SALT Report 2013 – The Tennessee Attorney General issued an opinion regarding the taxability of gold and silver coins. Specifically, the opinion addresses whether the state can legally collect sales tax on exchanges of gold and metal coins, as well as, whether the imposition of sales tax violates the Commerce Clause or the General Agreement on Tariffs and Trade.
In his opinion, the Attorney General states that Tennessee may legally collect sales tax on transfers of gold and silver coins when the coins are exchanged for legal tender based on their value as precious metals or as collectible items, rather than on their value as legal tender. Additionally, the AG notes that certain coins will have an intrinsic value that exceeds their value as legal tender due to the scarcity or appearance of the coin. In this case, coins that are exchanged for more than their value as legal tender will be considered a taxable sale of tangible personal property.
Further, the AG states that only Congress has the authority to establish the value of legal tender in the United States, therefore, a tax on US legal tender would encroach on that power. Therefore, exchanges of gold and silver coins that are based on the coins’ value as legal tender as set by Congress are not considered taxable sales of tangible personal property under the Retailers’ Sales Tax Act.
On the other hand, when gold and silver coins are exchanged for legal tender based on the value of their gold or silver content, the transaction is considered a taxable sale of tangible personal property. For instance, if a $50 gold coin is exchanged for $300, the gold coin is not being used as legal tender. Instead, the coin is being sold as an item of tangible personal property based on its value as a precious metal.
Finally, the AG notes that the imposition of sales tax on certain sales of foreign coins does not violate the General Agreement on Tariffs and Trade since Tennessee does not impose tax on foreign coins when they are first imported. Rather, sales of foreign coins are taxed after they have entered into domestic trade and are no longer considered imports.
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