April 15, 2015
New Jersey Taxation of
On March 10, 2015, the New Jersey Division of Taxation issued
Technical Advisory Memorandum TAM-2015-1,
explaining its policy regarding convertible virtual currency.
- In Notice 2014-21, the IRS held that
convertible virtual currency (CVC), such as Bitcoin, is
treated as property for U.S. federal income tax purposes. Consequently, transactions
involving CVC are treated as barter transactions. In general, each party in a barter
transaction is viewed as both a buyer (of the goods or services acquired) and a seller
(of the goods or services given in exchange). New Jersey conforms to the federal treatment
of CVC for corporate and personal income tax purposes, including wage withholding and
reporting of payments to independent contractors.
- In New Jersey, sales tax is imposed on the buyer, but the seller is obligated
to collect and remit the tax. Sellers of taxable
goods or services that accept CVC in exchange for those taxable goods or services must
register with the New Jersey Division of Taxation for sales tax purposes.
- Where a customer exchanges CVC for taxable goods or services, the customer owes sales
tax as if it paid in U.S. dollars. In this case, the sales tax owed is determined by the
market value of the CVC exchanged, converted into U.S. dollars at the time of the exchange,
and the seller of the goods or services that are taxable is required to collect and remit
the sales tax on the transaction. On the other side of the barter transaction, the seller
of the CVC (the customer) is not required to collect and remit sales tax on the transaction
because the CVC is nontaxable intangible property under New Jersey sales and use tax law.
- The sale of CVC itself in exchange for U.S. dollars or in exchange for another CVC does not
create a sales tax obligation on the part of either the seller or the buyer.
- Sellers accepting CVC must record in U.S. dollars at the time of each transaction the value
of the CVC accepted, the value of the goods or services sold, and the amount of sales tax collected.
The sales tax is based on the value of the CVC converted to U.S. dollars at the time of a taxable
transaction. Sellers must record the value of the CVC accepted at the time of each transaction in
U.S. dollars and the cash value of the goods or services sold. The amount of sales tax collected
by the Seller must be recorded in U.S. dollars at the time of each transaction, and must be remitted
in U.S. dollars. Sellers who accept CVC as payment for goods or services must also retain documentation
of the amount for which they regularly sell the same or similar property to customers for U.S. dollars.
For further information please contact
Richard Nielsen (San Francisco),
Michael J. Cataldo (San Francisco) or
Paul T. Casas (San Francisco).
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