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Libertad
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Canada
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How can I help support Coin Community?
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steve199
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United States
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Libertad
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Canada
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steve199
Pillar Of The Community
United States
1815 Posts |
 Posted 03/11/2010 1:42 pm
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If you were to buy a Silver Eagle (with $1 denomination) for $20, what dollar amount would the sales tax be based on? $20, $19, or $1?
Sounds like you have to pay sales tax on purchase of coins, but not on straight bullion (including non-govt issued rounds/bars).
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Libertad
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Canada
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jgfindring
Valued Member
United States
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Conder101
Pillar Of The Community
USA
2862 Posts |
Posted 03/11/2010 2:14 pm
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In general there is one major reason for a denomination on them, it is so coin collectors will be interested in them. Collectors as a rule will pay little more than spot for one oz silver rounds, but if it is a COIN collectors will often pay a significant premium for them. Think about it, with silver at $17 an oz would you pay $38 for a silver round just because it is a proof? NO. But put a $1 denomination on it and collectors will gladly pay it for a proof silver eagle. The government learnedthat lesson back in 1980 - 84. Before 1980 there was a big demand forgold bullion coins and the government tried to satisfy that demand with 1/2 oz and 1 oz gold medallions. They failed misarably. Then two years later they introduced the gold eagle with a $50 denomination and collectors took to them like a fish to water. Same metal, same size, about the same price. Only real difference, one had a denomination and the other didn't.
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Edited by Conder101 - 03/11/2010 2:21 pm |
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steve199
Pillar Of The Community
United States
1815 Posts |
Posted 03/11/2010 2:18 pm
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Conder101, was hoping you'd pipe in on this topic.
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steve199
Pillar Of The Community
United States
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Libertad
Valued Member
Canada
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Sap
Moderator
Australia
5612 Posts |
Posted 03/11/2010 8:06 pm
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Mexican onzas and South African krugerrands are unusual in that they are generally regarded as "real coins", issued by a government and you'll find them listed in the coin catalogues, but they don't have an actual denomination on them. At least, as far as I am aware, neither South Africa nor Mexico have ever legislated the "ounce" as an official monetary unit.
Historically, denominations were put on bullion coins to attract collector interest, as others have said, but they also add an extra safety net that was attractive to investors: no matter how low the bullion price went, there was still a minimum value you could exchange your coins for.
For most modern bullion coins, this face value is usually far, far below the actual bullion value of the coin. Governments worldwide learned at their cost that making the face value too high meant that they actually would have to redeem their own coins if the bullion price did collapse. For example: for years, there was less than $200 worth of gold in an Australian $200 gold coin; people were taking them down to the banks and depositing them, rather than trading them as bullion, because the coin dealers and bullion traders weren't giving them that much money. Governments don't want to be forced to do that, because it would mean in effect that they would have to purchase the coins back at a loss.
In short: the difference between a coin's "face value" and it's bullion value is entirely up to the government that issued them, and means very little - unless the government was careless and chose a face value that was too high.
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