Rep. Jamie Allard, R-Eagle River, examines copies of a gold-backed currency issued for Wyoming on Thursday, Feb. 2, 2023, during a hearing of the House State Affairs Committee. (Photo by James Brooks/Alaska Beacon)
A new bill proposed by a Big Lake Republican would exempt gold-backed currencies and gold and silver coins from local sales taxes in order to encourage their use as currency, not just collectibles.
Rep. Kevin McCabe, R-Big Lake, told the House State Affairs Committee on Thursday that the bill was inspired by a constituent who distrusts the national banking system and would like to use gold and silver.
House Bill 3, which was held in the committee for further discussion, wouldn’t require stores to take gold and silver alongside normal money, but it would require the House Finance Committee to study whether Alaska should allow people to pay their taxes in non-standard ways, such as in gold coins. The U.S. Constitution bars states from issuing their own money, but it does allow them to accept gold and silver coins in payment of debts.
Under existing law, gold coins are treated as investments, not currency. If someone wants to use them to buy something at a store, sales taxes are levied on the value of the coins and there’s a separate tax on the value of whatever’s being bought.
In Thursday’s hearing on the bill, legislators were offered an example: If a customer were to use a gold coin to buy groceries, existing law would require the transaction be recorded as the store buying the gold coin from the customer. The store would have to pay taxes on the value of the coin, just as the customer would have to pay taxes on their groceries.
Because the price of gold fluctuates from day to day, stores and customers would have to negotiate how much the coin is worth and how the customer would be given change (if any).
The sales tax waiver wouldn’t apply to nuggets, metal bars or other forms of precious metals that aren’t considered currency, and no anti-counterfeiting measures are required by the bill.
Alaska doesn’t have a state sales tax, so the issues with gold and silver coinage occur only in cities and boroughs with local sales taxes, and HB 3 would preempt cities and boroughs from taxing the value of the coin.
Local governments would still be able to collect taxes on the value of what’s being bought with the coin, unless gold or silver coins themselves are what’s being bought.
There may also be a federal tax liability, which wouldn’t be affected by the bill.
McCabe said that 12 states have passed identical legislation. The most recent is Tennessee, which passed it last year.
McCabe’s bill contains a fiscal note indicating no fiscal impact to the state and suggested that the impact on local communities, which collect sales taxes, will be “just about nil.”
Tennessee officials estimated that losing local sales taxes on that state’s 200-some coin dealers would cost municipalities about $118,000 per year. Alaska has significantly fewer coin dealers, but exact figures were not immediately available.
HB 3 was held in the state affairs committee for further discussion.
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