(St. Paul, Minnesota) – Legislators in the Land of 10,000 Lakes seek to fully exempt gold and silver coins from Minnesota’s state sales tax, ending its controversial and discriminatory practice of taxing of one type of bullion but not another.
House Rep. B. Olson and Sen. Draheim introduced HF 106 and SF 373, respectively. These two measures would include coins in Minnesota’s current sales tax exemption, which curiously only exempts bars and rounds.
Under current law, Minnesota citizens are discouraged from insuring their savings in precious metals coins against the devaluation of the dollar because they are penalized with taxation for doing so. Passage of this measure would remove disincentives to holding gold and silver coins for this purpose. HF 106 is important for a few reasons:
- Minnesota does not tax the purchase of other investments. Minnesota does not tax the purchase of stocks, bonds, ETFs, currencies, gold and silver bullion, and other financial instruments. Gold and silver coins are held as forms of savings and investment. Taxing precious metals is unfair to certain savers and investors.
- Studies have shown that taxing precious metals is an inefficient form of revenue collection. The results of one study involving Michigan show that any sales tax proceeds a state collects on precious metals are likely surpassed by the state revenue lost from conventions, businesses, and economic activity that are driven out of the state.
The harm is exacerbated when you consider that nearly all of Minnesota’s neighbors (Iowa, Michigan, North Dakota, and South Dakota) have already stopped taxing gold and silver.
In total, 42 states have reduced or eliminated sales tax on the monetary metals.
- Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers will take their business to neighboring states (which have eliminated or reduced sales tax on precious metals), thereby undermining Minnesota jobs. Levying sales tax on precious metals harms in-state businesses who will lose business to out-of-state precious metals dealers. Investors can easily avoid paying $134 in sales taxes, for example, on a $1,950 purchase of a one-ounce, US Mint produced, gold American Eagle coin.
- Levying sales taxes on precious metals is inappropriate. Sales taxes are typically levied on final consumer goods. Computers, shirts, and shoes carry sales taxes because the consumer is "consuming" the good. Precious metals are inherently held for resale, not "consumption," making the application of sales taxes on precious metals inappropriate.
- Taxing precious metals is harmful to citizens attempting to protect their assets. Purchasers of precious metals aren't fat-cat investors. Most who buy precious metals do so in small increments as a way of saving money. Precious metals investors are purchasing precious metals as a way to preserve their wealth against the damages of inflation. Inflation harms the poorest among us, including pensioners, Minnesotans on fixed incomes, wage earners, savers, and more.
Currently Minnesota ranks 47th out of 50 in the 2023 Sound Money Index.