Matt Lerner relies on the wink of gold bullion to draw shoppers into his downtown Frederick coin shop But lately, the gleam in stores like his has attracted some unwanted attention from state lawmakers.
Lerner, owner of the Frederick Coin Exchange, said he is concerned about a proposal that would have all buyers of rare coins and precious metals paying a 6 percent sales tax. Right now, because of a special exemption, customers who spend more than $1,000 on precious metal or coins can add to their treasure chests tax-free.
Rolling back the exemption would more than double the markup on many of Lerner’s products and could send buyers heading to Pennsylvania or the Internet for their South African Krugerrands.
“It might force our business to open in another state,” Lerner said.
The tax proposal offered by Gov. Martin O’Malley is part of a spectrum of cuts and revenue-raising strategies meant to polish the state’s financial outlook. His office estimated that abolishing the exemption for precious metal and coin sales of more than $1,000 could glean an additional $3 million for the state; the Maryland Department of Budget and Management believes the state missed out on about $2.9 million in fiscal 2012 because of the tax loophole.
As part of a “balanced approach” to narrowing a budget shortfall, O’Malley decided repealing the exemption was a responsible choice, said Takirra Winfield, spokeswoman for the governor’s office.
Initially, the state freed sales of bullion and rare coins from the tax to draw metal businesses to the region. O’Malley believes it is time to revisit the issue and stop offering these vendors special treatment, Winfield said.
Delegate Dana Stein made the same suggestion last year. In a troubled economy, the state should not only cut its budget, but also look at weeding out some tax exemptions, he said.
“I don’t think this particular item should be singled out for exemption. Why not … single out sales of precious art or other antiques?” he asked. “Why just sales of precious metals above a certain value?”
Sen. David Brinkley, a lawmaker from Frederick County, has a different take on the issue. In his opinion, levying a tax on the sizable sales of bullion and rare coins would be like charging a percentage for investment purchases.
Brinkley and Lerner both said some people like to hear the clink of metal in their coffers rather than rely completely on stocks and bonds, especially in a fickle economy.
“A lot of stocks just disappeared overnight,” Lerner said. “Gold and silver are something you can hold in your hand.”
On Feb. 12, 2007, gold was trading at about $660 per troy ounce; it is now at more than $1,700 for the same amount.
Those who want coins and bullion for their investment value are especially vigilant about getting the most for their money and are sensitive to price changes. Lerner said his highest markup for gold is less than 5 percent.
Not only would businesses potentially leave the state if the sales tax exemption is repealed, he said, but valuable coin conventions now held in Baltimore might also go elsewhere.
The proposal would damage the economy, including the Frederick Coin Exchange, without drawing much money to the state, Brinkley said.
“We’re concerned about the sticks and bricks businesses downtown,” he said. “Here we have a very successful one, and there are others throughout the state. And you’re now penalizing anyone from purchasing their investment from these localities.”
Lerner said he has been lobbying state legislators to oppose the governor’s proposal.