Navigating gold, silver legal tender isn’t for the faint of heart
While any state can pass a law declaring gold and silver as legal tender, no state government has yet to figure out how such a system will actually operate from day to day.
Posted: Friday , 22 Mar 2013
RENO (Mineweb) -
Despite a 2011 state law declaring gold and silver as “legal tender,” the government of the State of Utah is still not prepared to actually accept gold and silver payments.
And, any other state-- which adopts model legislation for a Legal Tender Act authorizing coin or bullion having gold or silver coin as a legitimate medium of exchange for the payment of debts and taxes--may be in for a long slog ahead when it comes to actual implementation.
The U.S. government-issued coin or bullion having gold or silver content is referred as “Specie” for legal tender purposes.
Ironically, long-time gold standard advocate Rep. Ron Paul, has been conspicuous by his absence in terms of support for a state-by-state implementation of a gold and silver legal tender act.
The Washington, D.C.-based American Principles Project has been the public political face of gold and silver legal tender, introducing model legislation in a number of states. Rich Danker, director of economics at the project, told Mineweb Thursday bills are now pending, in committee, or actually being voted upon in Arizona, Kansas, and South Carolina. Texas legislators are considering a measure to remove a sales tax on gold or silver coins.
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A number of politicians and regulators appear willing to accept one provision of the model bill calling for the exemption of gold and silver legal tender from taxation or regulation as personal property.
While the model legislation has garnered relatively good political support in western states, ironically, it has yet to be introduced in the heart of the U.S. gold mining sector, the State of Nevada.
However, even states that support the concept are confused as how to interpret and implement provisions that would allow state taxes to be paid in gold or silver legal tender. Utah State agencies contacted by Mineweb Thursday had no idea which, if any, state agency is actually officially in charge of implementing the new law.
To compound the officials’ concerns, the federal Uniform Money Management Act and FDIC requirements discourage most banks from consideration when it comes to accepting deposits of gold or silver coin.
Larry Hilton, chairman of the Utah Precious Metals Association, helped convince the Utah Legislature to adopt the gold and silver legal tender act in 2011, and has continued to push for its implementation. In 2012, the Utah Legislature adopted amendments dealing with the sales tax treatment of purchases made with specie legal tender, and set the stage to expand the scope of monetized coin.
In the future, UPMA trustees hope to undertake initiatives designed to exempt legal tender exchange from federal taxes; establish specie repositories as state regulation institutions; authorize governmental entities to hold and use specie legal tender; and clarify state money transmission regulations to expressly include specie legal tender.
Hilton told Mineweb the Utah Legislature’s Standing Committee on Tax and Revenue will undertake “a serious study” in the interim to help Utah’s government officials determine how they will actually go about setting value for gold and silver coins used to pay taxes. For obvious reasons, the coins are not valued at face value since gold averages $1,600 an ounce, as silver prices far exceed the face value of the traditional silver dollar.
The study will also attempt to ascertain what kind of financial institutions can actually accept gold or silver coins used to pay Utah state taxes.
UMPA established a pilot program in Utah through its Liquid Gold program in which members make regular contributions to their accounts in any amount of U.S. paper currency, which are then averaged into gold dollar holdings. Members then access their holdings, using a bill pay service, or by withdrawing one ounce gold coins.
Stories on gold and silver legal tender published on Mineweb have garnered readership and comments well outside of the mining industry and its stakeholders, demonstrating that an appetite apparently exists among the public for the concept, but questions concerning tax issues and implementation of such legal tender systems abound.