For the Utah Legislature’s Revenue and Taxation Interim Committee, taxation is golden – literally.
While gold and silver have been legally recognized tender in Utah since early 2012, the state has struggled to explain precisely what that means. It’s unlikely you’ll want to drop some gold dust on the counter at McDonald’s anytime soon, but making a state sales tax payment with a federally minted gold coin, through an escrow agent, is much closer than you might think.
Rep. Mike Kennedy (Republican – Alpine) introduced a measure to prioritize an amendment closing a perceived loophole in the Utah Legal Tender Act of 2011, which was signed into law two years ago. The proposed amendment would clarify the income tax obligations on gold transference, and would be similar to an earlier amendment which addressed sales tax on gold purchases.
Larry Hilton, a proponent of gold and silver tender, addressed the committee and took questions from legislators. In his report, he noted the possibility of lost revenue for the taxing authority due to individuals paying taxes on the face value of their gold rather than on the market value. For example, the face value of a gold coin may be $50, but on the market it may have a purchasing power of $1500. Mr. Hilton reported that he had spoken to tax attorneys whose clients have paid their gold taxes with paper currency at face value and have subsequently passed IRS audits. He noted that closing this loophole is a necessary step in executing the Legal Tender Act.
Another potential concern, raised by committee chairwoman Rep. Rebecca Chavez-Houck (D – Salt Lake City), is the lack of federal insurance on gold and silver held in escrow. She noted that it is unlikely they would be protected by the Federal Deposit Insurance Corporation (FDIC), and wondered if the state would be opening itself up to potential liability. Mr. Hilton agreed that this has been a concern of his, but the details are beyond his expertise. He recommended the state consult with legal counsel before moving any further.
Ultimately, the committee voted not to prioritize the proposed amendments to the bill. The discussion will likely continue into the November interim session.