Imagine if you asked a grocery clerk to break a $5 bill and he charged you 35 cents in tax.
Unfair, right? After all, you were only exchanging one form of money for another.
But try walking to a local precious metals dealer in more than 25 states and exchanging 16 Federal Reserve notes for an ounce of silver. If you do that kind of money exchange, you will get hammered with a sales tax. Call it the price you pay for bucking the system and picking up a piece of the only true money mentioned in the U.S. Constitution.
Of course, sales taxes haven’t been around forever.
Revenue hungry government officials in the 1930s brought us the first broad based, general sales taxes. Kentucky and Mississippi were the first adopters, and it spread rapidly from there.
Today, sales taxes are part and parcel of any shopping experience, in 45 states in the Union. Whether you buy a shirt or a hamburger, tax collectors want a piece of the action and force merchants to collect anywhere from 2.5% to 7.5% on top of your transaction total and forward it to the politicians in the state capital.
Putting aside whether taxes on consumer goods is right or wrong, charging sales taxes on money itself is beyond the pale. In effect, those states that collect taxes on all your purchases of precious metals are saying gold and silver money are not at all.
It isn’t difficult to understand how these laws negatively affect those who choose to protect themselves from inflation and financial turmoil by saving some of their money in precious metals.
Investors won’t want to pay, for example, $87.50 in taxes on a $1250 purchase of gold. It’s a competitive marketplace, so buyers would much rather go online or even travel out of state to obtain their precious metals.
Purchasing precious metals tax free from an out-of-state national dealer such as Idaho-based Money Metals Exchange is an option, because states are restricted in attempts to regulate interstate commerce. But these state sales taxes reduce investors’ options and thereby have the negative effect of causing local dealers to lose business, threatening jobs.
Indiana Is Eliminating Sales Taxes on Precious Metals
Fortunately, Indiana lawmakers understood these problems and decided to do something about it.
Effective July 1, House Bill 1046 is law, and Indiana will no longer collect a sales tax on purchases of precious metals by its residents.
Republican State Senator Brandt Hershman argued that the removal of the sales tax also encourages people to save for their retirement by investing precious metals into Individual Retirement Accounts, or IRAs. He highlighted one of the many reasons for the bill, saying, “If you buy a stock or bond, or put money into a savings account, you don’t pay sales tax on those items. But you were paying sales tax on these.”
Will Tennessee Be Next?
Following in Indiana’s footsteps, Tennessee is eying similar changes.
Two bills, HR1627 and SB1610, are working their way through the Tennessee legislature. These bills aim to “exempt the sale of gold, silver, and platinum coins and bullion that are used as mediums of exchange from sales tax.”
Repealing sales taxes on precious metals enables companies to be more competitive and potentially recover part of their lost market share.
With an increase in business activity comes the creation of new jobs. Collecting a sales tax on money is not only ludicrous, but it also sends money and jobs out of state.
As more states reduce the costs and barriers to precious metals ownership, those who diversify some of their savings into hard money will continue to grow, and the concept of sound money will become more widely accepted.
Every day we are seeing the American people open their minds to the historic role that sound money has played. We’ve seen a few presidential candidates talk about it.
A few state legislatures, too, have recognized the danger of being totally reliant on a monetary system based on debt and unbacked fiat money, and they’re taking concrete steps to liberalize the laws surrounding gold and silver ownership.
Thankfully, we’re seeing the stranglehold central planners have over our money begin to loosen. People are taking notice that something about the debt-laden economy and their money isn’t right. And people are realizing that money backed by nothing isn’t money at all.