In 2011, Utah became the first state in more than 100 years to formally recognize gold and silver coin as legal tender. Utah’s prerogative to do so rests upon Article 1, § 10 of the United States Constitution which provides that “No State shall * * * make any Thing but gold and silver Coin a Tender in Payment of Debts”. The flip side of the States’ reserved monetary authority is the power vested in Congress by § 8 of Article 1 to “coin money, regulate the value thereof and of foreign coin”.  This is a classic Constitutional check and balance.

Accordingly,  Utah Code Annotated (UCA) § 59-1-1501.1 provides “… ‘specie legal tender’ means gold or silver coin that is issued by the United States.“ Actually transacting in physical U.S. precious metal coin can be challenging though because even silver coinage is not currently offered in small enough denominations to facilitate common transactions. Significanly, however, the Utah legislature provided in subsection 59-1-1502(3) of the Specie Legal Tender Act (SLTA) the means for other gold and silver coin and bullion to become recognized as legal tender:

Gold or silver coin or bullion, other than gold or silver coin that is issued by the United States, is considered to be specie legal tender and is legal tender in the state if:

(a) a court of competent jurisdiction issues a final, unappealable judgment or order determining that the state may recognize the gold or silver coin or bullion, other than gold or silver coin that is issued by the United States, as legal tender in the state;

In its simplest form:  “Gold...coin or bullion...is legal tender in the state if...a court of competent jurisdiction issues a final, unappealable judgment or order determining that the state may recognize the gold or silver coin or bullion...as legal tender in the state.” (Ibid.)  In adopting this language, the legislature essentially agreed to recognize as legal tender whatever the Utah Courts may deem proper.  Fortunately, as of the adoption of the SLTA, the Utah Supreme Court had already spoken on this subject in Thorne and Wilson, Inc. v. Utah State Tax Commission, 681 P.2nd 1237 (1984):

The question on this appeal is whether rare United States coins, foreign coins, and precious metals are money or “tangible property” ...  This is a case of first impression in Utah. Other jurisdictions have held that such items are not money, but are tangible property subject to sales tax.  Those jurisdictions have ruled that whether a sales tax is applicable turns on whether the transaction is a commodity or a money transaction … a Michigan appellate court held that ‘where Krugerrands are transferred as a medium of exchange ... the coins remain intangible personal property, not subject to tax.’... We agree with this analysis… 

Although in the specific facts before the Court, the taxpayer was not using the coins in question as money, the Utah Supreme Court nevertheless ruled that in Utah where gold coin is used as a medium of exchange it is non-taxable money.  

This ruling clearly establishes that there will be cases where coin could be either treated as physical property (e.g. a collectible) or an “intangible property” (e.g. a means of storing value specifically as a medium of exchange), depending upon the intentions of the parties to a transaction.  Of course, this same potential “dual” nature also applies to other forms of legal tender, such as federal reserve or other government issued or authorized currency, as well as other potential collectibles such as new stamps. Usually, the purchaser knows the purpose of the transaction, but it can also be inferred from context such as whether stamps come in a regular sheet or roll or are sold singly surrounded by cellophane and a commemorative cover.  A two dollar bill may be of special value to a collector but it will not buy more in a store than two one dollar bills, even though it may cost more to buy one in a collector’s shop. Similarly, a person may keep the first dollar earned in business to frame in a store, yet will freely spend the rest earned in a transaction.

Regardless of how it is received, either physical property or intangible property, even after being used as money in one transaction, may be converted into investment property thereafter, and held for capital appreciation of one form or another.  However, when property is held only for capital appreciation, the property is treated as taxable property.  

The ruling of the Thorne court informs our decisions that purpose and use are primary considerations for how to treat potentially dual nature property.  Simply put, Utah has recognized that gold is money whenever it is actually used as such.

The Goldback was specifically created to rely upon and fit within the framework of the SLTA in order to facilitate its adoption as a local currency capable of claiming Utah legal tender status. It employs patented technology which deposits gold one atom at a time onto a proprietary polymer substrate to produce a series of paper-thin, rectangular coins in denominations of one, five, ten, twenty-five and fifty.  One Goldback contains 1/1,000th of a troy ounce of 24 karat gold. The other denominations have proportionately greater gold content, up to the fifty, which contains 1/20th of an ounce—exactly half the gold content of the smallest gold coin minted by the U.S. government. Thus the Goldback, back fills the smaller denominations needed to create a truly workable gold currency system.  The pure gold contained within each Goldback is fully recoverable by means of vaporizing the coin’s front and back coatings in a super-heated crucible.

The Goldback‘s specific design to circulate as money is underscored legends prominently displayed on the physical gold media:  “For Circulation in Utah”; and “voluntary, local currency”. Local currencies generally function as a complement to the national currency, to which their value is typically pegged.  Such currencies aim to encourage spending with locally owned businesses in order to better retain money within the community. While local currencies circulate in 38 states at present, to our knowledge, none existed in Utah until the recent launch of the Goldback.  Moreover, because the Goldback’s gold content automatically pegs its value to the U.S. Gold Dollar, rather than the Federal Reserve Note, the Goldback has emerged as a groundbreaking alternative.

On November 11, 2019, our firm applied to the Utah Tax Commission for a private letter ruling establishing that the Goldback is indeed legal tender under Utah law. Two of the members of the Commission, John Valentine and Rebecca Rockwell were intimately involved in passage of the SLTA in 2011, and so would be quite familiar with the issues at hand. Even so, a bit of encouragement from the citizenry can be tremendously helpful in establishing this significant monetary reform.

As Utahns, including members of the United Precious Metals Association (UPMA), have worked to popularize the use of specie legal tender over the past half decade or so, the lack of a truly convenient, tangible medium of exchange in commercially viable denominations has hampered the use of physical coin in daily transactions.  The Goldback addresses that problem by providing a workable precious metals based system to support broader adoption of gold money in Utah.