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August 16, 1983


The opinion of the court was delivered by: Higgins

Scotchman's Coin Shop, Inc., seeks reversal of a decision upholding an assessment of unpaid sales tax. It asserts that United States silver coins, South African Krugerrands, and Engelhard silver bars are money and intangible personal property not subject to Missouri sales tax under section 144.020 RSMo 1978; and that imposition of sales tax on these items violated the United States Constitution by interfering with the exclusive power of the federal government to regulate the value of United States and foreign coins, and to regulate commerce with foreign nations. The question is whether the coins and silver bars were tangible personal property when they were sold. If so, the Director of Revenue correctly assessed sales tax on the sales. Affirmed.

The Missouri Department of Revenue assessed sales tax against Scotchman's Coin Shop in the amount of $79,404.05 on sales made in 1979 and 1980 of United States silver coins, Krugerrands, and Engelhard silver bars. The Administrative Hearing Commission upheld the assessment and ruled that these items were purchased for their value as a commodity, and not as a medium of exchange or legal tender and were therefore subject to the sales tax under 12 CSR 10-3.124. The decision further held the imposition of a sales tax was neither coining money nor regulating its value, and therefore, no interference with an exclusive power of Congress.

Upon this review the decision of the Administrative Hearing Commission will be upheld if it is authorized by law and supported by competent and substantial evidence. § 161.338 RSMo (1978).

Scotchman's Coin Shop, Inc., a Missouri corporation, is located in Dellwood, Missouri. It is engaged in the business of buying and selling gold and silver, including South African Krugerrands, United States silver coins, Engelhard silver bars, and numismatic coins.

The Krugerrand is recognized as legal tender in South Africa although it has no face value. Its value is determined by its gold content plus seigniorage. Seigniorage is the premium paid to the government for certifying the purity of the token and its weight. Petitioner sold the Krugerrands for 3.5 percent over this value.

The United States silver coins in issue were minted prior to 1965; the silver content of each coin is approximately 92 percent. These coins are legal tender in the United States, and when used as a medium of exchange are accorded the value represented on their face. They are not in general circulation today as legal tender because the value of the metal in them exceeds their face value.

Engelhard silver bars are certified by a private firm rather than a government. This certification is accepted to the extent it has become the equivalent of a government certification. The value of the bars is determined by the value of the silver plus seigniorage and brokerage. They are not legal tender, but are purchased as a store of value.

The Vice President of Scotchman's Coin Shop testified the coins and silver bars in question had no numismatic or collector's value. Their value was determined by their precious metal content. At one time Scotchman's bought the silver coins at twenty-four times their face value and sold them at twenty-six times their face value. The Krugerrands and silver bars were sold at a certain percentage over the market value of the precious metal. He agreed that neither the Krugerrands nor the silver bars were legal tender in this country.

Dr. Leroy J. Grossman, professor of Economics at St. Louis University, defined money in terms of the four functions it performs: as a medium of exchange, payment for goods and services; as a store of value for people to hold their wealth; as a unit of account or measure; and as a method for deferring payment. Dr. Grossman stated, "As the price of the silver in those coins [United States dimes] changed, they became then a tangible asset. They were still money and they moved from an intangible to a tangible asset." Dr. Grossman further explained, "It becomes tangible when the market price of the material in the coin is worth more than whatever's stamped on that coin." He added that customers purchase gold and silver coins and bars for their value as assets.


Petitioner argues the coins and bullion involved in this case are intangible personal property not subject to this regulation.

Section 144.020.1 RSMo 1978 authorized imposition of a sales tax "upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state." Id. The Director of Revenue is charged with securing payment of and accounting for sales tax revenues. § 136.030(2) RSMo 1978. In order to accomplish this goal, the Director is authorized to promulgate rules and regulations. § 144.270 RSMo 1978. Pursuant to this authority, the Director promulgated Rule 12 CSR 10-3.124 applicable to the sale of coins and bullion:

(1) When any coin or currency is exchanged in the open market, at the current exchange rate, such transaction is not subject to the sales tax. However, when coins or currency, although acceptable as legal tender, are purchased at rates not reflecting actual currency value, for numismatic collection purposes or where the previous metal content of the coins determines ...

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