by: Jp Cortez
(Birmingham, AL, USA – January 10, 2022) – Alabama currently exempts precious metals from state sales tax, however this exemption is set to expire in 2022. A senator in the Yellowhammer State hopes to extend this popular exemption.
Introduced by Senator Tim Melson (1-R), and supported by the Sound Money Defense League and Money Metals Exchange, Senate Bill 13 maintains current law by extending the existing sales tax exemption on the purchases of precious metals purchases
If Senate Bill 13 is not enacted, and this exemption is therefore allowed to expire, Alabama small businesses would immediately be harmed – along with Alabama citizens seeking to protect their savings against the devaluation of the dollar.
The Alabama sales tax exemption on the monetary metals should be maintained for a few reasons:
- 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.
- 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 many of Alabama’s neighbors (Florida and Georgia) have already stopped taxing gold and silver. Mississippi and Tennessee are two of the several states considering their own sales tax exemptions for precious metals this year.
- Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers will take their business to neighboring states, such as Florida or Georgia (which have eliminated or reduced sales tax on precious metals), thereby undermining Alabama jobs. Levying sales tax on precious metals harms in-state businesses who will lose business to out-of-state precious metals dealers. Investors in Montgomery can easily avoid paying $195 in sales taxes, for example, on a $1,950 purchase of a one-ounce gold bar.
In total, 42 states (including Alabama) have reduced or eliminated sales tax on the monetary metals. Five more states are considering eliminating the tax this year.
- Taxing precious metals is unfair to certain savers and investors. Gold and silver are held as forms of savings and investment. Alabama does not tax the purchase of stocks, bonds, ETFs, currencies, and other financial instruments.
- 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, Alabamans on fixed incomes, wage earners, savers, and more.
In 2016, the state of Louisiana experimented briefly with slapping sales taxes on precious metals purchases. The state quickly reversed course only one year later — and reinstated the exemption on precious metals — because businesses, coin conventions, and state tax revenues were leaving the state.
Bills to remove taxation on sound, constitutional money are also being, or have been, introduced this year in Mississippi, Hawaii, South Carolina, Tennessee, and more.
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