How should VAT and sales tax exemptions for silver work?

[Bimetallic]

Hi all — Many jurisdictions exempt silver bullion from consumption taxes like VAT and sales taxes, and many don't. I'm interested in your feedback on how such an exemption should be designed. For the reasons given below, it's probably not as simple as just saying "exempt all bullion". For one thing, laws generally need to define their terms and clarify ambiguities. I'm going to assimilate all the feedback before I prepare to lobby some US state legislatures to enact or revise silver sales tax exemptions.

Note that there are two rationales for exempting silver. 1) It's an investment, and we don't levy consumption taxes on investments (e.g. stocks and bonds). 2) It's a monetary equivalent, or at least similar to money, and we don't levy consumption taxes on money (e.g. currency exchange).

Given those rationales, the type of silver that most merits an exemption is standard silver bullion: ungraded coins, bars, and rounds.

Things get murkier when we move to graded, slabbed coins, and high premium proofs, commemoratives, limited editions, Marvel superhero coins, silver bullets, trinkets, and doodads. A lot of that stuff can be classified as collectibles and toys, and therefore the sort of consumption that economists would recommend levying consumption taxes on.

However, for now I think the silver content of just about anything should be exempt. So I've landed on a formula that takes melt value and adds a premium allowance. The premium allowance would be sized to fully exempt standard bullion, while triggering tax on the increment above the allowance, if any. One advantage of this approach is that we don't have to define what is and is not standard bullion – the formula handles that for us. Examples:

Let's say our allowance is 25%, so 1.25 × melt value would be tax exempt. With spot at say $18.00, anything priced at $22.50 or below per ounce would be exempt. Under normal circumstances, that would comfortably exempt ASE, the highest premium coins, in North America at least. But a graded, slabbed ASE priced at $38.00 would trigger tax on the increment above $22.50. Same with a Nuie Marvel superhero coin costing $55.00.

What do you think of the melt + premium allowance approach? Can you think of better approaches? (I have some modifications designed to exempt fractional silver, which tends to have much higher premiums but is still standard bullion.)

This approach would operate similarly for both sales tax jurisdictions (USA) and VAT/GST jurisdictions (everywhere else).

Thanks.