Gross receipts tax gross for coins in Nevada
December 15, 2012
There is a storm brewing out there and it could be a nasty one. Recently there has been a push for a gross receipts tax (the tax for education). This tax could essentially end the entire industry of numismatics and bullion here in Nevada. First let us get one thing clear. There are a number of media outlets that have been calling this a tax on business profits, but it is much different than that. A gross receipts tax is a tax on the total amount sold regardless of profit. In low-margin businesses this means a tax nearly equal to its entire profit structure. If a company sells $1 million worth of merchandise and makes a 4 percent profit it made a net income of $40,000 before paying employees and expenses. A 2 percent gross receipts tax means that this business gives up half of its profit. In many instances businesses either have to close or raise their margins which means, you guessed it, higher prices to the Nevada consumer. Ask around, you might just be surprised how many businesses operate on very low margins. The rare coin and bullion industry is a highly competitive industry and many of the items traded in the market are done on very low margins. In fact the buy-sell spread on many bullion coins is just about 2 percent. If a 2 percent gross receipts tax were implemented either the business would give all its profit to the state, or the spread would have to double. With the Internet, local consumers have the ability to do business nationwide almost as easily as locally and a gross receipts tax would eliminate the ability for any local business to be competitive on a national level. Nevada consumers would either have to buy from out-of-state suppliers or pay nearly twice as much commission to do business locally, which is not a likely. Products manufactured, distributed, and sold in Nevada would feel a triple whammy. Each of the three business in this scenario would have to add 2 percent to the product which translates to a 6-plus percent (remember the 2 percent grows exponentially) higher cost to the Nevada consumer. For any numismatic-related items this would just be an insurmountable obstacle in a competitive world. As Nevadans we are all in the same scenario, tax dollars are not coming as easily as they used to. But before you support a gross receipts tax, think of the implications of what that would ultimately mean to all of us. A gross receipts tax is not a tax on the rich or corporations, it is a tax on all services and consumables. Low-margin industries such as some manufacturing, distribution or brokerage companies, and smaller-niche industries such as numismatics could be forced to leave the state with their jobs. The 2 percent would be passed on to Nevada consumers in each business step meaning even higher prices to Nevada consumers. The ultimate reality is that a 2 percent sales tax hike would be cheaper to each and every one of our pocketbooks and better for our state. • Allen Rowe is the owner of Northern Nevada Coin in Carson City.