Following a slew of penalty assessments by the California Department of Tax and Fee Administration (CDTFA) against bullion dealers, the California Coin and Bullion Merchants Association (CCBMA) is calling for clarification on state tax changes. California raised its exemption threshold for use and sales tax on bulk sales of non monetized silver or gold billion numismatic coins and monetized bullion after a review of data on inflation last October. Effective Jan. 1, 2023, the exemption threshold for the aforementioned taxes increase from $1,500 to $2,000.
However, several bullion dealers did not adjust to the new rates, primarily due to limited communication from the agency. This resulted in the dealers receiving penalty assessments when they filed their quarterly reports. One bullion and coil dealer in San Diego first brought the issue to life when they reached out to the National Coin and Bullion Association (NCBA) asking for the association’s position on the new penalty assessments.
Surprisingly, the NCBA had not even heard of the threshold adjustment, and further research into the matter revealed that the CDTFA made few efforts to make the changes known to the general public. The majority of California dealers were not aware of the threshold adjustment, and the changes were not easily noticeable on the agency’s website.
This lack of communication cost bullion and coin dealers in California thousands of dollars in penalties and taxes for mistakenly misreporting their sales.
Representatives from CCBMA argue that due to the lack of communication from the California Department of Tax and Fee Administration, the changes should have become effective on Jan. 1, 2024. The CCBMA is currently communicating with the CDTFA to clarify the date when the increased thresholds become effective and resolve the current issues as amicably as possible.
When asked how California coin and bullion dealers could proceed on the matter, the CDTFA released an unofficial statement saying that taxpayers who received penalties or interest due to the sale of bullion or gold during this period may receive relief from those interest and penalties. According to the CCBMA, affected dealers should reach out to the CDTFA to begin a dialogue and identify solutions for their specific issues.
Meanwhile, the CDTFA published a notice on its website to properly notify the public of the threshold increases. The CDTFA has also notified the CCBMA of pending legislation that would move the effective date of threshold increases in the future to July 1.
These changes are likely to be watched by producers such as Royal Gold Inc. (NASDAQ: RGLD) since the new fees could impact the operations of some of their clients.
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