Allen Rowe: Taxes could kill the coin industry in Nevada
Every once in a while our industry faces a monumental threat that must be addressed. Counterfeits, scams and the unscrupulous usually are the culprit, but sometimes it comes from regulations or taxes. This time the issue is the so-called education bill coming to a vote this year. The bill proposes a 2 percent gross-receipts tax on any business with sales of more than $1 million. This bill would effectively kill the coin and bullion industry in Nevada.
The reason is that it taxes gross receipts and not profit, which are two very different things. The industry operates on small margin numbers. A 2 percent tax does not sound like a lot, but I can show you two ways in which it would inflict damage.
On the bullion front, this tax essentially dooms any Nevada sales. Let us look at the transaction of an American Gold Eagle with the spot price of gold at $1,250 an ounce. A person can purchase one of these ounces of gold for about $1,310 ($60 over spot) at a retail store in Nevada. To get a new Gold Eagle, the retailer must pay a wholesaler about $1,290 ($40 over spot). With this proposed gross-receipts tax, the tax liability of the retailer would be 2 percent of the $1,310 sale (or just a little more than $26). It’s not a very equitable situation for anyone trying to provide a bullion service in Nevada. The state would actually be making more on this transaction than the company! Charging the 2 percent to the consumer is not viable either because a Nevada resident can order the same item from a host of other out-of-state retailers for about the same price without the tax added on.
Also, the tax is an exorbitant amount of a coin and bullion company’s profits. Over the past 20 years the profits in our company have usually fallen in the 2 percent to 10 percent range (mostly about 5 percent). I am sure that nearly every coin and bullion company has similar margins, as we are in an overall low-profit industry. What this means is that for every $1 million worth of coins and bullion sold there usually is $20,000 to $100,000 in profit. The gross-receipts tax would be $20,000 of that profit. What does that mean for a coin or bullion company in Nevada? Twenty percent to 100 percent of the profits made would now go to this gross-receipts tax. This tax is not a tax on profits. This is a tax on sales.
In an era in which our government seeks new taxes, please take a moment to think about what that really means. Every low-profit industry in Nevada would face the choice of moving or dealing with unrealistic taxes. Gross receipts is not a tax on profits. High-volume companies do not always rake in large profit margins. Our industry would face certain upheaval in Nevada, and so would many of the businesses our state has been trying to attract.
Allen Rowe is the owner of Northern Nevada Coin in Carson City.