Are precious metals purchases subject to sales tax?

Precious metals purchases are not subject to sales tax in the state of Texas.

When it comes time to sell my precious metals, will the sale be subject to capital gains tax?

Long-term and short-term capital gains tax questions fall under the class of topics for which you should consult an authorized tax professional. It is generally understood that profits derived from the sale of precious metals are subject to a capital gains tax of 28%. The reporting of those gains is subject to U.S. law and the conscience of each individual.

When I buy from Texas Precious Metals, does TPM report the sale to the U.S. government?

Unlike the banking industry, the precious metals industry is currently unregulated. Therefore, the sale of precious metals is a non-reportable event, provided you are not paying for your purchase with cash (physical dollars) in excess of $10,000 (which warrants the filing of Form 8300) or deemed to be involved in suspicious activity (SARS report).

The government is satisfied that the funds originating from your bank via personal check or bank wire have been pre-screened for suspicious activity because of the mandates presently enforced on banks. In other words, the government is convinced that your bank knows the origin of your funds and is conducting the proper due diligence on its clients. Consequently, precious metals dealers are not subject to additional reporting restrictions, no matter the size of the purchase.

Nevertheless, in our technological age, it would be naïve to assume that the government is not able to easily track the activity of any person of interest via the communications channels (phone, internet, etc.) leading to the purchase. The world is interconnected. Obviously, it is much more difficult for the government to track the whereabouts of the metal once purchased or the line of ownership once it is gifted, traded, lost, stolen, or otherwise dispensed of.

How do I know my metal is real?

There are two origins for the precious metals we sell: the mints, and third-party sellers such as clients or other dealers.

More than 85% of all the metal we sell originates from the sovereign or private mint producing the coin or bar. The mint guarantees the weight and purity of these products, and we sell them to our clients in the exact condition we receive them from the mint. We open sealed monster boxes or coin tubes only when orders of uneven increments oblige us to do so.

For orders originating from third-party sellers (clients or other dealers), we test every single product that enters our vault, no matter how large or small, using a combination of methods ranging from water density testing to X-ray fluorescence, among other methods.

I have heard that the government might confiscate gold again like they did in 1933. Is this true?

It is impossible to know whether or not the government will confiscate precious metals at a future time. However, there are three considerations for those anxious about the prospect:

The government can confiscate whatever it wants, whenever it wants, and has been known to seize land and other assets from citizens. In fact, the government presently confiscates a percentage of individual income through various taxes that could rise at any time. Gold is certainly not immune to governmental oversight and regulation.

It is worth noting that, in 1933, the government did reimburse citizens for their gold, albeit at an immediately discounted rate. Therefore, this form of “confiscation” was different than an airport toiletry confiscation by the TSA, for which there is no reimbursement.

Lastly, and perhaps most importantly, it is worth highlighting that the emphasis placed on the 1933 gold confiscation by some precious metals dealers is not without incentive. Certain dealers incentivize their sales force to drive profits. For example, since collectible coins offer higher margins, these opportunistic capitalists emphasize that the 1933 legislation exempted collectible coins. However, many of the products classified as collectibles today were standard bullion coins in 1933. So, the coins being promoted today were actually non-exempt at the time of legislation. In the event of future legislation, it is impossible to know what stipulations the government will place on the citizenry.

Is it better to purchase collectible coins or bullion coins?

Purchasing collectible coins is like purchasing a piece of art. Generally, the predominant value resides in the rarity, artistry, or desirability, not the metal. So, in evaluating collectible coins, it is vitally important to recognize that there are hefty premiums on these coins that sometimes far exceed the metallic value. If you desire collectible coins, ensure that your motivation is not for currency-like fungibility (i.e. easily and quickly convertible into an instrument of equal value).

How do I know I can trust Texas Precious Metals?

We strongly encourage first-time precious metals buyers to thoroughly research our company and others before purchasing. Read online reviews, assess Better Business Bureau complaints, or make a site visit to the company’s facility if feasible. The precious metals industry attracts the unscrupulous, so it is important to be diligent.

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What is bullion?

Technically, bullion is defined as gold and silver in the form of bars or ingots with purity exceeding 99.5%. However, coins with equal or greater purity, or even common sovereign coins that are only 22 karats (91.67%) such as the gold United States Mint Eagle or South African Mint Krugerrand, are generally referred to as “bullion” even though they do not pass the technical definition because they are purchased primarily for their metallic content and not for collectible purposes.

Since the United States Mint Eagle and South African Mint Krugerrand are only 22 karats (91.67% pure), why do they trade at roughly the same price as pure gold products?

Although it is true that the gold Eagle and Krugerrand are only 91.67% pure, they nevertheless still contain 1 troy ounce of gold. Their lesser purity is the result of adding metallic alloys to harden the coins, and so the gross weight of these coins is actually 1.09 troy ounces, with a net gold weight of 1 troy ounce.

What does it mean when a coin is labeled “Brilliant Uncirculated (BU)?”

The term “Brilliant Uncirculated,” or “BU,” refers to coins that have not been in circulation or handled commonly like commercial coins. They show no significant wear. When privately held bullion coins have abnormal wear, they may be designated as “Almost Uncirculated (AU)” or “common.”

A common mistake among buyers is to assume that “BU” coins possess the same qualities as “graded” coins. This is not the case. Imperfections in the minting process or slight nicks and scratches do not disqualify a coin from being designated “BU,” particularly when these coins are stacked one upon another in tubes while in transit. Customers who are seeking coins in perfect condition buy MS-70 graded coins, and they pay a higher premium for them.

What is the “spot” price?

The spot price of gold is the price of 1 ounce of gold as contained within a 400-ounce gold bank bar traded on the commodities exchange at current market prices. For silver, it is the price of 1 ounce of silver as contained within a 1,000-ounce silver bank bar traded on the commodities exchange at current market prices. These prices for “immediate delivery” are distinct from futures prices, which indicate trade value for delivery at a future date.

NOTE: We publish live spot prices on our website. These prices originate from CME GLOBEX. Since precious metals are traded throughout the world on many exchanges, and websites publish these prices at irregular intervals, it is common that slight variations in pricing exist between websites. For example, a website publishing prices from a certain exchange every two minutes will produce slightly different prices than another website publishing every 20 seconds from another exchange.

Additionally, most markets publish a “bid” and “ask” price for these metals, with a slight spread between them. In most cases, dealers buy at the bid (the lower number) and sell at the ask (the higher number). Popular metals charts, like, publish the “bid” price.

At Texas Precious Metals, we blend the “bid” and the “ask” together, which is more favorable to both buyers and sellers (lower price when buying, higher price when selling).

What is the “premium”?

The premium is the markup for a precious metals coin or bar above the spot price. Several factors contribute to a coin’s premium, the most significant of which is the minting cost. Buyers cannot afford (or do not want to purchase) 400-ounce gold bank bars; they want smaller denominations, and those smaller denominations must be minted. In the case of sovereign mints, another contributor is taxes because some governments levy a duty on every coin sold to consumers. Shipping costs from the mints to dealers also contribute to the premium. If the premium for a gold coin is $50, the dealer may gross $10-15 per coin, depending on volume.

For silver and platinum, the same principles apply. In general, Texas Precious Metals will also pay a premium to sellers when individuals are selling back to us, especially for products we carry on our website. Our “buyback” premiums are indicated on individual product pages.

What is the “melt” price?

The melt price is simply the spot price multiplied by the precious metal weight. For a 1-ounce gold coin, the spot price and the melt price are the same. If the gold spot price is $1,500, and the gold content in the coin is .9675, then the melt price is $1,500 x .9675 = $1,451.25.

What is a “troy” ounce?

Most people recall that an ounce is 1/16 of a pound, and when purchasing a half-pound of roast beef at the deli, the butcher will hand us an 8-ounce package. This standard unit of commerce is technically referred to as an “avoirdupois” ounce, and it is used commonly for weighing everything except precious metals and gunpowder.

Precious metals are measured in “troy” ounces, which is a unit of measure that dates to Roman times. A troy ounce is heavier than the avoirdupois ounce, and the conversion is as follows:

1 troy ounce = 1.09714286 avoirdupois ounces

So, do not be surprised if your 16 “1-ounce” 99.99 percent pure gold Canadian Maple Leaf coins weigh more than a pound on your kitchen scale. You have not won the lottery, unfortunately. You are simply using the wrong scale.

What is “purity?”

A coin’s purity is calculated as the precious metal weight divided by the total weight. In the case of a .9999 fine gold coin, the gold content is at least 99.99% of the total weight. A gold American Eagle coin contains 1 troy ounce of gold, but the total coin weight is 1.09 troy ounces (the coin contains other alloys). Therefore, the purity of the coin is 1/1.09 = .917 or 91.7% or 22 karat.

What is a “graded” coin?

A graded coin is any coin that has been evaluated by a third-party grading service in order to classify the coin’s condition using a generally accepted scale ranging from 1 to 70. The two most popular grading services are NGC and PCGS, and they certify both modern and vintage coins. Graded coins are subsequently mounted inside tamper-proof hard plastic cases, known as “slabs,” with a unique serial number archived in the company’s database.

What does it mean to “lock in” a price?

Unlike purchasing an item on Amazon, the prices for our products fluctuate with the commodities market every 20 seconds. They are constantly changing. A buyer can “lock in” a price either online or by phone the moment he or she orders. This is known as a “market order” and is fixed permanently the moment the order is placed, whether the price moves higher or lower afterwards.

Amidst these constant price fluctuations, we protect the company against gains or losses through a process known as “hedging.” We generate profit through product premiums, not by speculating in the commodities markets. As a result, we take a short position on our trading platform — a hedge — against any physical inventory in our possession. Our physical inventory acts as long position. These positions offset each other, thereby negating any price exposure.

When a buyer purchases from our company, we close out our short position and transfer the long position to the buyer. In this way, purchasing precious metals is very similar to buying a stock. Once you execute the trade, there is no reversing it. Our trading staff adheres to the following principle: For every action, there is an equal and opposite reaction. For every sale, we close out the offsetting position. Therefore, once you “lock in” your order, you own the metal at that price.

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