Confusion Clouds Cryptocurrency and Sales Tax in the US
It has become an extremely challenging task for US officials who are working hard to understand and leverage the perception of cryptocurrency in financial matters such as taxes. The federal agencies, however, have a tough time to get the crux of the ideology of crypto.
One perplexing case is the levying of sales tax on a certain acquisition done with Bitcoin. The whole of the United States have negligible guidance pertaining to this matter, especially states such as New Jersey, California, and New York have distinguished methodologies of dealing with sales tax and acquisitions made with bitcoin.
The Conceptualization of Cryptocurrency and Sales Tax in the United States
Intermingling cryptocurrency with financial matters like sales tax is often compared to mixing oil with water. Several cryptocurrency enthusiasts in the US understand that digital currencies such as Bitcoin are regarded as property for federal tax as per the regulations of IRS, the Internal Revenue Service. This denotes that recent property transactions made with virtual tokens fall under the category of the law set by the IRS.
Thus, a taxpayer in the US has required to jot down all the profits and losses made from the exchanging or selling off of their cryptocurrency. They need to mention in detail the cost of the crypto during the time of purchase, and its final price while selling. In addition, according to the regulations of IRS, cryptocurrency is treated as Convertible Virtual Currency. This means that any person who is accepting crypto as the mode of transaction, the state will levy a tax on both the customer and the merchant.
Due to the lack of proper guidance on the concept of cryptocurrency and sales tax, only a handful of US states can clarify the issues on bitcoin purchases and levying of sales tax on it. Besides, the countries which somehow manage to offer a descriptive view for the concept of sales tax and bitcoin, further two distinguished methodologies of deploying the idea of levying sales tax on purchases made with virtual tokens.