Is There Sales Tax on Gold and Silver in California?
Financially astute individuals often invest some of their savings in precious metals as a form of protection from economic uncertainty.
Tax considerations must also be kept in mind when investing in precious metals, since profits from such investments may be taxed as income.
Why Are States Applying Sales Taxes to Precious Metals?
Paper currency may lose value due to inflationary spending and out-of-control public debt, while precious metals have held their purchasing power, prompting more people to diversify their wealth through physical gold and silver investments.
State laws allow Americans to avoid taxes when purchasing precious metals by taking advantage of various exemptions available. Each state sets its underlying tax rate; localities can add extra points. ITM Trading suggests using our interactive map to find out the sales tax rate applicable to your order prior to purchase.
States typically apply sales taxes to final consumer goods such as computers or clothes because these goods are consumed. But since precious metals are held for savings and investment purposes, placing a sales tax on them would penalize those same investors who hold precious metals as savings and investments. Furthermore, studies show that taxing precious metals actually reduces state revenues as buyers opt to take their business elsewhere – including tax-free states nearby which could undercut in-state businesses by taking their purchases elsewhere.
Buying Precious Metals in California
California holds a special place in history when it comes to gold and silver mining and sales, serving as one of America’s major gold rushes and serving as home for numerous coin and bullion dealers.
Precious metal investing has long been recognized as an effective long-term saving solution, protecting against inflation, market fluctuations, and economic instability. If you’re considering taking this route as an investment strategy, however, it is crucial that you fully comprehend how doing so could impact your tax liability.
Physical gold and silver investments are considered collectibles by the IRS, making them subject to a maximum 28% capital gains tax when sold. Investors should keep careful records of purchases, sale prices and associated expenses so as to substantiate their cost basis if an IRS audit occurs, while also helping ensure accurate tax reporting; keeping detailed records can offset other capital gains while decreasing overall tax liabilities.
Capital Gains Tax on Precious Metals
California levies a capital gains tax on precious metal investments, meaning if you sell them for more than you originally purchased them for, any profits made will require payment of taxes based on your ordinary income tax bracket.
Maintaining records of purchases and sales transactions is essential to accurately reporting them on your taxes while also mitigating penalties imposed by the IRS if audited.
To avoid paying an 8% capital gains tax, it’s essential that your gold or silver investments be purchased and sold within the same state. There are some states which do not impose this tax such as Alaska, Oregon and New Hampshire where online sales tax does not exist as of 2020; Texas also exempts bullion products from capital gains taxation.
Imposing a Sales Tax on Precious Metals
Many individuals purchase precious metals as investments; if they later decide to sell for a profit, however, this could result in them being taxed on any capital gains made from selling. Government bureaucrats frequently penalize precious metal holders this way and there are currently efforts underway in several states to free gold and silver holders from these restrictions.
California offers some relief from these taxes by offering sales tax exemption on certain products including monetized bullion (medallion rounds or bars with purity of at least 900 parts per thousand) and non-legal tender coins whose threshold changes annually to reflect inflation rates.
ITM Trading’s interactive map makes it easier to identify which items are subject to various sales tax charges in your state, as these taxes are always changing. Please consult with a CPA or tax advisor on any matters of taxation as it can often be complex.
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