Coin dealers say Minnesota's sales tax on gold and silver gives dealers in surrounding states an advantage.
A bill that would eliminate taxes on the sale of large purchases of gold, silver and other precious metals in Minnesota is gathering steam in the Legislature.
Rep. Mary Kiffmeyer, R-Big Lake, said she sponsored the legislation because the sales tax on coins and bullion is hurting Minnesota brokerages, which must compete against businesses in 30 other states that have tax exemptions of one form or another.
Her bill, co-sponsored by Rep. Pat Garofalo, R-Farmington, would eliminate the sales and use tax on currency, coin and bullion purchases exceeding $1,000 -- a change that favors investors but would do little for small-time collectors.
An identical bill, sponsored by Sen. Chris Gerlach, R-Apple Valley, awaits a hearing before the Senate Tax Committee.
Kiffmeyer said most people treat purchases of gold and silver coins as an investment.
"When you invest in a mutual fund, you don't pay a sales tax. When you invest in a stock equity, you don't pay a sales tax," she said, questioning why precious metals should be treated differently.
Minnesota residents who want to invest in precious metals can easily avoid the state's sales tax by traveling to Iowa, the Dakotas, Illinois, Michigan or Nebraska, or by making the purchase online or from out-of-state telemarketers, Kiffmeyer said. If they're ripped off, she added, it's harder to press a claim.
But dealing with certain Minnesota coin dealers carries its own risks. The Star Tribune reported last spring that some Twin Cities coin brokerages -- staffed with ex-cons, chronic alcoholics and drug abusers -- have drawn complaints about unscrupulous sales practices, counterfeit coins or outright thefts. The Minnesota attorney general has investigated several firms on suspicion of consumer fraud, and separate federal investigations are underway.
"I know, we've got some bad characters in-state, too," said Gary Adkins, a longtime Edina coin dealer and past president of the Professional Numismatic Guild who's the main driver behind the legislation. But Adkins said the legislation would also benefit Minnesota consumers because they'd be better off dealing with someone face-to-face.
"If we get the sales tax [exemption] passed, maybe in the next legislative session I would like to have ... a general license for coin dealers, so that anybody who is a coin dealer or precious metals dealer in Minnesota would have to meet certain basic requirements," Adkins said.
State tallies up revenue loss
The Minnesota Department of Revenue projects the state will lose about $3.4 million from 2013 through 2015 if the sales tax exemption is enacted.
At a House hearing this week, Adkins challenged the Revenue Department's analysis. He predicts the legislation would lead to an industry expansion, spin off 250 to 300 new jobs, and draw convention business that goes to states without the sales and use taxes.
He cited industry-sponsored research showing that since Michigan's sales and use tax exemption took effect in 1999, its coin dealers have increased from 210 to 325; industry employment rose from 450 to 850; and annual revenue related to coin and bullion sales increased by more than $1 million.
If the bill makes it to a vote, it appears headed for some resistance.
Rep. Jim Davnie, DFL-Minneapolis, questioned why coin collectors deserved a tax break that wouldn't be granted to collectors of stamps, duck decoys, porcelain figurines or commemorative spoons. "I just have a hard time choosing one hobby over another," he said.
Rep. Paul Marquart, DFL-Dilworth, said it's hard to think about cutting taxes on coins and bullion when money is tight.
Adkins handed out copies of a letter from the Minneapolis Convention & Visitors Association endorsing the legislation. It says the city is vying to host the American Numismatic Association's convention in 2016, which is predicted to have an economic impact of $5 million.
On the back of the letter was another from the American Numismatic Association. "Whereas your bid is certainly competitive, I can see one hurdle that may be impossible to overcome: sales taxes," the organization wrote.
Dan Browning 612-673-4493