Monetary Intent

One important factor in determining the tax treatment of a particular transaction appears to be taxpayer intent. In Thorne and Wilson, Inc. v. Utah State Tax Commission, 681 P.2nd 1237 (1984), the Utah Supreme Court considered the applicability of sales tax to the purchase of precious metal coinage. Following the holding in Michigan National Bank v. Department of Treasury, 339 N.W.2d 515 (1983), the court in Thorne determined that:

[W]here Krugerrands are transferred as a medium of exchange ... the coins remain intangible personal property, not subject to tax. But where ... they are transferred as an investment commodity, they become tangible personal property within the meaning of the General Sales Tax Act." Thorne, supra at 1239.

The Thorne court expanded on the Michigan National Bank holding applying it to both "United States and foreign coins, when they are not used as currency or a medium of exchange". Ibid. at 1239. Significantly, Thorne was handed down during the specie legal tender mintage moratorium. Even then, the court found that whether specie is used as money or as investment property is determinative of its tax treatment.

More recently, an Ohio federal district court ruled that where coins are “not used as legal tender, but instead … traded and converted based on their intrinsic or tangible metallurgical value”, such lose their monetary status. U.S. ex rel. Holbrook v. Brink's Co., 2015 WL 196424 (S.D. Ohio Jan. 15, 2015). Thus, intent becomes paramount.