Legal Basics and Recordkeeping for Precious Metals Dealers

Introduction

Buying and selling precious metals puts you at the intersection of two things regulators care about a lot: large cash flows and items that are easy to convert and hard to trace. That’s exactly why this industry carries more compliance weight than typical retail. This lesson covers the legal frameworks you need to understand and the recordkeeping habits that keep your business, and you personally, protected.

Why Legal Compliance Matters in This Industry

Every regulation in this space exists for one of two reasons: stopping money laundering, or stopping the resale of stolen goods. Understanding that motivation helps everything else make sense. Regulators aren’t trying to slow down legitimate business. They’re trying to make sure this industry isn’t a clean way to move dirty money or launder stolen property back into the legal market. When you understand the “why,” the recordkeeping stops feeling like busywork and starts feeling like what it actually is: your evidence that you ran a clean operation.

Federal Anti-Money Laundering Requirements

If your business buys and sells more than $50,000 worth of precious metals, precious stones, or jewels in a year, federal law classifies you as a “dealer” under the Bank Secrecy Act, and you’re required to maintain a written anti-money laundering program. That program has four required pieces: written policies and procedures based on your actual risk exposure, a designated compliance officer responsible for the program, ongoing staff training, and independent testing to confirm the program is actually being followed, not just written down and forgotten.

This isn’t optional once you cross the threshold, and the IRS has authority to examine dealers for compliance. If you’re audited, your company needs to be able to produce its written program, training records, and proof of independent review on request.

Cash Transaction Reporting

Any time a business receives more than $10,000 in cash in a single transaction, or in related transactions, federal law requires it to file IRS/FinCEN Form 8300. This applies whether it’s one large cash payment or several smaller ones that are clearly connected.

For Form 8300 purposes, “cash” means more than just paper currency and coin. It also includes cash equivalents, specifically cashier’s checks, bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less, when they’re used in what the IRS calls a “designated reporting transaction.” The retail sale of a collectible, which explicitly includes metals, gems, and coins, is one of the transaction types that qualifies. That means if a customer pays with a $6,000 cashier’s check and $5,000 in cash for a purchase, the two combine to more than $10,000 in “cash” under this rule, and Form 8300 must be filed, even though no single instrument crossed the threshold on its own. A cashier’s check or money order with a face value of more than $10,000, by contrast, is not treated as cash, since the issuing bank has its own separate reporting obligation for that instrument.

One important point: deliberately breaking up a transaction into smaller pieces to avoid hitting that $10,000 threshold is called structuring, and it’s a federal crime on its own, separate from whatever the underlying transaction was. Never suggest or facilitate that, even if a customer asks you to.

Related Transactions

The $10,000 threshold doesn’t just apply to one transaction in isolation. The IRS treats multiple payments and transactions as related transactions in several ways, and when payments or transactions are related, they get aggregated to determine if Form 8300 is required.

First, any payments from the same payer received within a 24-hour window are automatically related transactions, even if they’re technically separate sales. If someone buys $6,000 in gold at 10 a.m. and comes back at 4 p.m. the same day to buy another $5,000 worth, that’s $11,000 in related transactions, and Form 8300 is required, even though neither single visit crossed $10,000 on its own.

Second, payments and transactions can still be related even when they’re spread out over days, weeks, or months, if the business knows, or has reason to know, that the payments are connected parts of the same underlying deal. A customer who pays $8,000 today and comes back two days later to pay $3,000 more toward the same purchase has made related transactions, not two separate ones.

Third, the IRS automatically considers certain family relationships to create related transactions, even if they occur separately on the same day. If a father comes in and makes one transaction, and his son comes in separately and makes another transaction on the same day, those are automatically related transactions and must be aggregated. If a husband and wife each make separate transactions on the same day, those are automatically related transactions. However, this automatic relatedness does not apply to adult brothers and adult sisters, or to friends, neighbors, or other non-family relationships. The IRS specifically recognizes parent-child and spouse relationships as triggering automatic related status.

The test is whether the payments and transactions are connected, either by the 24-hour window, by knowledge that they’re part of the same deal, or by the automatic family relationships the IRS recognizes.

State and Local Licensing and Reporting Requirements

On top of federal rules, most states regulate secondhand dealers and coin dealers separately, often through local police department licensing, mandatory reporting of certain transactions, and sometimes holding periods before purchased items can be resold or processed. The specifics, what counts as a reportable transaction, what’s exempt, what the holding period is, vary significantly by state and even by city, and the rules get amended periodically.

Because these requirements differ by jurisdiction and change over time, this is an area where your company’s compliance officer or manager confirms exact, current requirements for your specific location rather than relying on general knowledge, since getting this wrong can mean licensing problems, not just paperwork problems.

Customer Identification Requirements

Verifying who you’re buying from isn’t just good practice, it’s frequently a legal requirement, and it’s your best defense if a purchased item later turns out to be stolen. Always collect a valid government-issued photo ID for purchase transactions, and record the ID number along with the customer’s name and address. If something looks altered or doesn’t match the person in front of you, that’s a reason to slow down, not speed up.

What Every Transaction Record Should Include

Transaction recordkeeping requirements vary significantly by state and locality. Most secondhand dealer laws apply to tangible personal property, but coins and commercial grade bullion bars are often specifically exempted from detailed reporting requirements. Check state and local laws to understand what information is actually legally required to be kept.

Generally speaking, when detailed records are required, a complete transaction record should capture the seller’s identification, a description of the item, the price paid, the date and time, and which staff member handled the transaction. The specifics of what “description” means, whether weight, karat or fineness, identifying marks, condition details, and so on are needed, depend on what your jurisdiction requires.

Holding Periods

Across much of America, the standard practice for secondhand dealers is a 30-day holding period. Items purchased must be held in storage for 30 days before they can be resold or processed. During that holding period, dealers are typically required to retain certain information about those items to help law enforcement recover stolen property.

However, coins and commercial grade bullion bars are typically exempt from holding period requirements, though this exemption is not universal across all jurisdictions. Some states and localities may have different rules. Check local and state laws to understand what holding period, if any, applies to a specific location and inventory.

Sales Tax Obligations

Precious metals dealers generally have a duty to collect sales tax on retail sales, just like most retail businesses. However, because coins and bullion bars are often treated as special types of collectibles rather than typical merchandise, sales tax treatment varies significantly by state and sometimes even by county or other jurisdiction.

In some states, precious metals coins and bars are entirely exempt from sales tax. In others, there’s a threshold, for example, California waives sales tax on coins and bars when a single transaction exceeds $2,000. In still other states, sales tax applies to all precious metals sales regardless of type or amount.

Because sales tax rules are state-specific and change periodically, this is another area where you need to verify the exact requirements for your jurisdiction rather than assuming one rule applies everywhere.

Recordkeeping Retention and Storage

Keep transaction records, AML program documentation, training records, and Form 8300 filings for as long as federal and state obligations require, and when in doubt, keep them longer rather than shorter. Store them in a way that’s organized and retrievable, not just accumulated. If the business is ever audited or subpoenaed, the ability to quickly produce a clean, organized record is itself evidence that the operation is well run.

Common Compliance Mistakes That Create Liability

The mistakes that get dealers in trouble are rarely dramatic. They’re usually things like skipping ID verification because a customer seemed trustworthy, not realizing the business crossed the $50,000 AML threshold and never building a program, forgetting to file a Form 8300 because a payment came in across two days, or keeping inconsistent records that don’t match actual inventory movement. None of these require bad intent to create real legal exposure.

When to Consult Your Compliance Officer or Manager

This lesson gives you the framework, not a substitute for detailed guidance specific to your company and location. Thresholds, exemptions, and licensing requirements can vary, and they don’t always apply the same way across different jurisdictions or business structures. Anytime you’re unsure whether a specific transaction, threshold, or reporting obligation applies to your situation, that’s a conversation with your company’s compliance officer or manager, not a guess.

Closing

Legal compliance in this industry isn’t a separate task from running a good business, it’s part of what running a good business means. The dealers and employees who last are the ones who treat recordkeeping as a discipline, not an afterthought. Clean records, verified identifications, and a documented compliance program are what let you operate confidently, even under scrutiny.