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New Jersey Wants To Tax Bitcoin Transactions

In New Jersey, if you accept bitcoin as a retailer, you must collect sales tax — twice. That’s the word from the New Jersey Division of Taxation, which has issued a technical advisory memorandum spelling out the tax implications of cryptocurrency in the Garden State.

According to the state, bitcoin and other virtual currencies are treated as property, and a retail sale that’s paid for with bitcoin is treated as a barter transaction — which, the state says, actually consists of two separate sale transactions, because each party “gives something of value to the other in order to receive something of value in return,” according to the memorandum.

The memorandum continues: “As a result, if a seller uses convertible virtual currency as consideration for goods or services, sales tax is due based on the amount allowed in exchange for the virtual currency. If the customer that provides convertible virtual currency in the trade receives property that is subject to tax, the customer owes tax based on the market value of the virtual currency at the time of the transaction, converted to U.S. dollars.”

New Jersey’s current sales tax rate is 7 percent, with some exceptions that can make it lower, according to TaxRates.com. It’s the responsibility of sellers to keep track of documentation, including the dollar value of bitcoin at the time of the transaction, and remit any sales taxes due — in U.S. dollars — to the state.

Odd as the double-sales-tax treatment sounds, it’s in line with an IRS notice in March that said bitcoin should be treated as property for tax purposes. According to the Bitcoin Foundation, that “may make compliance with tax laws unnecessarily cumbersome and imposes untenable recording and reporting requirements on its users,” NEWSBTC reported.

While the New Jersey tax guidance deals with the bitcoin-as-property implications for retailers, it leaves unclear how less conventional uses of bitcoin, such as for international money transfers, might be affected.

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