Last updated on January 2nd, 2018 at 12:00 am
The New York State Department of Taxation and Finance (NYDTF) has classified Bitcoin and other similar types of “convertible digital currency” as “intangible property”. This means all cryptocurrency-related transactions will not be subject to sales tax in the state.
After several months of speculation triggered by a note issued in March by the IRS, the NYDTF released a document this week declaring the new status of Bitcoin. According to the department, “the use of convertible virtual currency by a customer to pay for goods or services delivered in New York State is treated as a barter transaction“.
The authority adds that “for sales tax purposes, convertible virtual currency is intangible property. Since the purchase or use of intangible property is not subject to sales tax, any convertible virtual currency received by a party to a barter transaction is not subject to sales tax”.
A seller making sales in New York State that accepts convertible virtual currency inexchange for taxable goods or services must:
- register for sales tax purposes
- record in its books and records the value of the convertible virtual currency accepted atthe time of each transaction, converted to US dollars
- record in its books and records the amount of sales tax collected at the time of eachtransaction, converted to U.S. dollars
- report such sales and remit any sales tax due in U.S. dollars when filing its periodicsales tax returns.
Following its release, the memorandum received both praise and criticism from the Bitcoin community. The co-founder of the Bitcoin Association, David Mondrus, told CoinTelegraph that “this ruling, while making perfect sense due to the IRS guidance, is yet another example of the old rusting monolith that is government showing its irrelevancy”.
“First, the law only applies to the NY resident in the transaction, since the Supreme Court ruled in 1992 that only companies with a presence in a state are liable for the collection of sales tax. Second, use tax compliance is notoriously low for internet purchases. And third since barter transactions are rare in the non-Bitcoin world, and therefore complex to most consumers and merchants, almost ensures that compliance with this ruling will be low”, Mondrus added.
On the other side, Bitcoin-savvy attorney Marco Santori described the announcement as “great news” via Twitter.
Featured image source: Wikimedia