Tax Type
Retail Sales and Use Tax
Description
Jeweler collects tax on the sale of the gold bullion
Topic
Exemptions
Property Subject to Tax
Date Issued
06-08-2005
June 8, 2005
Re: Request for Ruling: Retail Sales and Use Tax
Dear *********:
This will reply to your letter in which you seek a refund of retail sales tax paid by you (the "Taxpayer") to a jeweler on the purchase of gold. I am treating your letter as a request for an administrative ruling. I apologize for the delay in the Department's response.
FACTS
The Taxpayer states that he purchased gold bullion from a jeweler and was charged Virginia sales tax on the transaction. The Taxpayer notes that the Department's sales and use tax regulations discuss sales of gold and other tangible personal property by coin dealers and banks but do not address sales of gold by jewelers. For this reason, the Taxpayer suggests the tax does not apply to sales of gold by jewelers.
The Taxpayer also points out that banks and other financial institutions do not charge sales tax on the exchange of U.S. currency for foreign currency; nor is the tax charged on the exchange of U.S. paper currency for U.S. coin and vice versa. In addition, the Taxpayer maintains that the Federal Reserve Notes in circulation in the United States represent an exact summation of the gold and silver equivalent held in reserve and that the reserve equivalent should not be subject to Virginia sales tax in an exchange transaction.
RULING
Currency Exchange
The Taxpayer is correct that exchanges of United States currency and foreign currencies are not subject to Virginia sales tax. The currencies used in the United States and foreign countries represent valid and legal offers for payment of debts to creditors. The exchange of currencies is not a sale of tangible personal property for sales and use tax purposes.
Use of Gold as Currency
The Gold Reserve Act of 1934 required the Treasurer of the United States to withdraw gold coins and gold bullion from currency circulation in the United States. This remains true to this day. For this reason, gold bullion is no longer a legal currency in this country but is treated as a commodity that can be bought and sold based on its current market value. The sale of gold bullion is a sale of tangible personal property, not an exchange of currency.
Sales of Gold by Jewelers
Virginia Code § 58.1-603 imposes a sales tax on "every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth . . . ." Virginia Code § 58.1-602 defines "sale," in part; as
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- any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property . . . .
Virginia Code § 58.1-602 defines the term "tangible personal property," in part, as
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- personal property which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses. The term 'tangible personal property' shall not include stocks, bonds, notes, insurance or other obligations or securities.
Gold bullion is tangible personal property as defined by Virginia law. This is the basis for taxing retail sales of gold as discussed in the Virginia sales and use tax regulations on coin dealers and banks. Virginia law requires any person who makes retail sales of tangible personal property in Virginia to register and collect the Virginia retail sales tax on those sales. The tax applies to retail sales of gold bullion because it is tangible personal property, regardless of what type of business is making the sales. While a jeweler's business may consist primarily of the sale and repair of jewelry, the jeweler must collect the tax on all retail sales of tangible personal property. Therefore, the jeweler properly charged and collected the sales tax on the sale of the gold bullion.
Conclusion
Based on the foregoing, the jeweler was correct in collecting sales tax from the Taxpayer on the sale of the gold bullion. There is no basis to issue a refund of the sales tax paid on this transaction.
The Code of Virginia sections cited are available on-line in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this response, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/53323S
Rulings of the Tax Commissioner