Bitcoin sales tax

Earlier this year, the separation of Bitcoin and other so-called¬†“virtual currencies”¬†as assets by the IRS according to US internal code (cash) had a variety of unexpected and unpleasant consequences. Classification of Bitcoin as a counterfeit asset is slow at the state level, as most jurisdictions impose U.S. law on links. Some states have decided to use tax payments in digital currencies, while others have not.

In the United States, sales taxes are collected from state tax authorities. Not all states have sales taxes, because not all states have income taxes. In Texas, sales tax (“Limited Sales, Use, and Income Taxes”) applies to the purchase or sale of substantially all tangible personal property. This tax also applies to personal property acquired and imported into the state, if the highest legal tax (currently 8.25%) has not been paid to the local tax authorities.

The author claims a constitutional ban on all types of tax rates. As a result, the state has one of the most difficult sales tax areas in the country. Interpreting rules is often an art, not a science, and requires detailed encyclopedic knowledge of any kind of business that can be used or practiced here. Under the Texas sales tax law, sales of intellectual property are tax-exempt, as are gold items (including gold and silver) of $ 1,000 or more. In addition, other intangible assets, such as electricity, are classified as tangible goods and taxed (electricity consumers are billed for electricity).

There is no legal reason for a purchase, sale or repurchase to be exempt from Texas sales tax. Note that this means buying bitcoin, not buying bitcoin. Purchasing taxable products using Bitcoin as a payment method is clearly compliant with tax rules.

The Texas Banking Commission has said that bitcoin is actually considered an investment, but regulators do not control taxes in Texas. This task was left to the Texas Secretary, who has not yet provided formal guidance. If the secretary, a self-styled public servant, decides to classify digital currency as tangible, there is no statutory deficit that withholds taxes like the Texas tax.

This is not unexpected. Outside the United States, tax management for digital currencies is very different. Belgium, Finland and other countries are exempt from digital currency transactions for VAT (Sales Tax). The United Kingdom has classified them in the same category as gold. This has different tax effects on this country, depending on who pays the tax. Sweden and Poland have announced that digital currencies are subject to VAT in these countries. In Australia, dealing with digital currencies is treated like bartering. In other words, it is subject to VAT (another form of sales tax).

Texas law is just one example of the difficulty in figuring out how digital money fits into the regulatory system. Consider this a major impediment to the growth of digital finance. Do not expect a quick or painless solution, as the government enjoys monetary issuance and legal financial control over monetary policy plans (and there is no motivation to sleigh with any form of funding) .