Jewelers block for the inventory you hold.

Buying from the public brings police rules

If your store buys gold, estate pieces or watches over the counter, takes trade-ins, or accepts consignment, check whether California's secondhand dealer law reaches you. Business and Professions Code 21626 covers any business that buys, sells, trades, takes in pawn, or accepts on consignment or for auction secondhand tangible personal property. A coin dealer, whose principal business is coins, monetized bullion or commercial grade ingots, is excluded.

• A local license first. Under section 21641 you apply to the chief of police, sheriff or police commission, which submits the application to the Department of Justice before granting it. The license goes to an applicant who hasn't been convicted of an offense involving stolen property.
• Report every buy electronically. Section 21628 requires a report to CAPSS, the state's pawn and secondhand dealer system, daily or no later than the next business day, excluding weekends and holidays. The description includes serial numbers, personalized inscriptions, identifying marks, size, color and material, plus brand and model when known or reasonably ascertainable.
• ID, ownership statement, fingerprint. You verify the seller's identity with a document such as a U.S. passport or a driver's license, record their certification that they own the item or have the owner's authority to sell it, take a legible fingerprint, and keep the identification for three years from the date of the CAPSS report.
• Police holds. Under section 21647, an officer with probable cause to believe a piece is lost, stolen or embezzled can place a hold of up to 90 calendar days, renewable as often as a criminal investigation or proceeding requires. The officer either takes the piece as evidence or leaves it with you as custodian, and you can't release it without written authorization from that agency.

A piece on hold is paid for but can't be sold. When I build your schedule, I ask for buy-side volume and what's on hold so the values match what's in the vault. Outside California, secondhand dealer and precious-metal buyer rules vary by state.

Cash over $10,000 means Form 8300

A business that receives more than $10,000 in cash in the ordinary course of business, in one transaction or related transactions, files Form 8300, generally within 15 days after receiving the cash. What counts:

• Related payments add up. Cash from the same payer within a 24-hour period is combined. Payments further apart are related if you know or have reason to know they're connected, and installment cash received within one year of the first payment counts toward the threshold.
• Cash means more than bills. U.S. and foreign coins and currency always count. Cashier's checks, bank drafts, traveler's checks and money orders with a face value of $10,000 or less count in a retail sale of a collectible such as gems, metal, antiques or coins, or when you know the customer is trying to avoid the report. Personal checks and wire transfers from a bank don't count.
• Tell the customer. Each person named on the form gets a written statement by January 31 of the following year with your business name and address, a contact person and phone number, the reportable cash received, and a note that the information is being furnished to the IRS.
• Keep the file. Copies, supporting documents and customer statements stay on hand for at least five years from filing.
• E-file if required for other returns. If you're required to file at least 10 other information returns in a calendar year, such as W-2s or 1099s, Form 8300 has to be e-filed.

A large cash sale also means money in the store until the deposit. Underwriters ask how cash is counted, where it's kept overnight and who takes it to the bank. Depending on the forms, money and employee theft may be written on a crime policy rather than the inventory coverage, so I review both together.

Official sources

• Cal. Bus. & Prof. Code 21626 (secondhand dealer defined)
• Cal. Bus. & Prof. Code 21628 (reporting to CAPSS, ID, fingerprint)
• Cal. Bus. & Prof. Code 21641 (secondhand dealer license)
• Cal. Bus. & Prof. Code 21647 (police holds)
• 31 CFR 1027.100 Definitions (Cornell LII)
• 31 CFR 1027.210 AML programs for dealers (Cornell LII)
• IRS Form 8300 Reference Guide
• 16 CFR 23.3 Misrepresentation as to gold content (Cornell LII)
• 16 CFR 23.12 Definitions and misuse of the word diamond (Cornell LII)
• 16 CFR 23.25 Laboratory-created and imitation gemstones (Cornell LII)