If you want to buy gold in the United States and you want to purchase it from a local dealer, then there is a good chance that you will need to pay sales taxes on it. A lot of things are taxed in the US, and gold (as well as other precious metals) are no exception to that rule. There are ways around it though, ways that you can purchase tax free gold wherever you are in the United States.
Profit and Capital Gains
If you want to make money from precious metals then you have to take the margins into considerations. Every penny counts in this game.
In the United States, the sales taxes on precious metals can go as high as 12%. So, let’s assume that you have $5,000 to spend and the spot price of gold is $1,000 an ounce. Ideally, you should be buying 5 ounces, allowing you to profit from even the smallest increase. But if you shop locally then you may need to cough-up an extra 12%. There will also be premiums added to the product by the dealer, covering the staff costs, rent costs, storage costs and all of the other overheads that a brick-and-mortar dealer needs to cover.
In the end, your $5,000 may get you no more than 4 ounces. And that’s not all either, because you also have to factor in capital gains tax. This is a tax that is applied to the profit you make from you investments and it can go as high as 28% (the actual amount will depend on personal income, circumstance and location).
This means that even if the value of gold increases by 50%, which would be a sizable jump, then your profit from that $5,000 investment would be less than $1,500, as opposed to the $2,500 you would receive if you have purchased at spot price.
Tax Free States
There are a number of tax free states in the US, states where you will not be taxed regardless of whether you are buying online or offline. Some of the tax free states include Arizona, Delaware, Idaho, Utah and Washington. There are many more states that do collect taxes though, and these range between 3% and 12%. In such cases, the tax rate differs from one county to the next, although rarely by a great deal.
There are also many states that charge taxes, but only on purchases below a certain amount. These taxes are subject to change and may differ depending on your county or region, however, you can use the following information as a starting point:
Alabama: There are no exemptions in this state and in some states it can be as high as 12%. This is because of the addition of local taxes though, and the statewide rate is just 4%.
Alaska: There is no sales tax in this state. That does not necessarily mean that you won’t be charged a tax, as each region is left to make up its own laws. However, most regions have chosen not to apply a sales tax to precious metal purchases.
Arizona: There are no taxes on precious metals in the state of Arizona.
Arkansas: Although the statewide tax rate in Arkansas is just 6%, this in inflated by local rates and in some areas it goes as high as 11%, which is one of the highest in the US.
California: All purchases are taxed up to $1,500, which an exemption on purchases above that amount. Coins from South African do not have an exemption under any circumstance, while Californian gold medals are never taxed.
Colorado: There is no statewide sales tax in Colorado on the purchase of bullion coins or bars. However, this exemption does not cover jewelry or numismatics and individual regions may set their own rates.
Connecticut: There is a statewide tax of 6% in Connecticut, but there is an exemption for all precious metal purchases over $1,000.
Delaware: This is one of the most relaxed states in the country when it comes to taxes and there are no taxes on precious metal bullion of any form.
Florida: If you spend more than $500 then you will not owe any sales taxes in Florida. Below this amount you will be taxed a minimum of 6%.
Georgia: The Peach State is one of the most relaxed when it comes to precious metal taxes as everything is exempted.
Hawaii: There are no sales taxes in the state of Hawaii. The business does need to pay a tax though and this will likely effect the price of the product. As a result, you can expect to pay more when buying from a local dealer, even though there are no taxes.
Idaho: There is statewide exemption in Idaho that applies to most forms of bullion, with a focus on bullion sold for its intrinsic value. There is a statewide tax rate of 6% for anything that does not fall into this classification.
Illinois: There is an exemption for most bullion purchases in the state of Illinois. This does not apply to South African coins though and it only applies to coins an bars of a bullion-purity.
Indiana: You will need to account for an extra tax rate of at least 7% when buying bullion in this state. This rate is increased further by local authorities.
Iowa: There is an exemption for bullion coins and bars here, but there is a statewide rate of 6% that applies for anything that does not fit into this description.
Kansas: The statewide tax rate in Kansas is a little over 6%, with local taxes increasing this rate further.
Kentucky: All sales of precious metals are subject to a tax of 6% in Kentucky.
Louisiana: The taxes are not very straightforward in Louisiana. There is a tax rate of 4% that applies across the state and can go significantly higher with the addition of local taxes. But in 2013, they removed the tax on most bullion and numismatics, but tokens, medallions and some rare pieces may still be taxed.
Maine: The tax rate in this state is 5%, with additional rates added by local authorities. This applies to all precious metals and to paper currency.
Maryland: If you purchase more than $1,000 worth of precious metals in Maryland then there will be no tax due. Below this amount you will need to pay a minimum of 6%.
Massachusetts: The state of Massachusetts allows for an exemption of certain precious metals over a value of $1,000. Tis includes numismatics and bullion, but it does not apply to all forms of precious metals.
Michigan: There are exemptions for many bullion and numismatics in Michigan, with a rate of 6% applied to products that do not qualify for this exemption.
Minnesota: Precious metals are classed as tangible personal property and are therefore taxed. The statewide rate is 6.875%, with local rates pushing this even further.
Mississippi: The state sales tax here is 7%, with additional local rates taking it as high as 9%.
Missouri: Most bullion purchases are exempt from ta in this state, but on paper currency, tokens and some other pieces, a minimum rate of 4.225% is applied, with local rates increasing this to a maximum of 9.6%.
Montana: There is no statewide sales tax in Montana and this applies to all forms of bullion and numismatics. However, certain regions do apply a sales tax of 3% to such purchases.
Nebraska: There used to be a sales tax applied to precious metal purchases in this state, but it was removed in 2014 and all bullion is now exempt.
Nevada: There is a statewide sales tax of 6.85% in Nevada, but there are also local taxes that increase this rate. In Clark County, for instance, which includes the city of Las Vegas, the rate is as high as 8.1%.
New Hampshire: This is one of the most popular states for precious metal investors as there are no taxes on bullion.
New Jersey: There are no exemptions in the state of new Jersey, but there are good and bad points to the tax rate here. The good thing is that there are no additional local taxes, the bad thing is that the statewide tax rate is a relatively high 7%.
New Mexico: There is no sales tax in New Mexico but there is a tax charged to businesses, and they often pass this on to the buyer by increasing the prices of the product.
New York: The statewide tax rate in the state of new York is just 4%, however, local taxes can increase this significantly and in New York City the rate is just short of 9%.
North Carolina: This highest tax rate in North Carolina is 7.5%, but this is down to additional local taxes and the statewide rate is just 4.75%.
North Dakota: There are many exemptions on bullion and other precious metals in North Dakota, but this does not apply to numismatics. In this case you will need to pay a minimum tax rate of 5%.
Ohio: There used to be an exemption in this state, but that was repealed and you will now owe a minimum of 5.75%, which goes as high as 8% in some areas.
Oklahoma: If you store your bullion at an approved depository then you will be exempt from bullion taxes. Otherwise, all purchases are due a minimum of 4.5%, a rate that can go as high as 11% with the addition of local taxes.
Oregon: There are no sales taxes in this state and that applies across the state and on all forms of precious metals.
Pennsylvania: There is a tax rate of 6% that applies across the state of Pennsylvania, with local taxes added to this in most areas.
Rhode Island: You will not be charged sales tax for precious metal bullion in Rhode island, but there is a rate of 7% applied to paper currency, tokens and some other pieces.
South Carolina: There are many exemptions here, including most forms of bullion and most coins. For precious metals that do not meet this criteria there is a statewide rate of 6% with additional local taxes adding between 0% and 1% to this rate.
South Dakota: If you are buying bullion or legal tender coins, you will not need to pay tax in this state. However, numismatics, tokens and other pieces come with ad additional rate of 4%, which can go as high as 6% in some state.
Tennessee: There is a minimum rate of 7% in this state, and that is increased further by local authorities, making this one of the most expensive states.
Texas: There was a sales Texas on precious metal bullion in Texas, but this was removed in 2013 and this is now a tax free state.
Utah: You will need an extra 4.7% as a minimum to cover taxes in Utah, and local rates increase this as high as 8.35%.
Vermont: The tax rate in Vermont is 6%, and this applies to all precious metal purchases, with local taxes increasing this further.
Virginia: You need to pay a minimum of 5.3% on all precious metals in Virginia, and this amount increases to 6% if you reside in the northern part of the state.
Washington: There is a statewide tax rate of 6.5% in the state of Washington and this is increased further by local taxes. In some areas, including Seattle, this rate is as high as 9.5%.
Washington D.C.: In all areas of this small region you will need to pay a tax of 6% on your precious metal purchases.
West Virginia: There are no exemptions here and the statewide tax rate if 6%, with an additional 1% charged by some regions.
Wisconsin: There is a tax rate of 5% here that goes as high as 5,6% in some local areas.
Wyoming: You need to pay a minimum tax rate of 4% in this state, but there are additional local taxes that can push this as high 6%.
Tax Free Gold Wherever You Are
The above tax rates apply when you are purchasing from local dealers and when you are depositing into a local bank. They may also apply if you are purchasing from an online dealer based in a state that charges sales tax. They do not apply to bullion storage though, and in most cases you won’t need to pay tax on anything bought overseas.
This means that there should be no sales taxes due on purchases from GoldBroker, although you are advised to check with your local laws first. This is especially true when you are taking advantage of their free US delivery and are having your order shipped to your address, but in the case of their bullion storage, you should be okay regardless (although you should still check just in case).
Of course, if you make a profit from this investment then you are still required to declare that profit and to pay capital gains tax on it. This goes as high as 28% as mentioned above, but while this sounds like a lot, the amount you need to pay may actually be much less than this. It all depends, and all investors are advised to research into their rates before they invest.
Under no circumstances should you avoid declaring your profit. It might save you a few dollars, but it could also get you into serious trouble.
This applies wherever you are in the world, as many countries have some form of capital gains tax. That certainly doesn’t apply to all of them, but this is a common tax throughout Europe and Asia. In Canada, it only applies to 50% of your profit, in France it goes off your personal income tax rate and can be as high as 45%. The laws are a little more relaxed in Russia, New Zealand and many smaller island countries like Cayman Islands and Barbados.
Sales taxes also apply in many of these countries, although this is referred to as VAT (Value Added Tax) in Europe. This rate typically ranges from just a few percent to 25%. However, if you pay VAT in one country you will not need to pay it in another. So, if you live in the United Kingdom where the rate is 20%, then you can save by buying from Germany, where the rate is only 7%, and then having the product shipped over.
Of course, as with the United States, you should be able to avoid this tax altogether by buying and storing your gold overseas. And providing you do not ship the gold to your home address, then you will never be liable for those taxes or VAT. Although, even if you sell directly from the vault, you will still need to pay capital gains tax on the profit that you make.