Sales Tax and Bitcoin in the United States Can Be Confusing

Sales Tax and Bitcoin in the United States Can Be Confusing

Over the last two years in the US, the federal government and states have been trying to grasp the concept of cryptocurrencies and apply them to traditional finance laws like taxes. The task has proven to be extremely difficult for federal agencies and officials however. One confusing issue is the application of state sales tax towards a purchase made with bitcoin. A great majority of states across the US have zero guidance on this issue and some states like New York, New Jersey, and California have entirely different ways of handling digital currency purchases and sales tax.

Also read: Bitcoin Cash Hard Fork Debate Reconvenes After the Stress Test

Sales Tax and Bitcoin 

Bitcoins and taxation is not the most popular topic, and both topical conversations seem to mix like oil and water these days. In the US, most cryptocurrency enthusiasts understand that according to the Internal Revenue Service (IRS), digital currencies like bitcoin are considered property for Federal tax purposes. Essentially this means that current property transaction laws apply to transactions using virtual currencies. The US taxpayer is required to report the character of gains or losses from the sale or exchange of a cryptocurrency from the value it was acquired for at the time and for the value of the final sale. Additionally, the IRS treats cryptocurrencies like a ‘convertible virtual currency’ (CVC) which means theoretically if merchants accept a currency like bitcoin the state tax could be applied to both the merchant and customer.

Sales Tax and Bitcoin in the United States Can Be Confusing

However, only a few states offer clarification on the issue of sales tax and bitcoin purchases. Most US states have absolutely no guidance whatsoever on how a merchant and customers should handle sales tax. The few states that do offer some descriptive laws on state sales tax and cryptocurrencies also provide two different methods of applying sales tax to digital currency purchases. The subject was covered in a recent BNA tax report this week and the topic has been discussed in great detail over the last five years.

New Jersey’s Technical Assistance Memorandum

Sales Tax and Bitcoin in the United States Can Be ConfusingFor instance, back in 2015 the state of New Jersey published a Technical Assistance Memorandum (TAM-2015-1 -R) which explains bitcoin and other cryptocurrencies are to be treated as a CVC. If a customer purchases an item from a New Jersey merchant who accepts bitcoin, the purchase or use is not subject to the state’s sales/use tax. Merchants in New Jersey, on the other hand, are subject to sales tax laws and the percentage of sales tax is based on the fair market value of the cryptocurrency used. Of course, the merchant is required to pay the tax in US dollars as well. According to New Jersey law merchants must:

  • Register for sales tax purposes;
  • Record in their books and records the value of the convertible virtual currency accepted at the time of each transaction, converted to US dollars;
  • Record in their books and records the amount of sales tax collected at the time of each transaction, converted to US dollars; and
  • Report such sales and remit any sales tax due in US dollars when filing their periodic sales tax returns.

The New York State Department of Taxation and Finance Rules

Sales Tax and Bitcoin in the United States Can Be ConfusingThe State of New York’s law towards bitcoin and sales tax is quite similar to New Jersey’s sales tax guideline. New York defines bitcoin sales tax the same way by finding the value of the cryptocurrency or CVC used at the time of purchase and applying that to the value of the CVC amount spent determines the tax. Because the prices of digital assets fluctuate so much, merchants will have a difficult time formulating their revenue books with New York and New Jersey’s sales tax perspective.

“If the party that gives convertible virtual currency in trade receives in exchange goods or services that are subject to sales tax, that party owes sales tax based on the market value of the convertible virtual currency at the time of the transaction, converted to US dollars,” explains the New York State Department of Taxation and Finance.

If the party that trades property or services in exchange for receiving convertible virtual currency gives the other party a sales slip, invoice, or receipt, the first party must separately state the sales tax due in US dollars on the sales slip, invoice, or receipt.

Sales Tax and Bitcoin in the United States Can Be Confusing

California Uses the Advertised Selling Price of the Product for Sales Tax

Sales Tax and Bitcoin in the United States Can Be ConfusingHowever, another state with a powerful economy like New York has an entirely different way of handling state sales tax and bitcoin. The state of California has applied a sales tax law to virtual currencies as well, but instead of using the CVC value, the sales tax is only applied to the products sold. The California Board of Equalization explains that sales tax applies to bitcoin just like fiat and a tangible item of personal property. However, the measure of sales tax stems from the price of the product at the time of sale and has no correlation to the CVC’s value at the time. Just like New York and New Jersey, sales tax in California must be paid in US dollars.

“The measure of tax is the total amount of the sale or lease, whether received in money or other consideration,” the California Board of Equalization details.

Therefore, if a retailer enters into a contract where the consideration is virtual currency, the measure of tax from the sale of the product is the amount allowed by the retailer in exchange for the virtual currency (generally, the retailer’s advertised selling price of the product.)

There are a few other states in the US including Vermont, Illinois, Arizona, Wyoming, and Georgia that have cryptocurrency laws either being drafted or being reviewed by governors, senators and house representatives in those regions. Internationally sales tax law in other countries such as Germany, Denmark, Belarus, and Slovenia are far friendlier than the US but also use entirely different methods of taxation. Then there are a few regions that don’t apply a capital gains tax to virtual currencies like Mauritius, Hong Kong, New Zealand, Switzerland, and Barbados.

It doesn’t seem like the US or the IRS will be defining bitcoin in a different way and will continue to be treated as a property rather than a currency. As far as state sales tax is concerned, a large majority of merchants from different states are still very much in the dark when it comes to sales tax and bitcoin.

What do you think about applying sales tax to bitcoin and how each state is taking different measures? Let us know what you think about this subject in the comment section below.


Images via Shutterstock, Bitcoin.com, and Pixabay.


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PR: Brahma OS Is the Decentralized Value Operating System Based on Revolutionary Blockchain Technology

Brahma OS - Decentralized Value Operating System

This is a paid press release, which contains forward looking statements, and should be treated as advertising or promotional material. Bitcoin.com does not endorse nor support this product/service. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the press release.

SINGAPORE – The advent of blockchain technology is provoking a revolution of the Internet of Value. In the blockchain world, Ethereum, NEO, EOS and other blockchain-based computing platforms exploit land to run applications. On this land, a variety of application chain of different functions spring up, for example: Rebo network for cross-border payment, CVC with the function of authentication and Distributed File System IPFS. However, in the world of the blockchain, there is a lack of infrastructure with multiple functions which offer a variety of decentralized services. Brahma OS aims to fill that void.

What is Brahma OS?
Taking the widely used mobile Android system as an entry point, Brahma OS builds an underlying architecture of blockchain applications and ecosystem based on Ethereum. As the core of connecting end-users and blockchain networks, Brahma OS offers users services like decentralized authentication, network transmission, storage, app store, asset management, and transaction, also making Brahma OS highly scalable. Through the Brahma OS SDK interface, developers can quickly expand decentralized service components.

Why use Brahma OS?
The operating system as the interface of the user and the computer manages the scheduling, operation, and processing of the computer hardware resource. On the other hand, it also provides the user with a friendly human-machine user interface. In order to offer and utilize computer resources more efficiently, the virtual operating system and the cloud operating system service complement each other.

As operating systems become more centralized, the infrastructure on which they operate is accordingly more centralized. For instance, as brute-force password cracking can pose threat to the identity authentication method based on the “username + password”, people have proposed various two-factor authentication solutions such as Google auth dynamic password, fingerprint authentication, and access control cards. Although two-factor authentication enhances user security, the master key used for authentication is stored on a central server. Once the authentication server is out of order or once the master key is stolen, it will pose a systemic risk and expose user privacy.

The problems described above about centralization of identity authentication also exist in application services such as network transmission, central storage, app store and transaction payment.

In dealing with the trust problem in centralized services, Rebo, CVC, IPFS have solved some service and function trust issues in a real system through the blockchain technology. However, the design ideas for Brahma OS are different. Brahma OS provides users with application services based on blockchain technology from the platform layer and operating system level. In the early planning of the Brahma OS system, Brahma OS will be based on the Android system to provide users with blockchain application components. Using blockchain technology, Brahma OS will solve the trust problem from the operating system platform. From this, Brahma OS is more like a blockchain virtual machine system.

In the future planning, Brahma OS will be deeply integrated with the hardware to give birth to a new smartphone operating system in the world of the blockchain. The network communication chip of Brahma OS and the contact chip of Brahma OS will become a brand new communication protocol which can support many mobile phone hardware manufacturers.

What kind of blockchain services does Brahma OS provide?
In the initial implementation of the Brahma OS system, Brahma OS will provide users with the following blockchain decentralized services by building a sandboxed environment for Native DApp and removing Android’s centralized service components.

To protect user privacy, Brahma OS provides users with identity authentication services based on blockchain addresses and user portraits, and offers privacy protection for user communications, calls and storage through elliptic curve public key algorithm and through Hash algorithm. As the storage and the transmission of data are encrypted, only users with a private key can have access to it. Therefore, there is no risk of data leakage in Brahma OS.

As for blockchain asset management, users can achieve ETHs and various ERC20 tokens management through the asset management components offered by Brahma OS without an extra wallet.

In terms of building an autonomous connected networks, Brahma OS dissociates both the meta-network and the “router” from existing network protocols and expects to build a peer-to-peer OS network that ensures encryption of communication data through protocol confusion from the data transmission level and build an autonomous, connected network from the configuration of the routing role.

In terms of decentralized storage services, Brahma OS offers a functional interface invoking other decentralized cloud services, including services from IPFS, Sia, Storj among many others.

In addition, Brahma OS will provide developers with a rich SDK interface and privacy API for developers to expand blockchain applications. As the DApp software on Brahma OS becomes abundant, a centralized DApp Store market will be established in the future to promote the ecological autonomy of Brahma OS through token support incentives. The appearance of more and more valuable apps like decentralized games will bring unprecedented value to developers and users of Brahma OS.

Brahma OS technical architecture

Brahma OS technical architecture is hierarchical. The entire system is decomposed into a number of higher and lower logic layer like Chain, Runtime, Framework. Taking into account compatibility issues of native Android applications, we separate virtual machine to completely isolate the runtime environment of Android App and DApp. In this way, we can increase security controls of Android App and prevent system crashes.

The current status of the development work on Brahma OS is well underway. In the development planning, the Brahma team has detailed milestones for each stage. In the third quarter of 2018, the team plans to complete the replacement of the Android centralization service and Brahma OS will connect to the Ethernet network for the first test users to operate on the system prototype.

In the blockchain world, if the blockchain platform such as Ethereum, NEO and EOS are regarded as land, and the networks like Rebol, STEEM, and IPFS as houses of different function, the Brahma OS is a beautiful multifunctional district enabled by a decentralized virtual operating system!

About Brahma OS
Brahma OS is an operating system that hosts decentralized networks by enabling the deconstruction of existing services and the use of a wide range of decentralized services and components to ensure that users can safely and easily access services on the blockchain and application.

For more information on Brahma OS
Official Website: http://brahmaos.io
Telegram Channel: https://t.me/BrahmaOS
Twitter: https://twitter.com/brahma_os
Medium: https://medium.com/brahmalabs
Bitcointalk: https://bitcointalk.org/index.php?topic=2992872
Contact: Lynn
Press contact: brahmabrm@gmail.com

PR-I.CO is a communication service working exclusively for blockchain and crypto companies. Brahma OS is the source of this content; this press release is for information only and does not constitute investment advice.

Contact Email Address
prteam@pr-i.co
Supporting Link
http://brahmaos.io

This is a paid press release. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.

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Bitcoin Cash (BCH) Starts the Day High with 28% Growth

Bitcoin Cash (BCH)

Bitcoin Cash (BCH) starts the day off on a high.

Of the top ten cryptocurrencies, only four coins are up. The leader of that group, by a long shot, is Bitcoin Cash, which has, at the time of writing, increased by 27.86% in the past 24 hours. The second best performer in the top ten is currently IOTA (MIOTA), but even that is only up by 1.97%.

Bitcoin Cash is the 4th largest cryptocurrency by market cap, trailing only about $8 billion behind Ripple’s market cap, which is ranked as number 3 on CoinMarketCap. ...

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