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.

The 1913 Liberty Head nickel should be worth more!

The excitement is waxing in the numismatic circles with the news that a 1913 Liberty Head Nickel will be on the auction block by Heritage Auctions at the Central Numismatic Society's coin show in Chicago in April, 2013.  After hearing early estimates that the coin will fetch between two and three million dollars, I am now hearing estimates as high as five million.  In my view, this would still be a tremendous bargain.

The price should be comparable to the 1933 Saint Gaudens double Eagle, which last sold for $7,590,020.  I note that gold coins generally sell for more than nickel coins and large coins are worth more than small coins.  This fact alone might explain the discrepancy in the price.  If we examine the mintages, a mere five 1913 liberty head nickels were struck compared to 445,500 1933 double eagles.

All five liberty head nickels are currently accounted for.  Two are in museums, leaving only three available for private collectors.  Most of the 1933 double eagles were melted, but some escaped.  The US government's position is that there is only one 1933 double eagle that is legal to own  - a specimen legally exported by King Farouk.  The secret service has been actively seizing 1933 double eagles, stating that they were released illegally.  The same argument could apply to the 1913 liberty head nickels, which were made surreptitiously at the Philadelphia mint.

In 2004, the government seized ten 1933 double eagles from s Philadelphia jeweler who submitted them to the government for authentication.  (read that story here) This means that there are at least 11 1933 double eagles that are accounted for.  There are undoubtedly more that are secretly owned.  The 1913 liberty head nickel, is therefore the much scarcer of the two coins.  In the future, the government could release some of its 1933 double eagles, which would cause their values to plummet.  There is no such risk with the 1913 liberty head nickel.

A good story is an essential ingredient to the value of a coin.  Both the 1933 double eagle and the 1913 Liberty Head nickel have stories -- but I find the nickel story more intriguing.  It began with someone clandestinely striking the nickels at the Philadelphia mint.  Then,as a rouse, a mint employee placed ads offering to buy any such nickels (which were not thought to exist).  Years later, five nickels magically appeared.  One of the nickels was purchased by George Walton, who was killed in a car accident on the way to a coin show.  His heirs recovered the nickel, but it was thought to be a fake -- only to be discovered as real years later.

A great story, and a great nickel -- clearly worthy of a seven million dollar price tag.
Read more about it in the book Million Dollar Nickels: Mysteries of the 1913 Liberty Head Nickels Revealed... or visit my webpage at peterplanchet.com.

"Numismatics" is word of the day

The field of coin collecting was honored during the nudiustertian morning when the word "numismatics" was selected as the word of the day on wordsmith.org.  The weeks theme is words that start with the "new" sound.  Other words in the category include pneumonic and nouveau pauvre

For those unfamiliar with the word "nudiustertian" it means of or relating to the day before yesterday.  I have never used the word before now, and I imagine I will seldom use it again.
The word numismatics, of course, I use everyday at least thrice.