The New York State Department of Taxation and Finance has said that bitcoin purchases will not be subject to sales taxes.
The move comes months after the US Internal Revenue Service (IRS) released its initial guidance on taxing bitcoin as a type of property, and provides an answer to a long-brewing question about how state sales taxes in the US may be applied to bitcoin transactions.
Only in certain cases
The document states that a sales exchange involving a digital currency would be considered a type of barter transaction. Under this definition, the agency writes, only certain goods and services exchanged for a digital currency would be subject to a sales tax or related reporting requirements.
The memorandum includes several examples outlining how one party may, or may not, be required to pay and report sales taxes when a digital currency is involved, stating:
The Taxpayer Guidance Division also clarifies that its treatment of corporate and personal income taxes related to digital currency “conforms to the federal treatment of convertible virtual currency”, referring to past guidance published by the IRS.
Tax a 'systemic risk' to digital currency
Santori, global policy counsel at Blockchain and attorney at law firm Pillsbury Winthrop Shaw Pittman, told CoinDesk one of the greatest systemic risks to digital currency adoption has always been that its purchase be subject to sales taxation by governments.
This has led to fears of double-taxation as users are charged tax once to acquire bitcoins, and then again when using it for purchases. The European Union is still considering the question.
A full copy of the New York State tax guidance memorandum can be found below:
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