Did a South Carolina savings and loan association have to collect sales tax when it sold U.S. Mint Constitution Coins as the Mint's consignee and federal agent?

Plain-English summary

South Carolina Private Letter Ruling 88-4 concluded that XYZ Savings & Loan Association's retail sales of U.S. Mint Constitution Coins were immune from South Carolina sales tax.

The result did not rest on XYZ merely being a savings and loan association. It rested on the specific consignment agreement under which XYZ acted as the U.S. Mint's depositary, financial agent, and retail-sales consignee.

The Mint kept title to every coin until sale, set the retail price, owned the coins and covered funds, could recall coins, and received the net proceeds. XYZ earned a commission. The Commission therefore treated the sales as sales by an agent of the federal government.

The U.S. Mint consignment arrangement

XYZ entered an agreement to become an authorized U.S. Mint consignee for Constitution Coins issued under the Bicentennial of the Constitution Coins Act.

The agreement provided that:

• title remained with the Mint until XYZ sold a coin;
• the Mint set the retail prices;
• the coins were sold over the counter in Mint-provided presentation cases;
• XYZ deposited each day's net proceeds into an insured account in the Mint's name;
• net proceeds were the retail price minus XYZ's commission;
• the coins and covered funds remained U.S. government property; and
• the Mint could recall coins when it considered recall in the program's best interest.

The agreement designated XYZ as a depositary and financial agent of the United States solely for its responsibilities under the coin-sales agreement.

Why this was a true consignment

The ruling quoted Manger v. Davis for the features of a true consignment: the consignor retains ownership, can recall the goods, sets the sales price, and pays the consignee a commission rather than allowing it to keep the sales profit.

The Commission found every one of those elements in the Mint agreement. XYZ was therefore acting as the Mint's agent, not buying and reselling the coins for its own account.

Consignment sales were normally taxable

Section 12-35-510 imposed sales tax on the gross proceeds of a retail business. Section 12-35-30 included proceeds from property handled on consignment in gross proceeds.

The Commission expressly recognized that consignment sales usually were taxable. The different result here came from federal immunity because the consignor was the United States and XYZ was its agent.

Federal immunity controlled

The ruling cited the constitutional rule that states may not tax federal property, functions, instrumentalities, or agencies unless Congress expressly authorizes the tax.

The Bicentennial of the Constitution Coins Act authorized the minting and sale of the coins but, according to the ruling, did not authorize states to tax those sales.

Section 12-35-550(1) separately exempted proceeds that South Carolina was prohibited from taxing under the U.S. Constitution or federal law. The Commission concluded that the coin sales fell within that protection.

The association itself was not the source of exemption

The ruling noted that neither federal nor state statutes provided a South Carolina sales-and-use-tax exemption simply because the seller was a federal savings and loan association.

XYZ's favorable result instead depended on the agency and consignment terms showing that the Mint retained ownership and control and that XYZ sold the coins for the federal government.

What this means for you

Financial institutions serving as government consignees

PLR 88-4 looked beyond the seller's institutional status to the actual agreement. Federal-agency treatment was supported by retained federal title, federal price control, recall rights, government ownership of proceeds, and commission compensation.

Coin and merchandise sellers

A normal consignment was not exempt under the ruling. The tax immunity arose because the sales were made for the federal government and Congress had not authorized state taxation of the program.

Government program administrators

The written agreement documented who owned the goods and proceeds, who set prices, who bore program control, and how the consignee was paid. Those terms supported the Commission's agency conclusion.

Accountants and tax professionals

The ruling separated two questions: whether a consignment sale ordinarily entered gross proceeds, and whether federal immunity prevented the state from taxing this particular federal-agency sale.

Readers applying the ruling today

PLR 88-4 addressed a specific 1980s commemorative-coin program and agreement. Current federal authorization, agency status, contract terms, immunity doctrine, and state exemption language must be checked for any present transaction.

Common questions

Q: Were the Constitution Coin sales subject to South Carolina sales tax?

A: No. The Commission concluded that XYZ sold them as an agent of the federal government and that the sales were immune from state sales tax.

Q: Did XYZ own the coins before selling them?

A: No. The agreement said title remained with the Mint until each sale.

Q: Who set the sales price?

A: The U.S. Mint set the retail price.

Q: How was XYZ paid?

A: XYZ retained a commission, while the daily net proceeds were deposited into an account in the Mint's name.

Q: Were all consignment sales exempt?

A: No. The ruling said consignment sales usually were taxable. Federal immunity changed the result for these Mint sales.

Q: Was the sale exempt simply because XYZ was a savings and loan association?

A: No. The ruling noted that there was no sales-and-use-tax exemption on that ground and based its conclusion on XYZ's role as the Mint's agent.

Q: Can another consignee rely on PLR 88-4?

A: No. The ruling states that it applied only to XYZ's specific facts, had no precedential value, and was not intended for general distribution.

Citations and references

• S.C. Code section 12-35-510 (1976) — sales tax on retail gross proceeds
• S.C. Code section 12-35-30 (1976) — gross proceeds include property handled on consignment
• S.C. Code section 12-35-550(1) (1976) — exemption for proceeds South Carolina is prohibited from taxing under federal law or the Constitution
• S.C. Code section 12-3-170 (1976) and SC Revenue Procedure 87-3 — private-letter-ruling authority
• 12 U.S.C. section 1464(h) — state taxation of federal savings and loan associations, quoted in the ruling
• Public Law 99-582, Bicentennial of the Constitution Coins Act — authority for the coin program
• Manger v. Davis, 619 P.2d 687 (Utah 1981) — true-consignment factors quoted in the ruling
• Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, and Mayo v. United States, 319 U.S. 441 — federal-immunity authorities cited in the ruling

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR88-4.pdf

Original ruling text

SC PRIVATE LETTER RULING #88-4

TO:

XYZ Savings & Loan Association

SUBJECT:

Sales Tax - Sales of United States Mint Constitution Coins

REFERENCE:

S.C. Code Ann. Section 12-35-510 (1976)
S.C. Code Ann. Section 12-35-30 (1976)
S.C. Code Ann. Section 12-35-550(1) (1976)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
S.C. Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer, upon
request, and it applies only to the specific facts or circumstances related in the
request. Private Letter Rulings have no precedential value and are not
intended for general distribution.

Question:
Are sales of United States Mint Constitution Coins by the XYZ Savings & Loan Association
subject to the sales tax pursuant to Code Section 12-35-510?
Facts:
XYZ Savings and Loan Association ("Association") has entered into an agreement to become an
authorized United States Mint consignee. The Association is selling United States Constitution
Coins.
The agreement provides for the consignment of coins, disposition of proceeds and modification
or termination of the agreement.
With respect to these stipulations, the agreement reads, in part:
The United States Mint ("Mint") authorizes the above named financial institution
("Consignee") to act as a consignee for the retail sale of United States Coins. Consignee
is hereby designated as a depositary and financial agent of the United States solely for the
purpose of exercising Consignee's responsibilities under this Agreement.
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The agreement also provides the following stipulations:

1. "Title to each Coin will remain with the Mint until sale by Consignee occurs."
2. "All Coins are to be sold within the United States, over the counter, and in the
   presentation cases provided, at retail prices set by the Mint."
3. "Consignee shall establish an insured internal deposit account in the name of the U.S.
   Mint for the United States Coin Program. Consignee shall, on a daily basis, deposit
   into the account net proceeds from the day's Coin sales." Net proceeds is defined as
   the retail price of the coins minus the Consignee's commission.
4. "Consignee acknowledges that Coins and funds covered by this Agreement are
   property of the U.S. Government...."
5. "The Mint reserves the right to recall particular Coins at any time, when in the best
   interest of the program..."
   The minting and selling of Constitution Coins is authorized by the "Bicentennial of the
   Constitution Coins Act" ("Act"), Public Law 99-582 [H.R. 3415], effective October 29, 1986.
   Further, neither Federal nor state statutes provide an exemption from the State's sales and use tax
   for Federal savings and loan associations. Section 1464(h) of Title 12 of the U.S. Code provides
   that "[n]o State, county, municipal, or local taxing authority shall impose any tax on such
   associations or their franchise, capital, reserves, surplus, loans or income greater than that
   imposed by such authority on other similar local mutual or cooperative thrift and home financing
   institutions."
   Discussion:
   The Supreme Court of Utah in Manger v. Davis, 619 P.2d 687 (1981), held:
   "A true consignment constitutes an agency.....relationship between the consignor and
   consignee. The consignor, as principle retains ownership, may recall the goods, and set
   the sales price. The consignee (agent) receives a commission and not the profits of the
   sale. (emphasis added)
   It should be noted that all elements of the above definition are contained in the agreement
   between the Mint and the Association.
   South Carolina Code Section 12-35-510 imposes the sales tax on the "gross proceeds of sales" of
   any business selling tangible personal property at retail. Code Section 12-35-30 defines "gross
   proceeds of sales" as, "the value proceeding or accruing from the sale of tangible personal
   property (and including the proceeds from the sale of any property handled on consignment by
   the taxpayer)..." (emphasis added)
   2

Sales on consignment are usually subject to the tax; however, the courts have viewed agency
relationships involving the Federal Government differently.
"Without congressional action there is immunity from state and local taxation, implied from the
Constitution itself, of all properties, functions, and instrumentalities of the Federal Government.
It necessarily follows that a state and the subordinate taxing units thereof are without power to
subject to taxation the property of the Federal Government or the means, instrumentalities, and
agencies thereof which it employs to carry out its proper functions, unless Congress expressly
confers a right upon the states to tax such agencies, instrumentalities, or property." 71 AM Jur
2d State and Local Taxation, Section 221 (Kern-Limerick, Inc. v. Scurlock, 347 US 110, 98 L.Ed
546, 74 S.Ct 403; Mayo v. United States, 319 US 441, 87 L.Ed 1504, 63 S.Ct 1137, 147 ALR
761).
The Act does not provide the necessary congressional mandate to tax the sale of these coins.
South Carolina Code Section 12-35-550(1) reiterates the principal of federal immunity from state
taxation by providing an exemption for "the gross proceeds of sale of tangible personal property
or the gross receipts of any business which the State is prohibited from taxing under the
Constitution or laws of the United States of America....."
Conclusion:
Sales of U.S. Mint Constitution Coins by the XYZ Savings & Loan Association are sales by an
agent of the Federal Government and are immune from the State's sales tax.

SOUTH CAROLINA TAX COMMISSION
s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman
s/John M. Rucker
John M. Rucker, Commissioner
s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner

Columbia, South Carolina
January 27
. 1988

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