Youngstown Daily Legal News

Precious metals sales, use taxes at stake in companion bills' call for repeal

KEITH ARNOLD
Special to the Legal News
Published: March 30, 2016

Ohio’s local government, public transit and library funding may take a hit as a result of the Ohio General Assembly’s efforts to repeal the sales and use taxes on purchase of coins and precious metals for investment purposes.

Most recently Republican Sen. Kris Jordan of Ostrander offered testimony before House Ways and Means Committee members on behalf of the state’s 131 licensed precious metal dealers and any associated convention business that a repeal might promote.

“Ohio is one of a decreasing number of states continuing to levy a sales tax on investment metal bullion and coins,” Jordan began in sponsor testimony for Senate Bill 172. “So far, 30 states have chosen to exempt these investments, including two of our next door neighbors, Michigan and Pennsylvania. These exemptions place Ohio’s coin and precious metal dealers, including some that I have spoken to in my district and around the state, in a difficult position.

“With tax free options so close by, collectors and investors are far more likely to travel to one of our neighboring competitors for large purchases than they are to spend their dollars here in Ohio.”

SB 172 bill would exempt from sales and use taxation sales of investment metal bullion and investment coins.

The measure is a reintroduction of Senate Bill 85 and House Bill 26, both having failed to become enacted by the 130th General Assembly.

It is companion legislation to House Bill 26 of the current General Assembly.

The exemption will apply starting on the first day of the first month that begins after the bill's effective date, the measure stipulated.

According to the Ohio Legislative Service Commission’s analysis of the bill, investment metal bullion is defined to be any elementary precious metal that has been put through a process of smelting or refining and which is in such a state or condition that its value depends upon its content and not upon its form. Examples include gold, silver, platinum, and palladium.

Investment coins are defined to be money and legal tender manufactured under the laws of the United States or any foreign nation with a fair market value greater than any statutory or nominal value, analysis indicated.

“The impact is not only being felt by Ohio’s precious metal dealers,” Jordan told lawmakers. “Prior to the implementation of the sales tax on collectable coins, the Central States Numismatic Society would hold a four-day convention in Ohio that attracted 6,000 to 8,000 attendees. The American Numismatic Society would also hold a four-day convention in the state that brought in 8,000 to 12,000 people to the conference.”

He said an estimated $5 billion worth of coins were sold in during these conventions, generating millions of dollars for the local host economies.

“This economic activity now goes to other states,” he said.

The General Revenue Fund would bear the majority of the revenue loss, according to OLSC fiscal analysis. Any reduction to the fund’s tax receipts also would reduce the amount distributed to the Local Government Fund and Public Library Fund as these local funds receive distributions from General Revenue Fund tax receipts.

“For the current biennium, the LGF and the PLF are receiving 1.66 percent and 1.70 percent of GRF tax revenue, respectively,” the commission wrote. “Thus, the potential revenue loss to those local funds would total about $0.2 million.

“Permissive local county and transit authority sales taxes share the same tax base as the state sales tax, and are approximately 24.5 percent of state sales tax revenues. Thus, the annual revenue loss to local governments from county and transit authority sales and use taxes would be between $1.0 million and $1.4 million.”

In previous testimony for the House companion bill before the committee, Dave Miholer, owner of The Executive Coin Company near Akron, cited a 60 percent decline in sales since 2011.

“When we lost the sales tax exemption in 2005, nearly all of our customers were uncomfortable buying gold, silver and coins through the Internet or from out-of-state dealers by phone,” Miholer said. “They were justifiably hesitant to send their money somewhere hoping that a box would show up with their merchandise in it.

“As a result, we were able to keep most of our customers — for a time.”

He told committee members that customers soon became comfortable with the online purchases, which are protected by additional safeguards that did not exist earlier.

“We have lost nearly all of the customers that used to come in and buy five, 10, 20 or more ounces of gold. One hundred, 500 (and) 1,000-ounce silver customers are gone. These are the same customers that were my best jewelry customers.”

To capture the lost revenue stream, Executive Coin Company began selling coins and precious metals online.

“Frankly, it has saved our business. It is the only part of our business that is growing,” Miholer concluded.

Jordan told committee members that these reasons are sufficient for consideration of eliminating the tax structure.

“It’s damaging the incomes and competitiveness of Ohio’s precious metal dealers, and reducing the positive economic impact that this industry has had on the state,” he said.

Jordan is sole sponsor of SB 172, while Reps. Ron Maag, R-Lebanon, and Christina Hagan, R-Alliance, jointly sponsored HB 26. Both measures are assigned to Ways and Means committees in the opposing house.

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