Frankfort, Kentucky – Responding to overwhelming grassroots support over the last three years, lawmakers in the Kentucky House have voted to end the state’s controversial practice of imposing sales taxes on all purchases of precious metals.
House Bill 360, a sweeping sales tax bill, includes language to exempt gold, silver, platinum, and palladium bars, ingots, rounds, and coins from state sales taxes.
The bill is now pending in the Senate Appropriations and Revenue committee and only has about 10 days to pass before time runs out in the Kentucky legislative session.
Taxing gold and silver purchases is becoming an unusual and outmoded practice in the United States. 42 states have now ended this practice – including all seven of Kentucky’s neighboring states.
In the past two years alone, Alabama, Ohio, Arkansas, Tennessee, and Virginia each passed legislation to enact or extend sales tax exemptions on precious metals in their states. Mississippi is expected to pass similar legislation in the coming weeks.
As a result of skyrocketing federal debt along with excessive issuance of Federal Reserve note dollars (or their electronic equivalent), savers have been losing significant purchasing power as inflation rages across America.
Holding some savings in gold and silver – the only money actually mentioned in the United States Constitution – is one way to protect one’s purchasing power.
The exemption on sound money included in House Bill 360 is good policy for several reasons:
- Levying sales taxes on precious metals makes no sense because they held for resale. 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 imposition of sales taxes on precious metals illogical from the start.
- Studies have shown that taxing precious metals is an inefficient form of revenue collection. The results of a Michigan study, for example, demonstrated that any sales tax proceeds a state collects on precious metals may be 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 ALL of Kentucky’s neighbors (Illinois, Indiana, Missouri, Ohio, Tennessee, Virginia, West Virginia) have already stopped taxing gold and silver.
- Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers will take their business to neighboring states, thereby undermining Kentucky 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 $117 in sales taxes, for example, on a $1,950 purchase of a one-ounce gold bar.
- Gold and silver are the only money mentioned in the U.S. Constitution. Article 1, Section 10 states that “no state shall make any Thing but Gold and Silver a tender in payment of debts.” Exchanging one form of U.S. money for another should not be taxed.
- Other types of savings or investment do not carry a sales tax. Gold and silver are held as forms of savings and investment. Kentucky does not assess a sales tax on the purchase of stocks, bonds, ETFs, real estate, currencies, and other financial instruments.
- Taxing precious metals is harmful to smalltime savers. Purchasers of precious metals aren't usually 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, Kentuckians on fixed incomes, wage earners, savers, and more.
The national backlash against inflation caused by federal spending, debt, and money printing is growing. State legislators this year have already introduced an unprecedented number of bills to remove government impediments to buying, saving, and using gold and silver.
The Bluegrass State is currently ranked 45th in the 2023 Sound Money Index. By passing HB 360, Kentucky can vastly improve its Sound Money Index ranking, as well as become the 43rd state to end sales taxes on precious metals.