy side: wholesale / offers (back of CDN bid). She is real sharp and her sales skills are superior.
Never seen anybody at a show setup just to trade lol - the show expenses would eat them up. Each show / state has its own rules.
I tend to agree with this for the most part (not so much about the sales being undercut part, because folks wanting to only do trades aren't usually my typical demographic). Obviously, we've all seen and done some trades/partial trades at shows but I've never seen anyone set up to ONLY do across the board even-up trades...and like Cougar said, after fees they'd actually be backing up, so it doesn't seem logical to me. Plus- I can see why the bourse chair would frown on it; it's a bourse, not some swap meet in the Hardee's parking lot.
RIP Mom- 1932-2012
I used to buy and sell cars for fun. Many states once had a policy where you only paid sales tax on the difference in value between the car you were trading in and the car you were buying.
Granted in my own case they were seldom being traded in at a dealership so it mightn't have applied, but at any rate most states have seen this as an easy revenue opportunity and few permit it any longer. (To my knowledge.)
Mine certainly doesn't. Mine has an annual personal-property tax which is like paying the sales tax all over again every single year you own the car. On a declining basis, to be sure. But I digress.
But if I understand the OP correctly, he’s in a State where sales tax isn’t an issue.
If I wanted to go to the show, get a Sales Tax # and proceed. Then file a zero activity report monthly, quarterly, etc.
If audited, it will be easy enough to prove you didn’t collect ( or was required) sales taxes.
>
I’m not going to comment on the States where sales taxes are required because this really wasn’t the initial question.
I think this all just has WAY too much angst for anything to do with a hobby. I have had a CPA named Jenny for over 30 years. Each year you give her any invoices that pertain. You give her any sales/auction results.
You sign your name twice.
You write a check for whatever she says.
Life is good. Want a Jenny? Call Kinner & Co. In a pinch a Jeffery will do. James
Perhaps that guy scared of the state tax people.
Just get the state resale certificate. Learn about FIT tax reporting for sch C. Get familiar with what you can deduct for the business (sch c instructions).
Get a glass display case (s). If you don’t have that many coins or slabs you can fill the extra space w currency or junk box, vinyl pages of 2x2 collector coins. Get some biz cards printed up.
As you setup at shows you will get bourse forms for other shows / biz expansion.
Keep your tax resale certificate handy, you never know when the tax people may come around want to see it.
Doing the show circuit fun but tough. Sales can vary for numerous reasons. Fixed costs doing shows take a big bite.
Yes, but you don't do that if you are evading taxes.
And a collector has the advantage of paying capital gains rates on long term investments. The dealer pays full income tax rates, even if he's owned the coins for decades. So the field may be uneven, but I'm not sure it's tilted in one direction or the other.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
To answer your question, I've been going to coin shows for 50 years and I don't know if it's the norm. But why would larger shows be any more likely to be protective of their dealers' competitive advantage than smaller shows?
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
There is no such thing as "registration" or "licensing" for a coin dealer. You say you are a dealer, you're a dealer.
You can get a tax ID from your state for free online in seconds.
As long as you have the tax id active check your state rules and if required, DO NOT FORGET to file your quarterly tax returns, even if it's $0. The penalty in Texas is $50, even if you have no sales. That stings.
We've had several threads on the dealer vs. hobbyist - the last one I participated in was over basis cost. But that's between you and the IRS.
ANA 50 year/Life Member (now "Emeritus")
I keep waiting for the state audit. Since ebay started collecting the sales tax for me, if I don't do a show I often have to file $0. It makes me suspicious of myself. Lol
Yep. That $50 penalty really really stung. I thought I was being a good citizen by registering even though I did very little taxable sales. And well, I forgot one quarter.
ANA 50 year/Life Member (now "Emeritus")