The internet sales tax: A threat to coin investors

As I write this, The United States Senate is working on a bill to allow states to collect sales tax on purchases made on the internet.  This will put the damper on those making numismatic investments by purchases rare coins on sites such as ebay .  When you invest in stock there is no sales tax -- but rare coins are considered a taxable purchase.  Let's consider what happens to a Philadelphia resident (subject  to a whopping 8% sales tax) purchasing $1000 worth of coins over the internet.  After tax, the price will be $1080.  Suppose the seller then wishes to resell the coins at a break even price.  The new buyer must pay 8% tax making the cost $1166.  The table below shows the effect of cumulative sales for a $1000 coin.

  1. $1080
  2. $1166
  3. $1260
  4. $1360
  5. $1469
  6. $1587
  7. $1714
  8. $1851
  9. $1999
After nine sales, the coin must be sold for nearly double the initial cost to merely let each buyer recover the original purchase price.  Under the same scenario, a buyer in one of the five states without sales tax will still find the coin for $1000.

Investments are tough when one must immediately recover 8% merely to break even.


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