A year ago, Kerry Rogers, a Seattle-area leasing agent, didn’t know much about gold and silver. But that’s changed.
Worried about the economy, inflation and the weak dollar, she recently started buying bullion.
“If, you know, the economy crashes or something, you have something to stand on,” she said while shopping at Geoff Minor’s The Metal Shop Gold & Silver in Redmond late last month. “It’s kind of a good foundation, especially since the dollar seems to not be worth anything.”
Rogers was not alone at Minor’s store. A steady flow of customers buying and selling gold bars and silver coins were buzzed through the locked door of the shop. Minor has rarely been busier than over the past year, he said, as investors have looked for safety and gold sellers have cashed out as prices for bullion soared.
But all that activity may soon come to a halt at Minor’s shop and likely across Washington.
Minor will close his store in late December in response to the Legislature’s move in the last session to end a longstanding sales tax exemption on the sale of bullion. Starting Jan. 1, people who purchase precious metals in Washington will pay state and local taxes ranging from 7.5% to 10.6%. In Seattle, the sales tax will be 10.35%, which includes 6.5% in state tax and 3.85% in local tax, according to the state Department of Revenue.
In other words, if you buy an ounce of gold at the current price of around $4,100 in Seattle, you’ll pay around $425 in sales tax starting next year.
Not a fan of Washington’s tax policies, Minor said he was mulling an eventual move to Idaho anyway but hadn’t planned to leave for at least a couple of years. He said he might open a shop in Coeur d’Alene or Sandpoint, Idaho, a state that doesn’t tax bullion sales.
“As soon as I saw that it actually passed, I made my decision to leave,” he said.
Changes to come
The Legislature ended the exemption for bullion sales after a review by the Joint Legislative Audit and Review Committee, which routinely reviews tax advantages given to specific industries. JLARC made no recommendations on whether to keep the exemption but indicated that the purpose of the policy was unclear.
With the growth of online sales, out-of-state bullion dealers sell gold to Washington residents. Roughly 40% of the bullion dealers benefiting from the tax break in 2023 were based outside Washington, according to the JLARC report.
In 2023, the exemption saved precious metal buyers around $27 million in state and local taxes, a figure that’s grown from around $4.7 million in 2017, the committee estimated. At the time of JLARC’s review, seven other states were taxing bullion sales.
Starting in January, coin and precious metals dealers will also have to pay business and occupation tax on their gross income from retail sales of bullion, which has also been exempted since 1985. That tax is 0.471% and would amount to about a $20 tax on an ounce of gold at the current price.
The B&O and sales tax are projected to raise a combined $25 million annually, according to a spokesperson for the revenue department. The state portion will go into the general fund.
Carolyn Beko, president of the newly formed Washington Coin and Bullion Association, projected bullion sales to decline sharply in Washington next year. Investors will stop buying gold and silver, or they’ll travel to Idaho or Oregon where bullion sales, at least for now, aren’t taxed, she said.
“Our buyers want the cheapest price possible,” said Beko, who owns Redmond Rare Coins & Precious Metals, now located in Kirkland. “They will drive around town and call to save 50 cents an ounce, so this is a no-brainer for them.”
The tax also applies to online sales.
Issaquah-based Costco, among the nation’s largest gold dealers, sells a lot of bars in the Seattle area. Store members buy gold and silver from Costco and reap cash rewards, Beko said, then resell them in shops like hers.
“I am incredibly curious how they’re going to get through this,” Beko said.
Costco didn’t return a request for comment on its plans.
‘Going to cripple our business’
Some shops are worried that they might go out of business or have to relocate across state lines.
Zach Fleet, owner of Kent Coin & Bullion, expects his gold, silver and platinum sales to dry up immediately.
“It is likely going to cripple our business,” Fleet said last month.
Many of his customers are small investors who are buying gold and silver to save money for retirement or as insurance for emergencies.
“We’re going to have a lot of angry folks wondering why they can’t invest without being taxed,” Fleet said.
Some shops, he said, will expand their jewelry offerings or sell gold watches, items that are already taxed. Jewelry can more easily be marked up as the brand and craftsmanship influence the price. Bullion dealers often sell jewelry to increase their profit margins.
Fleet, who doesn’t sell jewelry, said his profits are a “thin” 1% to 3% and fixed by the spot prices of metals. Say, the spot price of an ounce of gold is $4,000. The dealer might expect a gross profit before expenses of around $125.
He said he will try switching to wholesaling, basically buying bullion from customers and selling it in bulk to distributors.
“I don’t want to move,” Fleet said, noting he is a Washingtonian who grew up Kelso and his wife works in an area school.
Redmond shop owner Minor stood behind his counter in a black Megadeth hoodie counting a stack of silver coins while a Slayer tune cranked out of a speaker. The walls are decorated with signed pictures of metal artists, like the late KISS guitarist Ace Frehley, memorabilia from Minor’s younger days as a band promoter and stage manager.
A believer in the inherent value of gold and silver and the instability of paper money, Minor spent several minutes urging a young woman not to sell her gold unless she really needed the cash.
He called the tax “immoral.”
“How do you start taxing money, that’s insane,” Minor said, noting he could theoretically use the U.S. minted silver coins in his display cases to buy goods in stores.
Taxing bullion will also open a window for shadier corners of the market to thrive, Minor said. Objects advertised as gold and silver are sold on eBay or traded privately. He said an unsophisticated buyer easily can be cheated.
“We get a lot of fake bars in through here,” Minor said. “We have a machine that tests them that, you know, shows us pretty quickly that they’re not legitimate. But it’s not something that the average person would have access to.”
‘A surprising metal’
Across the nation and in the Seattle area, people have been buying and selling a lot of gold and silver in recent months. Gold surged to a new high at more than $4,300 an ounce in October before falling off late in the month. The spot price was back up to over $4,100 in early November.
“We’re having lineups outside the store quite often in the last month or so,” said Chris Pollock, co-founder and owner of Seattle Gold, a bullion shop located in the Crown Hill neighborhood. He also has a store near Portland.
Pollock’s store has a banklike atmosphere where the attendants work behind a glass partition, retrieving gold from a vault and passing it to a customer through a slot. The store also buys jewelry, which is shipped to a distributor, melted down for its gold content and resold.
While some investors have placed orders exceeding $1 million, the average investor spends around $2,000 to $3,000 on a single buy, Pollock said. A wafer-thin, 1-gram bar of gold the size of microchip is popular with gift givers.
Some people still like to own some gold for the same reason ancient civilizations adorned temples and buried their kings with it 5,000 years ago.
“Gold is a surprising metal,” Pollock said. “It’s beautiful, it’s soft, it’s dense, it’s sparkly, it doesn’t corrode. There’s a lot of cool things about it, but also it’s expensive, so you don’t get a lot of volume for the money you pay for it.”
Brandon Steele, CEO of Bellevue-based Mainsail Financial Group, said Seattle-area investors have been piling into gold as the price soared. Gold serves as a hedge against recessions, inflation, a weakening U.S. dollar and stock market crashes.
There are downsides to stockpiling gold, however. Gold is not easily converted to cash.
“You can’t just go kind of shave off a piece of your gold bar to pay your mortgage,” Steele said.
Gold also carries security risks, and it incurs a cost to insure and store securely. When an investor resells gold, “you’re going to get hit pretty hard on the back end,” Steele said. “And so, even though the gold price might have gone up, you may not get anywhere near that when you sell it back.”
Investors also have alternatives, Steele said, such as buying stock in an Exchange Traded Fund that purchases precious metals and related assets. ETFs can provide the same protective role in a portfolio without the downsides of owning the metal, Steele said.
Christopher Wheatley, a retired English professor who lives in Port Ludlow, bought stock in a gold-mining company 18 months ago. It’s proven to be a lucrative investment.
He was looking for protection in his portfolio but also wanted to heed the advice of famed investor Warren Buffett, who has said he doesn’t like gold as a long-term investment.
Wheatley said his compromise was to buy into Newmont, a global mining company that has been profitable and pays a dividend.
“I don’t think gold is going to plummet in value,” he said. “It might go down some, but you know, while the country has fiscally unsustainable spending, gold looks like the safe haven.”
Hal Mueller, a software developer who owns a cache of American Eagle coins, has yet to sell his gold.
“I have thought about it,” he said, noting he periodically peeks in on the gold price.
“I’m not following it daily, but every week or two, I’ll take a look,” Mueller said.
Mueller said he bought the coins in the early 2000s, and they’re locked away in an undisclosed location. He also inherited a collection of gold coins from the early 1900s.
He would never part with the antique coins, a family heirloom, but would consider selling the American Eagles, which he bought mostly as an investment hedge against downturns and inflation.
“I don’t really view those as a coin collection, that’s just a bunch of gold,” Mueller said.