Can you setup a business and “trade” your good or service for a certain amount of silver? Or is that illegal?
Not purchase…but trade.
I can imagine you’d have to pay capital gains tax over the increase in dollar value of your silver, which makes trading in it very inconvenient.
Not really sure if contracts in silver are enforced, someone once told me once this was not the case, but i’ve got nothing to back that up with.
Under current laws it would be considered barter. As far as I know there are no laws against barter (now), but that may depend on the state, county or municipality.
A business would have to report assets as property. If you exchange your goods or services for silver, then you’d have a quantity of silver in your inventory. That inventory would be taxed every year. As the value of the dollar decreases with respect to silver, you’d see an increase in your business tax burden.
Now some locations can require you to pay sales taxes for the value of the original exchange. On top of that you may also have to pay taxes to exchange your silver to some other asset (good you want to have) or currency (dollars). Therefore, while bartering with silver may be legal, you could be taxed up to three times the value of the silver (or more): tax on the orignal barter, tax on holding silver, tax on exchanging silver for something else. The longer you hold onto the silver, the more taxes you have to pay.
In addition, if the currency runs into serious trouble, the government may also outlaw the use of gold or silver (and possibly all forms of barter).
An interesting case on business inventory tax: A family has owned a small business for decades. The father of the current owner bought a desk in 1930 for less than $40. Today the son is still paying taxes on that desk, and he figures they’ve paid far more than the original price of the desk or even what the desk is worth today.
“I can imagine you’d have to pay capital gains tax over the increase in dollar value of your silver, which makes trading in it very inconvenient.”
what if you don’t really consider yourself a business…
you’re just trading stuff…in this case, it happens to be a good for a certain amount of silver…
why pay taxes? you’re not making any money?
The question was presented as setting up a business.
Individuals can exchange whatever they wish and it becomes a matter of enforcement. Technically, if you exchange goods of value it could be considered a “sale”, and you could be assessed a tax for it. Receiving a good of value (value subjected to the judgment of the tax collector) can be considered a capital gain.
Here’s a practical example. You work for a company. Your work is considered exceptional, so the company gives you and your family a vacation to Disney World. So we have labor exchanged for a vacation. Technically the company has to withhold taxes for the value of what it gave you, or else you’ll receive a 1099 form for the value of the vacation and you’ll pay the tax (either way you end up paying). So essentially you are paying a tax even though you haven’t received a bit of money. In fact, you have to come up with the cash to pay the tax since last time I checked the IRS isn’t accepting Disney merchandise as tax payment.
Now when two individuals exchange goods, they may choose to follow the law or not. Technically any time you provide something of value more than X amount of dollars ($1,000 is what I think is the amount for 2010), you must fill out a 1099 form. You could still end up owing sales tax if the state or local government deems your transaction as a sale. Typically they don’t care about the average citizen because the cost to collect sales tax on the small amounts being exchanged among individuals isn’t worth the value of the tax. If such exchanges are large, however, you bet the governments will come calling if they find out about it.
Now there may be some legal precedence to use a specific quantity of silver as being equivalent to dollars - implied by the Constitution of the United States. However, that definition of a dollar is not equivalent to the currency of the same name. The currency valued much less than the constitutional dollar. Given the events of the last century, however, it would be extremely difficult to beat the government in an effort to re-establish the constitutional dollar.
Tax laws and regulations also vary by state. What you or I may consider nothing but a mutual arrangement can end up being heavily regulated and taxed. For example, in the state of Alabama if you watch a child who is not your own, or you are not their legal guardian, for more than four hours without a child daycare license then you are in violation of state law and may be fined a significant amount of money. It doesn’t matter if you get paid for watching the child or not. The regulations also require large and unreasonable costs: state requred training, facility modifications, extensive background checks, a backup babysitter with the same training and background checks in the event you’re sick (even if you don’t need a backup), etc. So technically in the state of Alabama holding a slumber party for your kids without a child daycare business license and all else required in the regulations is a violation of the law. My neighbor, who has set up her own daycare business, called up the state regulatory authority, and they confirmed this is an accurate reading of the regulation. And Alabama likes to pride itself that it doesn’t have the high degree of regulations as other states.